SEC holds round‐table on fair value accounting and auditing standards

Abstract

PurposeThe purpose of this paper is to summarize and analyze the SEC's July 9, 2008 roundtable discussion regarding fair value accounting and auditing standards.Design/methodology/approachThe paper discusses investor, auditor/accountant/actuary, and corporation views concerning the usefulness of fair value accounting, potential market behavior effects from fair value accounting, challenges in applying fair value standards, possible improvement to the current standards, and working with auditors who provide assurance for fair value accounting.FindingsSome investor panelists said fair value provides investors with the most current and relevant information of any accounting method and some believe fair valuation is important for market integrity and trust because it is a transparent measure for valuation. Auditors are especially challenged in determining fair values in illiquid or frozen markets. Roundtable participants viewed disclosure as critical for implementation of fair valuation, particularly regarding key inputs and assumptions. Auditors and corporations would like more guidance on applying fair value accounting from the SEC and Public Company Accounting Oversight Board.Originality/valueThe paper provides expert guidance by experienced securities lawyers.