In the article it states that one of the biggest challenges faced by Fair
Value is obtaining relevant information. And that this lack of
information increases estimation uncertainty. I believe that if there
was a more uniformed way to gather this information that challenge
would dimmish. GAAP states that the financial information provided
to its users should be relevant, reliable and useful but with all the
guessing/estimation that goes with fair value users are left unsure of
the correct position to take. Abruptly taking away or stopping the
use of fair value would do more harm than good like the article
describes and I get that the accounting world would like to bridge
the gap between the way the US and the rest of the world
approaches accounting but to lessen the impact purposeful and
measured steps needs to be taken. For example, finding a balance
between using cost accounting and fair value accounting while also
working to find an approach that incorporates a mix of both methods
that is used across the board.
For managers, lenders, and investors to make important decisions
about a company, its value and whether it's worth investing in they
must be able to trust and have full confidence in the financial
statements they review. But how can they when one company that
uses fair value assess that an asset with a value that is not known is
worth a certain amount and another company values the same asset
at a different amount? In this I agree with the article that a new way
of presenting the financial statement would be most beneficial.
Having one common high-quality standard for providing this
information would increase the comparability of companies and
would allow its users to be more confident in information they are
given as it would be clear, concise, and consistent.
