Home  Journals  International Accounting  38(332) - 2014 October

The rationale behind using fair value to increase the reliability of accounting and reporting of accounting items

Available online: 31 October 2014

Subject Heading: INTERNATIONAL AND NATIONAL STANDARDS

JEL Classification: 

Pages: 2-9

The application of the International Financial Reporting Standards in the Russian accounting practice and, particularly, the transition from historic cost of accounting items to fair value measurement still need a proof of advantages, which they give to enterprises, companies, firms and organizations performing different types of economic activity, and which are relevant areas in domestic science and practice. The study states not only strict following administratively established rules, but also using the world experience in improving the national practice of accounting and reporting. This is an object of the study, which predetermines its purpose. The subject of the study is a valuation of accounting items. In this regard, the purpose of this work is the publicizing the development of scientific knowledge from historic cost to fair value measurement for reliable reflection of accounting items in accounting records and reports. It is possible to apply fair value measurement by methods, methodology and respective rules of conducting research work. To meet the goal, the authors studied theoretical prerequisites of not only fair value emergence, but also its application to organize true accounting and reporting in companies, firms and enterprises. The study identifies the opinion of various economic schools' representatives on historic cost and fair value measurement, emphasizes merits and demerits of two types of cost and a technique of recording them in accounting and reporting. The work also analyzes an assessment on a fair value basis, and stresses that a fair value use is rather a new area in the accounting system of economic entities operating in the real sector of economy. The application field of the obtained results of the research involves a number of problems, which can be solved by improving the reporting on a fair value basis, especially for a steady growth. The authors conclude on the need for accelerated and technically correct transition from a historic cost valuation to valuation on the basis of fair value for the purpose of reliable recording of accounting objects in accounting records and reports of enterprises, organizations, firms and companies.

Keywords: International Financial Reporting Standards, historic cost, estimate, fair value, benefits, accounting, reporting facilities, improving, national system, reporting

References:

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