The nominal price analysis of trading financial assets at fair value

Abstract

Recognizing trading financial assets at their fair value facilitates quick transaction and convenient accounting, however, it causes uncertainty in terms of reasonable price, validity of market and involvement of investors. On some levels, the determination of fair value is subjective and artificial to a large extent and lacking in objectivity. Assets recognition seemingly rational based on financial reports does not result in valid inflow of funds or turn trading financial assets into equivalent monetary funds. Conducting an analysis on the nominal price of trading financial assets is a re-visit of the prudence principle of accounting as well as an interpretation of rationality of fair value recognition. Index Terms - trading financial assets; fair value; recognition; nominal price; rationality Trading financial assets is purchase in secondary market of financial assets such as shares, bonds and investment funds for the purpose of short-term profits. It is mainly recognized at fair value at the end. As it data in the financial reports of public companies affect share prices, it raises wider public concerns and consequently causes manipulation of recognition of fair value at the end, making 'fair value' less fair and resulting in the nominal price of trading financial assets. 1. Determination of fair value of trading financial assets