Discuss the benefits and drawback of fair value accounting measurement Assignment

Discuss the benefits and drawback of fair value bill system measurement vis--vis other measurements with deference to enhancing the step of pecuniary information - Assignment ExampleThe accounting system demands an estimation of fair securities industry value in order to demonstrate the present value of future cash flows (Penman, 2007). Many financial analysts are of the opinion that the fair value accounting has significantly contributed to the reasons behind financial crisis of 2008 (IMF, 2009). In this newspaper the statement will be critically evaluated to justify such argument. The paper will also test the benefits and drawbacks of fair value accounting in comparison with other measurements in order to enhance quality of financial information.Many critiques have argued that apart from the reasons such as subprime mortgage, excessive debt and default credit swaps that had mainly caused for financial crisis of 2008, fair value accounting which is also known as mark to mar ket accounting has significantly contributed towards the crisis through producing deceptive data and defective financial statements (Laeven and Huizinga, 2009). However, though there has been much arrest regarding asset fire sales and downward spirals in financial markets, supporting evidences that may prove the accounting systems function in igniting the crisis are negligible. Such discussion can be found on the following myths.Some critiques have argued in favour of FVA that the assets reported on a lower floor historical terms in the companys balance sheet have no relation to their current value. The set of most of such assets are documented at their purchasing price with adjustments for depreciation (for building, plant and machineries etc.) or appreciation (bonds and other fixed maturity investments) of those assets (Bonaci, Matis and Strouhal, 2010). However, such valuation may not be discriminate in current market scenario. For example, value of a company owned building may lodge more value in present market than its depreciated book value as calculated under historical cost. Hence, even under historical accounting, importance of fair value has been established