Corporate Accounting

Running head: CORPORATE ACCOUNTING
Corporate Accounting
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1CORPORATE ACCOUNTING
Table of Contents
Part A.........................................................................................................................................2
Part B..........................................................................................................................................5
Reference....................................................................................................................................8

2CORPORATE ACCOUNTING
Part A
FAIR VALUE ACCOUNTING
Mark to Market or Fair value accounting shows the current price or the potential of
the asset in the market. Assessment of fair value accounting is one to reflect economic reality
in the corporate environment. The fair value shows the potential price in which the asset can
be bought or sold in respect of the cash flows or the economic benefits flowing from the asset
(Goh et al. 2015). The cons and pros of applying the fair value accounting in the financial
reporting framework has been taken more into consideration after the financial crisis. Fair
value accounting is important and should be applicable on the corporate accounting standards
and the same to be applied on the financial statements of the company. A financial report of
the company is a mixture which contains variety of assets and liabilities classified at different
value according to their nature and characteristics. FAS 157 clearly defines the concept of
fair value accounting as a price that would be paid or received from the transfer of the asset
on the measurement date (Magnan, Menini and Parbonetti 2015).
The crucial debate that is linked with the application of fair value accounting is that
the financial market is not static it keeps on changing. Financial Assets and economies
operates through various business cycles and the value of the assets can be volatile or during
the boom period and recession period making difficult for the company to present financial
information. A stable and secure accounting approach providing a classified way of defining
the assets and liabilities of the company should be the key aim of the financial report of the
company. The key points that should be taken into account is that during economic booms
financial institution and companies will be taking high amount of leverage where the value of
their financial assets would be going up (Gohet al. 2015). These can be the key points which
were noted during the financial crisis. However, it is crucial to note that the Historical Cost