Before going into the review of the article, first of all we like to define what Fair Value is?

Fair Value or Fair Price is defined as the rational and unbiased estimate of the potential market price of a good, service or asset. It is a concept used both in Economics and Accounting. Objective Factors are: * acquisition/production/distribution costs, replacement costs, or costs of close substitutes * actual utility at a given level of development of social productive capability * supply vs. demand Subjective Factors are: * risk characteristics * cost of and return on capital * individually perceived utility

In accounting, fair value is used as a certainty of the market value of an asset (or liability) for which a market price cannot be determined (usually because there is no established market for the asset). So, basically for a land of 100 acre costing Rs. 1crore in 1970 will be recorded as 1crore only in the balance sheet forever due to historical costing but if the same land is sold in some year say 1990, then the purchasing party will write the actual cost of purchase as land cost which is lets suppose Rs. 5crore. So, this difference of 4crore would not be there if there is a fair value estimate of that land.

IFRS had started the project of Fair Value Measurement in November 2006 which was finalized in May 2011 and will be effective from January 2013. On 12 May 2011, the IASB issued IFRS 13 Fair Value Measurement. IFRS 13, which is effective from 1 January 2013, defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 does not determine when an asset, a liability or an entitys own equity instrument is measured at fair value. Rather, the measurement and disclosure requirements of IFRS 13 apply when another IFRS requires or permits the item to be measured at fair value (with limited exceptions).

Review for the Article Fair Value is indeed a debatable topic in the todays financing era of Indian as well as International Economies. There are many areas where this fair value will affect the value of the asset or liability. So, the main question that arises is, Whether Fair Value is beneficial? or as the name of this article suggests How Fair is the Fair Value? It is evident that fair value accounting has its pros and cons and the implementation of fair value accounting under the purview of IFRS will have different meaning for different scale of organizations for instance implementing fair value will on one provide more regulation and clarity in the books of accounts thus making it more difficult for situations like the Satyam scam and the crash of Lehman brothers to arise in the future while some may argue that it would also render it more difficult to analyze. Fair Value gives rise to current market value of any asset or liability. A property which is not under construction instead of being valued by its historical value can now be priced at its current market value. This helps in correct evaluation of the asset. Also helps in show the performance of property on the balance sheet. Most importantly, it will help to value those assets that are not being transacted in monetary terms that is, non-monetary assets acquired in exchange for another non-monetary asset. Fair value also excludes estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale. Fair value does not reflect future capital expenditure that will improve or enhance the asset and does not reflect the related future benefits from this future expenditure. It will provide an insight into the nature and characteristics of asset being exchanged or liability settled, its actual or potential use to the buyer or seller. It will also set a price to buy/sell which makes it a willingness of a buyer or seller to either buy or sell the assets at that particular fair value price. It will remove the havocs of overestimation or underestimation of any asset or liability. On the other hand, it will also increase uncertainty in analyses because of the presence of the following clauses: Fair value is determined without any deduction for transaction costs it may incur on sale or other disposal. Fair value is time-specific as of a given date. Because market conditions may change, the amount reported as fair value may be incorrect or inappropriate if estimated as of another time. Fair value specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale. Fair value does not reflect future capital expenditure that will improve or enhance the asset and does not reflect the related future benefits from this future expenditure.

 Fair Value is also time consuming process for the financial gurus also. It poses a greater threat to the countries having less developed valuation professionals. All the above stated factors might make it more difficult to come up with an accurate trend for the financial activities of an organization. Also as fair value mandates the organizations to take into consideration the unrealized gains as well as losses it will become easy for the organizations to regulate their accounts. Fair value accounting is a radical idea the implementation of which might change the face of accounting process as we know it now whether for good or bad depends entirely on the type and nature of the organization which makes use of it. To the final words for Fair Value, we like to go with the author of the article as, There are equal contentions in favour of fair value basis of accounting as there are against it. Fair Value Accounting Opens up new opportunities to valuation professionals.