As the balance sheet is of much importance to investors the representation of fair values instead of the historical cost would be a more useful and transparent representation. The historical cost accounting of assets required reserves to be created to bring the value of the asset more close to the market whereas in fair value accounting the measurement is done in relation to the market which makes it more close to the market values and bridges the gap between the book value and market value of assets.
The decision usefulness of fair value accounting has not improved even after the issue of AASB IAS 139 as the board does not prescribe any analysis for the functioning of fair values in balance sheet and income statements. There is no guideline on the income associated with the fair value measurement. The fair value measurement does provide the economical instability on income but the absence of theoretical implementation techniques decreases the decision usefulness of fair value accounting technique and it would have improved if the standard setting bodies provided extensive guidelines (Hitz 2007).
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