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3 September, 07:05

Do you think that contracts or other financial instruments that do not have readily available market prices should be accounted for at fair value

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  1. 3 September, 10:16
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    Fair value is defined as, a rational and unbiased estimate of the potential market price of a good, service, or asset. It takes into account such objective factors as: acquisition/production/distribution costs, replacement costs, or costs of close substitutes.

    Since this is an opinion question, either answering yes or no is correct, but you have to say why.

    If I understand the question correctly, and the question isn't missing any parts, I would assume it's asking if you should put value on contracts as a document and other financial instruments.

    I was going to say no, but because contracts can be transferred or used as currency, I would say yes.

    If you say yes I would argue that giving a fair value of the contracts would make them more legal and have more bearing in a place of business. That it would prevent the fluctuation of value on that contract based on other factors like profit/loss and whether or not you transferred, changed, etc. the contract. I would argue that to protect that contract and other financial instruments, and the holders stake in it, you should create a fair value for it.

    If you say no, I would argue that the contract can already be treated as a form of currency, and because of that it should not have a fair value placed on it. I would also argue that because contracts often times state the value of that contract within itself, that it should not have a fair value. And finally, I would argue that because with time, the value of items change, you should not place a fair value on a document that can be changed and can lose or gain value with time based on the purposed information in the contract.
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