Description
1-Describe the followings in your own words:
AWhat is Fair Value Accounting?
BWhat Is Fair Market Value Accounting? How the FASB is going to standardize the calculation of financial instruments by looking at their historical cost?
2- What do you mean by loan loss provision? Why Does a Loan Loss Provision Matter? Andhow does a loan loss provision work?
3- How to differentiate liquid risk and Credit Risk with reference to the financial economics sector and how the interest rate risk make an impact on the economy?
4- contrast fair value method vs amortized cost method and explain how they are working?
5-discuss the recent trends in the banking industry?
6-Banks are working with higher financial leverage, discuss this statement explaining how is capital adequacy ratio being calculated in Saudi banks?
Explanation & Answer
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Running head: ACCOUNTING AND FINANCE
Accounting and Finance
Student Name
Affiliated Institution
1
ACCOUNTING AND FINANCE
2
Accounting and Finance
1. Fait Value and Fair Market Value
Fair value accounting is a representation of the estimated worth of different liabilities and
assets that have to be listed in a firm’s books.
Fair market value in accounting is the price at which two parties are willing to make
payment for a liability or assets given three primary conditions. First, both parties agree to the
asset or liability condition. Second, none of the parties is being forced to sell or buy the asset
or liability (Goh et al., 2015). Lastly, there is no pressure in terms of time to complete the
transaction.
FASB (Financial Accounting Standards Board) implemented the valuation principle to
standardize financial instrument...