Fair Value Accounting: A Controversial but Promising System

Abstract

There is almost a worldwide consensus that the usage of fair value accounting is not an easy task due to some limitations that affect its reliability. Prior studies in fair value accounting have unanimously agreed on the existence of clear defects in measuring fair value especially under level 3 of fair value hierarchy where active market does not easily exist for the asset or liability. The current study offers some creative suggestions that standard-setters (e.g. FASB and IASB), regulators, practitioners and academics should globally adopt to ensure a brighter future for fair value accounting.