Hardly a day goes by without an article appearing on
the crises affecting many of our financial...

Question

Hardly a day goes by without an article appearing on
the crises affecting many of our financial institutions in the United States.
It is estimated that the savings and loan (S&L) debacle of the 1980s, for
example, ended up costing $500 billion ($2,000 for every man, woman, child in
the United States).Some argue that if
the S&Ls had been required to report their investments at fair value
instead of cost, large losses would have been reported earlier, which would
have signaled regulators to close those S&Ls and, therefore, minimize the losses
to U.S. taxpayers.
Explain how reported accounting numbers might affect
an individual’s perceptions and actions. Cite two examples.

Robert · Accepted Answer

Solution:- 
In order to present the financial status of the company in a appropriate manner to all the 
stakeholders there is need of a set of instructions which is called as accounting standards. These 
accounting standards help in the more fair and transparent presentation of the financial 
transactions. Anomalies in the accounting standards led to huge financial crises and loss of 
millions of dollars to the government and general public in past. 
To prevent such loss in future the accounting standard board and various governmental 
bodies has come forward to bring changes in the accounting standards, few of those are as 
follows:- 
1) Fair market valuation:- 
Fair market value is a concept in which financial statements are prepared on the basis of 
fair market value of assets, liabilities and owner’s equity.

Hardly a day goes by without an article appearing on the crises affecting many of our financial institutions in the United States. It is estimated that the savings and loan (S&L) debacle of the 1980s,...

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