I have learned invaluable lessons on capital assets and long-term obligations in the past one week. For this assignment, I choose to focus on the article, “Relevance of GASB No. 34 to Financial Reporting by Municipal Governments. ” It focuses on accounting changes that all public government agencies are likely to encounter over the next several years. These changes are collectively called the Governmental Accounting Standards Board Statement No. 34 (GASB No. 34). This statement is expected to cause public water system financial advisors, auditors, and accountants to scramble for new accounting and technical information to understand the differences between accrual-based accounting and cash-based accounting ( Pridgen, & Wilder, 2013 ) .
However, after reading this article, I found the concept of fair value to be an interesting one. As seen from class readings, fair value is the price set and agreed by both the seller and the buyer as per their interests. Therefore, the fair value of security refers to the present market value of the security; the price at which an investor must pay to obtain the security ( Pridgen, & Wilder, 2013 ) . As seen from the article, the market determines the fair value for most of the assets or investments.
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This article is important to this week’s topic because GASB No. 34 offers various approaches to determining fair value as discussed in class. This accounting standard gives methods for all liabilities and assets. In most cases, we apply fair value measurement and accounting to financial liabilities and assets. However, the article contains some criticisms against the idea of fair value because it is irrelevant and inapplicable for securities with longer holding durations ( Pridgen, & Wilder, 2013 ) . It is also evident that fair value is not an accurate measure because of irrational or biased opinions of investors, market risks, and issues arising from structured models. Nonetheless, the article is invaluable as it has widened my knowledge and understanding of capital assets and long-terms obligations.
Reference
Pridgen, A. K. & Wilder W. M. ( 2013 ). Relevance of GASB No. 34 to Financial Reporting by Municipal Governments. Accounting Horizons 27(2): 175-204.
