Tuesday, July 30, 2013

Staying up With Trends



If you are thinking about becoming an accountant then staying up with trends will benefit you in the long run. In this case, the trend towards Fair Value Measurement (FVM) has been a big topic of discussion through out the accounting field. FVM is a financial reporting approach in which companies are required or permitted to measure and report certain assets and liabilities at estimates of the prices they would receive. Under fair value accounting, companies report losses when the fair values of their assets decrease or liabilities increase (Ryan 11). Teresa M. Cortese-Danile, professor at St. John’s University, explains in "Ethics Is Imperative to Effective Fair Value Reporting: Weaving Ethics into Fair Value" that FVM is giving accountants incentives to act unethically and letting greed take over their judgment.   An example of unethical behavior regarding the use of FVM within the accounting discourse is how an uncommon asset, called a level 3 input, has no information on its value resulting in accountants using their own measurements. The reporting entities value the asset higher to make the company look more profitable than it actually is (Cortese-Danile 51).

FVM offers detailed procedures for implementation, but the length and complexity only creates new problems for the members of the discourse. FVM process is a two-hundred-page document solely based on processes which create complexity in a relatively simple job. Russell Madray, a CPA, explains in “The Trend toward Fair Value Accounting” that switching to FVM will raise arguments over the definition of certain assets and liabilities and will make financial statements unreliable to investors (17). An example of this within the accounting discourse would be the effect of the income statements on a company’s fixed assets like land, equipment and buildings. Accountants would have to record the assets and liabilities at the new fair value and the result of the financial statements would not resemble the company’s performance but rather the change in the value of their assets/liabilities.  This would cause false information of a company’s success in the financial reporting and could possibly hurt companies looking for investors. It will be close to impossible to implement a fair value on assets/liabilities, like fixed assets, and will lead to more aggravating arguments on how to measure a product.

By the time you earn your accounting degree, FVM might be implemented or still be in discussion. Learning more about trends will make it easier to transition into accounting by being knowledgeable of current situations. Not only does being knowledgeable about current events look good to the boss, but it gives you a chance to make an impact in the field!


 

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