I chose an article by Charles Lee, “Why Fair Value Accounting Isn’t
Fair”. Lee argues that fair value accounting goes against the
fundamental purpose of accounting. It would actually inject more
uncertainty into financial reporting and make life harder for
shareholders. It might even create new opportunities for companies
to cook their books. (Lee, 2014)
The article provided the example of implications of companies in the
article. It described how the Apple Company’s shares plunged during
2013 even though the stock market was surging steadily. The Apple
Company CEO reported that the company had the highest sales ever
for 2013. The investors where not happy with the company’s future
and resulted in the share price falling down.
As a user of financial statements, I agree with the author that Market
Value is not the true value of the assets and liabilities. I prefer to
have values based of the historic cost.
Andrews, E. L. (2014, July2). Charles Lee: Why Fair-Value Accounting
Isn't Fair. Insights by Stanford Business. Retrieved
from https://www.gsb.stanford.edu/insight/charles-lee-why-fair-
value-accounting-isnt-fair
