Fair value accounting is considered an extremely controversial
approach in the accounting world. The valuation of assets based on
current market value not only creates uncertainty, based on the fact
that the market is ever changing, but it also leaves a large window
open for fraud. Management, Lenders, and Investors are not
presented with as clear of a picture when using Fair value
accounting, because they may see fluctuations in their balance sheet
related to current market values, making it difficult to make
important business decisions, due to lack of accurate economic
history, and concrete figures. If the market value plummets, under
the fair market value approach, the existing assets on the books
would sell for much less than they are currently booked for, creating
a false sense of financial stability. Especially with all of the things
going on in the world today, I can't personally see where opting to
utilize fair value accounting would be beneficial for a business.
02, J., | by Edmund L. Andrews, & Andrews, E. L. (2014, July
2). Charles Lee: Why fair-value accounting isn't Fair. Stanford Graduate
School of Business. Retrieved from
https://www.gsb.stanford.edu/insights/charles-lee-why-fair-value-
accounting-isnt-fair
