StudentShare solutions
Triangle menu

Fair Value Measurements of Financial Instruments by US companies and comparability issues - Research Paper Example

Not dowloaded yet

Extract of sample
Fair Value Measurements of Financial Instruments by US companies and comparability issues

Thus the implementation of the fair value has to be implemented at an applicable hierarchical level (Price Water Coopers, 2009, p.2) Need for study Fair value measurement of financial instruments has become a debatable topic since the emergence of the economic downturn. According to the International Accounting Standards Board (IASB) it has been made a rule to report the financial instruments based on the fair value measurement system. Through the calculation of the financial data at fair value prices the decisions related to the high risky business facing economic problem in the financial market becomes easier. The financial statements of the company computed at a fair value system gives more meaningful information to the investors, suppliers and creditors about the valuation methodologies thus used for the same. Hence it is only justified to have a clear view about the impact of the fair value measures of the financial instrument of the company. Literature review The fair value measurement is implemented both by Goldman Sachs and Citibank with the purpose of getting the actual value during selling of assets or during the transfer of a liability on the date of measurement between the participants of the market. Even while trading of the derivatives of the company measuring in the fair value is of utmost importance to the company. Thus maintaining the rules of the levels of the hierarchy the implementation of the fair value measurement is essential as the correct information related to the accounting of the company’s books of accounts gets projected. Methodology The three methodologies for the calculation of the fair value of the company are market approach, income approach and the cost approach. In market approach the matrix pricing method is used which helps in finding the value of the debt securities in comparison to that of another firm without relying on the data of the quoted prices of specific securities. The time value of money technique is implemented in case of the income approach methodology of fair value measurement. Lastly based on the concept of obsolesce is the implication of cost approach system of fair value. The data related to the calculation of the fair value of a company can be obtained from the annual reports of both Goldman Sachs and Citibank. For the convenience of analysis the period of 2011 has been chosen. The financial ratios are generally implemented to assess the financial health of the company, analysing which the companies fair value measurement can be done. Limitations of study The fair value measurement also has some criticism in its calculation method. Fair value measurement the inherent risk factor of the company tends to gets exaggerated resulting in misleading results in the long run. Hence the recording of the contingent losses which have not yet been realised signals negative outcome to investors, which lead to meeting of negative consequences. The fair value measurement is usually not preferred by many analysts due to lack of reliability as the system of valuation has a tendency of showing an optimistic value irrespective of the present economic situation. Thus the business decisions taken on the basis such fair value measurement may be inaccurate in nature. Company profiles Goldman Sachs The Goldman Sachs Group, Inc. is one of the leading banks which is globally renowned for investment banking and provides a wide range of financial ...Show more

Summary

Fair Value Measurements of Financial Instruments by US companies and comparability issues Part I Introduction The financial statements of a company which are valued at the fair value of a company have to be classified under the three levels of hierarchy which are: i) the assets and the liabilities which are identical in nature have to be priced in the active markets…
Author : fred32
Fair Value Measurements of Financial Instruments by US companies and comparability issues essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the research paper on your topic
"Fair Value Measurements of Financial Instruments by US companies and comparability issues"
with a personal 20% discount.
Grab the best paper

Related Essays

Finance: Fair value accounting during the financial crisis
Investigators have claimed that more than half of the global capital which was being pooled in from one end of the corner to another by the implication of financial products, have wiped out. There were a couple of factors that backed up the crisis including the low credit history borrowers who applied for subprime loans etc (Broadley).
22 pages (5500 words) Research Paper
Is fair trade fair
It “is an alternative approach to conventional” (What is Fairtrade? 2011) pattern of trade. The four pillars of fair trade structure, namely, “institutions, producers, consumers, and government/policy” (Stenn, 2012) are now found to make huge contributions to sustainable development through the provision of better trading conditions in partnerships between the producers and the consumers, and protecting the rights of the “marginalized producers and workers” (Mare, 2008, p.
6 pages (1500 words) Research Paper
Measurements and Instruments for a Quantitative Research Plan
While selecting the suitable instruments for undertaking a Quantitative Research, various aspects should be put into consideration. The practical application of the instruments to the study phenomena should be the fundamental consideration, which serves to assess whether the instrument selected for use is practically applicable to the nature of the study and the objectives that are to be met.
7 pages (1750 words) Research Paper
Companies: Ethical Issues in Statistics
The drivers are not the only victims, but in some cases, the pedestrians are the victims too. The accidents that are occurring in the traffic are not just due to one factor but it is due to the participation of a large number of factors like individual users of the road, players in the industry and the government.
10 pages (2500 words) Research Paper
Fair value vs. Historical cost
The transaction should be the buying or the selling of an asset. (Heffes, 2008) The formulation of the definition is done is such a manner
4 pages (1000 words) Research Paper
Fair Value of Accounting
d. The valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use in pricing the asset or liability and the level of the fair value
5 pages (1250 words) Research Paper
Ethical issues in Financial Companies Lending practices
Their lending strategies and policies have therefore become the determinants of values, mores and ethics which are invariably attached to the sphere of commerce. According to Jennings (2005), financial institutions play the role of reservoirs that control the means of
8 pages (2000 words) Research Paper
US Physician Practices: Contracting with Payors (health insurance companies), how it works and what are the pain points or issues for physicians
This is so whether the patient seeks healthcare services or not. However, there is a drastic movement of risk from the insurance company to physicians for a patient undergoing comprehensive care. Managed care creates a cohesive relationship
4 pages (1000 words) Research Paper
Companies
Co. W.L.L. employs over 2000 employees that belong to 33 different nationalities (“Careers”). I would particularly like to work for this company because the culture of this company fosters, promotes, and encourages
2 pages (500 words) Research Paper
Forecasting key financial variables in Shariah Based Financial instruments
) function, a base historical data considering 12 months (n = 12) was quantitatively forecasted to predict the performance of the indices for 11 years. Results Evaluate that 3-5 year investments were more reliable than 7-10 year investments. Additionally, using benchmarking
12 pages (3000 words) Research Paper
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation