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Towards a criticism of fair value accounting
Univeristy of Niš, Faculty of Economy

emailmilorad.stojilkovic@eknfak.ni.ac.rs
Keywords: fair value accounting; principle of accurate balancing; target orientation of financial statements; qualitative characteristics of information; financial crisis
Abstract
Fair value accounting has been subject to serious although not numerous criticisms throughout all development stages. The lack of convincing empirical evidence about its inherent weaknesses was a basic argument for rejecting and challenging these criticisms. The world financial crisis that began with the crash of financial markets in the US, in September 2008, provided numerous data that incited the examination of fair value accounting, among else. In the paper, the author contributes to the criticism of the fair value concept. The focus of the paper is on some serious shortcomings that are, in the author's opinion, taken less into consideration when treating this issue in Serbia and the world. Some of these shortcomings stem from wrong target orientation of annual financial statements based on fair value accounting. Others are the result of unavoidable conflict of the concept with the basic principles of accurate balancing. Finally, the author points out those weaknesses of fair value accounting that negatively reflect on basic characteristics of accounting information in a number of situations. Generally speaking, the paper deals with inherent conceptual limitations with numerous repercussions on the users of financial statements that cannot be removed through reforming. Thus, the author supports the planned and time-limited abolishment of fair value accounting as a measurement attribute in IAS/IFRS.
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article language: English
document type: unclassified
published in SCIndeks: 25/01/2012