Fair Value and the IASB/FASB Conceptual Framework Project: An
Alternative View.
Abacus, 44 (2):
p139 - 168 (20080601)Abstract
This paper analyses various controversial issues arising
from the current project of the IASB and FASB to develop a joint
conceptual framework for financial reporting standards. It discusses
their possible implications for measurement and, in particular, for the
use of fair value as the preferred measurement basis. Two competing
world views are identified as underlying the debate: a Fair Value View,
implicit in the IASB's public pronouncements, and an Alternative View
implicit in publicly expressed criticisms of the IASB's pronouncements.
The Fair Value View assumes that markets are relatively perfect and
complete and that, in such a setting, financial reports should meet the
needs of passive investors and creditors by reporting fair values
derived from current market prices. The Alternative View assumes that
markets are relatively imperfect and incomplete and that, in such a
market setting, financial reports should also meet the monitoring
requirements of current shareholders (stewar