Fair Value Accounting

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In the wake of the subprime property or mortgage crisis, arguments for and against the fair value have emerged. It is clear that both sides of the divide have a genuine case and shout at the issue of concern. Proponents and opponents of the fair value accounting in determining market prices for the property can well be contented with their views but it is more necessary to come to a realistic argument as to which one presents the best and sustainable solution to the meltdown.

Fair value accounting is a model that allows the market forces of demand and supply between the involved parties to determine the value of the property. The problem emerged when the major funding institutions ran into extreme financial crisis which in effect resulted into more uncertainty in the mortgage backed instruments with close reference to the CDOs, the collateralized debt obligations (Novoa, Jodi and Juan, 16). This was aggravated by investors making attempts to dig deep into the financial instruments and who were further set back by the complex systems leading to more panic in the property and lending market.

In the event that the market prices are to adjust and that the investors are to obtain the property values, then only fair value could be used to determine the data and information which was hurriedly sought for. Therefore, it is clear that most of the financial difficulties witnessed in the property market at the time were as a result of combination of factors which included the pressure bestowed on the information b……………………………………………………………..

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