Abstract:

Fair value accounting becoming more actual today, it might provide more correct and accurate valuation of assets and liabilities on an ongoing basis.

Why is correct measurement of assets and liabilities so important? Audited financial statements provide to the users of accounting information (investors, creditors, and members of management board) the data they need to make appropriate business and investment decisions. An investor want to know how well the company is performing according to a set of standardized international rules and measurements that a company has not fabricated to make it look good. Similarly, creditors and banks that have lent money or are considering lending money to a business, need an accurate assessment or understanding of cash flow and how likely they are to be paid back.

The definition of fair value is based on market-based measurement using assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Fair value assumes measurement of the asset and liability in principal market. Principal market is a market which has the greatest activity level and volume for the transactions of certain assets and liabilities.

The purpose of the paper is to reveal the significance of fair value measurement of assets and liabilities. The article follows the standard setting process (framework) to define the fair value measurements starting with the international arena and further focusing on the particularities of an emerging economy.

This work is based on an analytical and theoretical methods, where detaily considered and analyzed the features of fair value measurement, provides calculation methods and models.