Critically discuss the merits and flaws of FVA in relation to cost accounting.
Chapter8: International Cases
Section8.5: Shari’a
Problem 3Q
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Proponents of the use of Fair Value Accounting (FVA) argue that the use of fair value reflects current market conditions. On the contrary, opponents of the FVA argue that under specific circumstances, such as a financial crisis, mark to market accounting may lead to considerable volatility in the financial statements and especially the Income Statement (Laux and Leuz, 2009). Critically discuss the merits and flaws of FVA in relation to cost accounting.
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