Convergences and Divergences Related to Fair Value

Many authors present the advantages of fair value accounting, but others contest this concept, because of its volatility and subjective tendency of the models used for the evaluation. The advantages of fair value include utility, relevance, transparency and superior accuracy of the results, provides more clarity to the financial statements, it provides a total accounting of the comparable value and it gives more liability to the manager. However, critics of fair value accounting do not provide credible alternatives. Do we go back to historical cost accounting, wherein the financial assets are stated at outdated values and hence are not relevant or reliable? In the current crisis, a question is: Should assets be marked down to their current throw away prices, as companies may not want to sell them at those values? This paper analyses this question, and various controversial issues related to the concept of fair value as it is currently presented by IASB and FASB