Fair Value Accounting
Accounting question? Fair market value reporting over historic value?
Here is the question:
You are having a conversation with your friend, John, who is a small business owner. John states that he doesn’t need financial statements. His philosophy is as long as there is cash in the bank to pay the bills, then that is all that matters. The bank will have him appraise the property if he needs a loan. The question he asked you is why would he need financial statements that list historical value instead of FMV?
You need more information than that for the tax return
The bank may want actual financial statements to see what other debts there are and how the cash flow is.
He may not need actual financial statements but just looking at cash can be a problem depending on the timing of collections and payments.
Mark-to-Market Debate: Difference between Mark to Market accounting and Fair Value Accounting
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Intermediate Accounting $39.95 Hard Copy Brand New… |
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