Under the  Fair Market Accounting,  the company is allowed for assessing and reporting certain assets & liabilities at the current market values. Certain assets could be reported at the current net realizable value in the market . Similarly the liabilities, like as financial instruments, could be estimated and it is  reported as if they are to be repaid on today’s date

We can high light  several benefit for using fair value accounting over historical accounting, as flow

Accurate Valuation.

A main advantage of using the  fair value accounting is, accurate asset and liability valuation on an ongoing basis To users of a company’s reported

True Income. As fair value accounting limits the company’s ability for  potentially manipulate its reported amount of  net income. Sometimes the  management might  purposely arrange certain class of  asset sales,  example, To use gains or the losses from  sales for increasing  or decreasing  net income as reported at desired time.

Further, in the case company’s assets’ value decrease or the  liabilities decrease, then company is also required for reporting losses. And such losses reduce  the firm’s reported equity and also reported net income. Although, the  fair market values are really difficult to estimate and it can be easily also manipulated, because this  approach provide useful information to the stakeholders at large. For example, fair market accounting provides information after considering prevalent economic conditions. Thus, such type of information is more accurate, timely, and also relevant as compared to information provided by the  historical cost accounting