The rules for Fair Value Accounting (ASC 820) have been around for several years. They are complex and difficult to apply.
In fact, the Public Company Accounting Oversight Board (PCAOB), which inspects audits of public entities, notes that fair value measurements were the cause of about half of the deficiencies noted in recent years.
Volatile Markets Disrupt Fair Value Measurements
The economic crisis in the late 2000s made it especially difficult to apply the new rules. Fair value seemed to be a moving target due to the unusual volatility in market conditions. Sometimes management used improper methods, models and assumptions to make their fair value measurements.
As the economy recovers, management is relying more often on financial projections to support their fair value measurements. Now, it becomes especially important for management to support the growth rates, margins and discount rates used in their projections.
Be Confident in Fair Market Accounting
Don’t wait until after year-end to document your fair value projections. Give us a call now at 214-545-3966 or email us at [email protected] so that we can help you in that process.