Week 4 Discussion Post 11 Document

Fairvalueaccountinghasbeenhistoricallycontroversial.FawziA.Al

SawalqatalksaboutthiscontroversyinthearticleFairValue

Accounting:AControversialbutPromisingSystem



FawziFairvalue- 

with-cover-page-v2.pdf(d1wqtxts1xzle7.cloudfront.net)



.Theauthorstates

thatfairvalueaccountingcanbeunreliable."Studiesinfairvalue

accountinghaveshowndefectsinmeasuringfairvalue,especially

underlevel3offairvaluehierarchywheretheactivemarketdoes

noteasilyexistfortheassetorliability."(Sawalqa,2015)Theauthor

alsobringsupaninterestingpoint.Fairvalueaccountingcanbe

usefulbecauseitmeasuresvalueinthecurrentmarketreflectingthe

timeperiod,however,thelocationofwheretheaccountingisbeing

donedetermineswhethertousefairvalueaccountingorcost

accounting.Indevelopedcountries,fairvalueaccountingiscommon

butindevelopingcountries,fairvalueaccountingisalmostuseless

duetostillemergingmarkets.

Otherdeficienciesinfairvalueaccountingarehowintimes

ofrecessionbusinessesreclassifiedassetstoavoidrecognizingaloss

andreportinginaccurateinformation.Itseemsfairvalueaccounting

doesallowroomformanipulationanddistortionofthecompany's

financialstandings.Thisalsobringsthestrengthofthecompany's

ethicsintoquestion.Sinceitisbasedoncurrentmarketvaluewhich

canbesounstablepersonally,Iprefercostaccounting.Whilethere

canbeinaccuraciesinbothmethodsourgoalinaccountingistobe

asaccurateaspossible.

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Reference:

Sawalqa,F.A.A.(2015,December22).Fair Value Accounting: A

controversial but promising system.AccountingandFinanceResearch.

RetrievedMarch20,2022,

fromhttp://dx.doi.org/10.5430/afr.v5n1p88