Corporate Accounting

Running Head: CORPORATE ACCOUNTING
CORPORATE ACCOUNTING
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1CORPORATE ACCOUNTING
Table of Contents
Part A.........................................................................................................................................2
Fair Value Accounting...........................................................................................................2
Part B..........................................................................................................................................4
Corporate Reporting on Fair Value........................................................................................4
Reference....................................................................................................................................7

2CORPORATE ACCOUNTING
Part A
Fair Value Accounting
Fair value is defined as the sales price that is agreed upon by the willing seller and
buyers assuming that both of the parties enter into the transactions knowingly and freely. It
helps in representing the company’s value of assets and the liabilities in case when the
financial statements of the subsidiary company are consolidated with the parent company.
Hence, it is defined as that estimated price, which would be received by selling the assets or
paying to transfer the liability in the orderly transactions between the participants of the
market at the date of the measurement (Magnan, Menini & Parbonetti, 2015). This
accounting method of measurement uses the current market value for the basis of recognizing
certain liabilities and the assets. Fair value is considered as estimate that is unbiased and
rational of potential market prices of the services, goods or the assets. This method takes into
account the objectivity factors such as cost of replacement, distribution and production
(Palea, 2014).
Relevance of Fair Value Accounting in the Contemporary World
In the fair value accounting, the organizations are permitted and obliged for
measuring the particular assets as well as liabilities on the reporting date at the fair value. In
order to accurately measures fair value, there is the need for the set of the factors. If these set
of the factors are absent then it may creates the major challenges to the organizations for the
accurate measures of the assets and the liabilities (Hodder, Hopkins & Schipper, 2014). The
fair value efficiency depends upon the market types in which the liabilities and the assets are
found. However, this has created debate in the business market for the reliability of fair value.
It is easy for estimating fair value of the assets and the liabilities if they are traded actively in