CHAPTER 12

FASB Value Worlds

The Financial Accounting Standards Board (FASB) is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States in the public's interest. The FASB, acting as an authority, has created a number of value worlds in the past few years, several of which are described in this chapter.

Specifically, this chapter discusses fair value, which gives guidance for post-transaction financial reporting compliance. The goal of the FASB's framework is to eliminate the inconsistencies between balance sheet (historical cost) numbers and income statement (fair value) numbers. Further, the fair value of the target company's identifiable assets and goodwill is reflected on the acquiring company's balance sheet. The fair value ultimately impacts the company's reported earnings in subsequent periods due to amortization of certain identifiable intangible assets.

FASB FAIR VALUE (ASC 820, FORMERLY FAS 157)

During the last decade, the use of fair value measurements in financial reporting has increased. In 2006, the FASB issued Financial Accounting Standard (FAS) 157 to provide a framework for how companies should measure fair value and sets out the required disclosures when GAAP requires the use of fair value. Note that the FASB is using the term “fair value” here, even though “fair value,” the subject of Chapter 9, has been used to describe minority dissent and oppression cases for decades. ...

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