Question 1
(a) What are the benefits of fair value accounting?
(b) What are the disadvantages of fair value accounting?
Question 2
(a) What does the article mean by the statement ‘under the stress of current market conditions, accounting policy should focus on measuring the heat of the flame instead of pouring gasoline on the fire'?
(b) There is a debate on whether fair value accounting is a messenger of or contributor to the global financial crisis (GFC). Conduct your own research and explain your position on the debate.
(c) How might fair value accounting have contributed to the GFC?
Question 3
(a) What does the case mean by ‘full fair value model' and ‘mixed-attribute model'?
(b) Why do bankers prefer the mixed attribute model instead of full fair value model?
Question 4
(a) "The old originate and hold model has been replaced by the originate and distribute model." What does Hertz, the chairman of the FASB, imply by the ‘originate and hold model' and the ‘originate and distribute model'?
(b) What are the three arguments put forward by Hertz against the bankers' claims for a mixed attribute model?
Question 5
What are the additional burdens to the investors resulting from the mixed attribute model?
Question 6
What particular assets constitute the subject matter of the case? Mention the name of the relevant
Australian accounting standard currently in place for those particular assets.
Other
Appropriate reference to at least three journal articles and use of correct reference style.