The distinction between valuation and And the advantages and disadvantages of using Fair Value A Rescher describes valuation as ‘acomparative assessment or measurement of something with respect to its embodiment of a certain ’ Accounting valuation is aprocess by which the value of a company is measured in terms of their assets and liabilities for financial reporting Valuation can be achieved through several methods， with the ultimate goal to present the most precise picture of the company’s financial Banks and lenders assessing the viability of a business and loanwill provided based on how they are performing in the This process must include the most recent assessment possible of the company because its value may change significantly in just a short Campbell defined measurement as ‘the assignment of numerals to represent properties of material systems other than numbers， in virtue of the laws governing these ’ In accounting， measurement is the computation of economic or financial activitiesin terms of money or other measurable elements like hours to produce a Accounting measurement is used to compare and evaluate accounting Furthermore，measurement in accounting falls into the category of derived measurement forboth capital and profit， and accountants have to measure the value of opening capital， the income received， capital usage and changes in the fair value ofnet The advantages offair value are: Accurate ValuationFair value accounting can provide more information on asset and liability valuation， it is a market-based presents the result to all market participants instead of only the reporting When there is a increasing on assets or liabilities， company will mark up the value of relevant assets or liabilities to current market price to reflect how much the company will receive if the assets being sold or how much it will pay for the Comparewith book value， fair value measurement allow the financial records to reflectthe economic reality of the business， because book values tend to underestimate the value of Fair and True IncomeBy using fair value accounting， company will be restricted to manipulate their reported net This is because gain or loss form price changes forassets or liabilities under fair value measurement are reported in time when they occurred， and the increasing on assets value or decrease on liabilities will add to net income， conversely i twill reduce company’s net Hence， management will not able to purposely arrange some assets sales to make the net income look Disadvantages of Fair Value: Misleading InformationFair vale does not require a transaction to occur to recognize thechange in value it can recognize profits and losses earlier than historical cost Changes in value are recorded at each balance sheet date，however market changes every second， it affect company valuation of assets When market stabilize， value changes may reverse to their previous level， fair value measurement may overstating values and profits when marketrising and overstating the declines in value when the market goes down， this means that fair value may provided misleading SubjectivityFair value may subjectively determined when the assets are not active inthe market， if the similar items are not found in the market then the fairvalue are not reliable and can be subjective and there is a risk that management of the company may manipulate the value of 自己的作业 望采纳。
