Stephen Penman

Principles for the Application of Fair Value Accounting

Coauthor(s): Doron Nissim.

Abstract:
This paper, the second in CEASA's White Paper series on accounting issues, lays out principles under which fair value accounting satisfies the objective of reporting to shareholders. Its "principles-based" approach embraces broad economic concepts but is also pragmatic and specific enough to guide practice. Accordingly, the pros and cons of fair valuing bank loans, core deposits, inventories, investments in subsidiaries, insurance contracts, performance obligations, and debt, to name a few balance sheet items, are addressed, leading to formal financial statement templates for the application of fair value accounting in specific industries.

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