What are fair value accounting measures?
Generally Accepted Accounting Principles has required companies to use fair value or mark-to-market accounting. This initiative is supposed to give investors more transparency. The fair value of an asset is the amount at which that asset could be bought or sold and the fair value of a liability is the amount at which that liability could be incurred or settled in a current transaction between willing parties, other than in liquidation.
Why are they being blamed by some financial institutions for worsening the current financial crisis?
Generally, a majority of financial reporting was based on historical cost, or the original price paid for an asset. Since the fair value standards require a current market price, the value could be much different from its original price. A more readily available market price for an asset provides a more realistic view of worth. When a market price is not readily available, financial institutions must use more complex calculations to arrive at fair value. This has led to the notion that “numbers” and not actual cash is creating a crisis in the financial markets.
Should federal regulators loosen restrictions on fair value accounting?
Fair value accounting appears to be here to stay. When a rule is passed, the regulators expect that it will be followed and applied to a company’s financial instruments. Should restrictions really be loosened in bad times and applied in good times? There should be consistency in the application of the standards.
With Barack Obama as president, what big tax changes can businesses in Connecticut expect?
With the weakening economy, it would appear that the original Obama tax plan is probably going to have to be put on hold for the time being. In the near term, it would be logical to see more use of accelerated depreciation and perhaps investment tax credits to spur purchases of business equipment. We think that the capital gains rates will remain at the 15 percent level for the near term as well.
