More and more, fair values rather than historical costs are reported in the financial statements. The movement towards fair value accounting has been quite controversial. Some groups view fair value accounting as a positive step forward in financial reporting. Others assert fair values are too unreliable. Here, we’ll describe the movement towards fair value accounting in the US and internationally. We’ll discuss the pros and cons of fair value accounting. Then, we’ll delve into where fair values are reported in the financials and what their financial statement effects are. We’ll briefly cover the different sources of fair values and the GAAP fair value hierarchy.
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