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Fair Value Measurements of Financial Instruments by US companies and comparability issues
Finance & Accounting
Pages 8 (2008 words)
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.
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. ...
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