Fair value accounting

Posted By: KYAuditor

Fair value accounting - 11/07/07 08:02 PM

I am looking for information on fair value accounting. If anyone knows of any seminars, manuals, or other resources that I could use to determine the proper methods for calculating fair value on loans and investments, I would appreciate your input.
Posted By: Jokerman

Re: Fair value accounting - 11/08/07 05:00 AM

Did you read the FASB statements? (159, 115)

Are you trying to model IRR? Prepare f/s footnotes? Audit one or the other?
Posted By: KYAuditor

Re: Fair value accounting - 11/08/07 05:04 PM

I have looked at the FASB's. I guess that I am looking for something in layman's terms to help explain the process.
Posted By: Jokerman

Re: Fair value accounting - 11/09/07 04:21 AM

The idea of fair value accounting is to report a fair market value on the balance sheet for each asset, rather than a traditional book value. You're probably familiar with how you already account for your available-for-sale investment portfolio under FAS 115. It's the same thing on loans, just trickier to come up with a fair value.

Say your balance sheet consists of one loan you made to me a year ago at 6%. Depending on what kind of rate you would be able to charge on a similar loan today, that loan may have a fair value that is more or less than the principal balance. Depending on how long the loan is scheduled and likely to be outstanding, the fair value may differ a lot, or not much at all from the book value.