Fair Value Accounting
Fair value accounting is based measurement which are market based and not based on entity. Fair value can be said to be the price a firm can obtain by selling the asset or doing the transaction in principal market or in the event there is no principal market selling it in the market that is most advantageous to the firm.
It can also be defined as the amount at which an asset or liability will be exchanged between two knowledgeable entities. This transaction amount will be done at arm’s length.
There have been criticism as well acceptance for fair value accounting. Since fair value accounting takes into account the present market information most of the economists are in favor of the fair value accounting. Also since fair value accounting helps to add market information in the financial statement it is always more useful.