2CORPORATE ACCOUNTING
Part A: Essay
Introduction
Over the years, Fair Value Measurement is regarded as one of the most popular
approaches for the valuation of the assets and liabilities of the companies. Fair value accounting
is the process where the companies measure their assets and liabilities based on the current
market price (Hodder, Hopkins & Schipper, 2014). It can be seen that there are certain major
arguments on the effectiveness of fair value accounting in the measurement of the assets and
liabilities of the public and private companies. The main aim of this essay is the analysis of the
relevance of fair value accounting in the current business world.
Discussion
According to IFRS 13 Fair Value Measurement, Fair Value can be defined as the price
that the companies would receive to sell an asset or paid to transfer a liability in an orderly
transaction between the market participants at the date of measurement (cpaaustralia.com.au,
2019). Thus, the primary use of the fair value accounting is to provide the users of the financial
statements the useful information about the company’s assets and liabilities. However, the
situation has become complicated as there are many arguments on the relevance of the use of fair
value accounting for the private and public corporations (Palea, 2014). While comparing the fair
value accounting with the historical cost accounting, it can be seen that there is more
transparency in the financial statements under the use of fair value accounting as the users can
know the more relevant market prices of the assets and liabilities. However, it can be seen at the
same time that information of the assets and liabilities under historical cost accounting is relevant
to the users only on the date of measurement. This aspect indicates towards the presence of

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