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Based on a review of literature, critically evaluate the accounting standard for fair value accounting.

Based on a review of literature, critically evaluate the accounting standard for fair value accounting.

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Accounting standards contain a set of rules and governing practices for the treatment of all financial transactions. The main objective of accounting standards is to establish recognition, measurement, presentation and disclosure requirements dealing with which are important in the financial statements of companies. These financial statements give end-users important information, as well asan in depth understanding about an organization's performance, position and cash flow.  

Advantages

  • Having a defined list of rules in preparing financial statements allows standardization, improving consistency which allows comparability between different companies.
  • Easier to audit for compliance purposes disadvantage
  • Having to follow a detailed set of rules results in rigidity,each transaction is accounted with respect to each rule.

In conclusion, there is a necessity for accounting standards when companies prepare their financial reports.Financial statements prepared based on accepted accounting standards not only gives users a detailed overview of the financial position of company, but also assures users that the information they had obtained is reliable , credible and transparent.

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