A BRIEF ANALYSIS-ABOUT the Corona virus AND fair value measurements

COMMERCE

Fair value refers to the actual value of an asset a product, stock, or security that is agreed upon by both the seller and the buyer. It is determined in order to come up with an amount or value that is fair to the buyer without putting the seller on the losing end. Market value fluctuates more than fair value. With fair value accounting, valuations are more accurate, such that the valuations can follow when prices go up or down. Fair value accounting is a type of accounting in which companies measure and report certain assets and liabilities at prices equal to their fair value. Fair value means that assets are reported at the price the company would receive if they sold them and liabilities are reported at the value the company would receive if they were relieved of them. The purpose of this method is for creating realistic financial statements. Companies reporting under this method have financial statements that are more accurate than those not using this method. When assets and liabilities are reported for their actual value, it results in more realistic financial statements. The corona virus disease 2019 (COVID-19) is throwing a wrench into fair value measurements. Even the basic definition of fair value requires a closer look. Which assumptions would a market participant use? Are those assumptions incorporated into your valuation technique? Are you missing something? Also, when is the last time you calibrated your valuation technique? Calibration is important to make sure your valuation technique reflects current market conditions. Calibration can also help you identify a missing element.

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