An Examination of the Efficiency of Fair Market Accounting: An Analysis of SFAS No. 115 and SFAS 157

Due to issues related to the savings and loan crises of the 1980s, over the past several decades, emphasis has been placed on fair value accounting rather than lower cost or lower market (LCM) approaches. Its outstanding position is particularly under pressure by the financial industry including but not limited to the financial industry. Certain events that resulted in a significant increase in the fair value method include accusations that historical cost accounting methods can not accurately account for the financial institution's sustainability and soundness.

The fair value accounting was issued by the Financial Accounting Standards Board (FASB), which is privately operated in 2006 as US GAAP SFAS 157. For this, it is necessary to evaluate transactionable assets such as mortgage securities based on the current market value, not the acquisition cost or future forecast value. As the markets of these securities fluctuate and collapse, the resulting loss of value has a significant financial impact on the institution that holds them, even if they are not planning to sell them immediately.

In September 2006, the FASB established a framework to measure fair value of generally accepted accounting principles by defining fair value and expanding fair value measurements SFAS No. 157 "Fair Value Measurement "(" WSAS 157 "). Disclosure. SFAS No. 157 is effective for financial statements issued during the fiscal year beginning after November 15, 2007 and interim periods during that fiscal year. Starbucks that allows early adoption will need to adopt these new requirements by the first quarter of 2009. Starbucks has not determined whether the adoption of SFAS No. 157 will have an impact on the company's consolidated financial statements (if any), or whether it will be applied before the first quarter of 2009.

In February 2007, the FASB issued SFAS No. 159 "Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits an entity to choose to measure a number of financial instruments and certain other items at fair value. SFAS No. 159 is effective for the fiscal year starting on November 15, 2007 or the first Starbucks financial statements. Starbucks permitting early adoption has not yet decided whether to elect to apply any provision of SFAS No. 159 or affect the consolidated financial statements (if any).