Critical review Essay Example | Topics and Well Written Essays - 1000 words - 4

Critical review - Essay Example Moreover, the changing of the traditional balance sheet by conceptual frameworks from a legal to an economic institution required that both assets and liabilities are economically viable, which could only be guaranteed by fair practices in accounting. Finally, fair value became integral in the development and transformation of professional and regulatory identity for those that are involved in the setting of standards. Power therefore stresses that for fair values in accounting to be successful, there is need to understand such parameters such as measurement, reliability, financial economics, accounting policy and the different financial instruments. Power addresses the reasons as to why there was need to change into fair practices in accounting and its significance arguing that it did not just come up because of forensic analysis of the developments in the financial market. The reason for the transformation to fair practices is due to the contest between fundamentally different accounting concepts in terms of reliability majorly based on market-based and marketing simulation that competes with the traditional transaction-based model. He draws summaries on fair value and the distinctive notion of accounting and therefore reliability as articulated before the financial crisis of 2007 emerged. Power further deals with the rise of financial economics as a challenge and an important cultural resource for financial accounting stating that the preconditions for fair value can only be achieved through open-minded delivery of decision significance for accounting that must take into consideration the market dynamics. To him, the problem in accounting practice for derivatives many a times pose a great challenge on the credibility of accounting, but may at times work in catalysing the appreciation of the importance of fair value and reliability as required of accounting. Power also states that the de-legalization of the traditional