Question Loftus Chapter 4 Fair Value Measurement, p. 123 Exercises 4.7 Emily Chasan (2008) reported: It s ridiculous to apply fair value accounting to assets that have no market , said Christopher

Question

Loftus Chapter 4 Fair Value Measurement, p. 123 Exercises 4.7

Emily Chasan (2008) reported:

‘It’s ridiculous to apply fair value accounting to assets that have no market’, said Christopher Whalen, managing director of risk research firm Institutional Risk Analytics. ‘All this volatility we now have in financial reporting and disclosure, it’s just absolute madness’.

‘Investors as a group have to get a better understanding of what the volatility means’, said Ed Nusbaum, chief executive of accounting firm Grant Thornton. ‘They want to live in a perfect world. They’d like complete transparency and no surprises. But I think it’s unlikely that the big write-downs that we’ve seen will reverse’.

Required:

Discuss the issues associated with fair value accounting for assets without an active market.

Leave a Comment