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Your assignment is to prepare and submit a paper on fair values in the preparation of financial statements.
Your assignment is to prepare and submit a paper on fair values in the preparation of financial statements. Relevant Information Information needs to be relevant to the needs of users in order to serve its purpose. However, there are also other fundamental qualities that financial statements need to have. These qualities include comparability, faithful representation, consistency, completeness, understandability, and reliability (BPP 2009a). Information is useless if it is not reliable and in a number of cases, the values described as fair values in the accounts do not provide a reliable estimate of the value of assets and liabilities. According to Bath (n.d.) concerns also focus on this matter. It should also be noted the more reliable the information is the less relevant it will be. Relevant information has predictive value, feedback value, and timeliness. Reliable information is verifiable Comparability of financial statements Financial statements need to be comparable from one year to the next and between one company and another. However, even though fair values may be said to be current and therefore more comparable, the fact that judgment needs to be exercised brings subjectivity into play. In addition to that, those judgments on which investors and other stakeholders depend have their own agenda. In some cases, they may exercise their judgment in such a way as to manipulate the accounts. This, therefore, brings us back to the reliability of the figures in the financial statements.
