ABSTRACT
In recent years, fair value accounting (FVA) has emerged as one of the key lenses by which standard-setters look at measurement, recognition and disclosure issues in financial reporting. The prevalence of FVA in contemporary financial reporting standard-setting is sometimes underappreciated since it applies either on a recurring or on a non-recurring basis. For instance, while the measurement of financial instruments relies on FVA on a continuous basis with fluctuations in value being directly reflected in comprehensive income, the reality is much more subtle for goodwill. At its initial recognition, goodwill reflects the differential between the fair value of the consideration paid for the acquisition of a business and the estimated fair values assigned to the various assets acquired and liabilities assumed as a result of the acquisition. However, following the transaction, the amount reported for goodwill does not change or evolve, except if and when there is impairment. In such a case, a valuation will be performed, and goodwill will be written down to an amount that approximates its current fair value. Hence, in the case of goodwill, FVA applies at specific times under particular, non-recurring, conditions.
