Essay: Regulations and Fair Value Accounting

Sample Essay

The accounting regulations have had an important role in the preparation of financial statements and there are laws which govern the representation of values in financial statements. These regulations help the users of financial statements through transparency and reliability. As it has been discussed earlier the Fair Value Accounting model helps in the transparency of the values represented in financial statements. These values are closer to the market values of the assets as compared to the values represented by the historical cost model.

If fair value accounting is really helping in this transparency of the represented values then it is increasing the efficiency of the regulatory framework of accounting. The regulatory system requires companies to prepare financial statements following prescribed rules and procedures and the regulatory bodies are usually the accounting standards board such as the Australian Accounting Standards Board. The complications for banks are quite high in this regard like one complication of the implementation of marking to market financial instruments if they are not traded in liquid markets (Landsman 2006).

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