FAIR VALUE ACCOUNTING: BENEFITS, CHALLENGES AND IMPLICATIONS FOR FINANCIAL REPORTING

Abstract

This research paper delves into fair value accounting, exploring its benefits, challenges, and implications for financial reporting. Beginning with its significance and contrast to historical cost accounting, it navigates through its role in global reporting standards. The benefits of transparency, relevance and informed decision-making are weighed against challenges such as subjectivity, volatility's impact, illiquid asset valuation complexity and the potential for manipulation. The effects of fair value on financial statements, disclosure, ratios and valuation are scrutinized. The regulatory framework's intricacies, regulatory responses and global harmonization efforts are assessed. This research paper's concluding reflection underscores fair value's evolving importance in a dynamic financial landscape, emphasizing the need for on-going vigilance and adaptation.