The amendments require managers and accountants to provide more detailed information regarding the fair value measurement of assets and liabilities. The three areas of fair value measurements which would be affected by the proposed amendments include application of input variables in measurement of level 3 assets and liabilities, disclosure of transfers in level 1 and level 2 assets and liabilities and sale, purchase, settlements and issuance of level 3 assets individually on a gross basis rather than a net basis (Katz 2009). Companies would have to disclose the variables applied in measurement and include a range of measurement levels rather than a single variable to measure values of assets and liabilities.
All three of the theories mentioned in the second question are linked directly with issue of fair value discussed in the article. Positive accounting theory presents the choices made by firms in applications of accounting policies. It explains why companies use specific calculation and measurement techniques in various areas of accounting such as First in First Out or Last in First Out for inventory valuation and straight line method or declining balance method for estimating depreciation (Rabin 2003). Managers use assumptions in estimating values of level three assets and liabilities f\due to lack of underlying markets for these assets. A variety of choices are available to these managers for applying input variables during management. The proposed changes in standard 157 would limit the choices of company management to use alternative variables in estimating the values of level 3 assets and liabilities.
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