Question

GAAP permits many items to be recorded at fair value on the balance sheet. Many experts...

GAAP permits many items to be recorded at fair value on the balance sheet. Many experts argue in favor of fair value accounting because it allows the users of the balance sheet to see what current (as of the balance sheet date) exit price of many assets and liabilities. Many also argue against fair value accounting because it may cause a great deal of income volatility (as seen currently due to COVID 19 and in the 2008 recession). Based upon our discussion of fair value do you feel that GAAP should permit the use of fair value vs. historical cost for assets and liabilities. Briefly explain your opinion.  

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Answer #1

As Per my opinion, the GAAP should Permit the use of Fair value measurement of Assets & liabilities.

Because, the financials should show a True & Correct view to the users of the Financials. In order to show a True & correct view, the items of the financial statements should be presented on fair Value basis.

Even IFRS also indirectly supports Fair Value reporting by way of inserting special standard like Fair Value measurement standard.

If Financials are reported at Fair Value, then only Company's Present worth will be known. We can't assess the company based on Historical recorded values. They have to be shown at current Values(Fair Values)

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