Fair Value Accounting versus Historical Cost Accounting - the Impact on Financial Statement Presentation

Cristin, Nicolae Traian; Mitică, Pepi
February 2013
Ovidius University Annals, Series Economic Sciences;2013, Vol. 13 Issue 1, p1399
Academic Journal
The financial scandals of recent years have further strengthened the hands of the proponents of fair value accounting. By shining a bright light into dark corners of a firm's accounts, fair value accounting precludes the dubious practices of managers in hiding the consequences of their actions from the eyes of outside observers. The debate presents a new start for fair-value accounting going forward and standard setters' push to extend fair-value accounting into other areas. In our research, we found important issues as an attempt to make sense of the controversies. While there are legitimate concerns about implementations of fair-value accounting, it is less clear that these problems apply to the stipulations of fair-value accounting in the accounting regulations. We believe that historical cost accounting is not the remedy. Fair value accounting is used when reliable fair value estimates are available and when they convey information about operating performance.


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