It is time to evaluate fair value accounting objectively by returning to the conceptual roots of our modern accounting framework and debunking certain false doctrines. Analyzing the conceptual integrity of fair value compared to historic cost accounting demonstrates the clear superiority of fair value measurement and reporting. True capital adequacy can only be ascertained on a risk-adjusted basis. The starting point for such needed and sound risk-adjustment is reflecting changes in market values for all assets and liabilities to determine the economic value of equity. Full fair value accounting with appropriately detailed disclosures should be required now for all reporting entities and for all assets and liabilities. Such a requirement also would result in equity stated on a full fair value basis. Full fair value accounting sharpens investor and management focus on long-term, risk-adjusted organizational performance and the optimization of economic value of equity. The learning objectives of this session are to:
- Understand fair value definitions and accounting rules
- Explore fair value in context of conceptual accounting framework
- Discover fair value in context of practical banking
- Identify fair value accounting’s role in current financial crisis
- Gain insights into the case for fair value now
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