The plus characteristic of using the fair market value to comply with International Financial Reporting standards is also due to the reason that the derivatives investor is always set on alert mode with a list of the past as well as the latest blow by blow presentation of fair market values of the derivative that he is has already put his hard earned money.

The financial accounting data that uses the fair market values is a definite plus to the persons or company presenting such financial data because fair market values are neutral amounts and not based on the estimates or biases of the person or company responsible for the presentation of such financial data. Likewise, the use of the fair market values in the preparation of financial data is a big plus because it satisfies the accounting theory of substance over form.

Substance over form can be defined also as recording only what is important and not whether the financial statements are presented in short form, in long form, in beautifully engrossed reports, in high quality printing paper, or otherwise but rather what the financial statements will do in terms of helping the investors in the derivatives market as well as investors in other types of business to make better decisions. This is one of the countless reasons why the financial accounting data using the fair market as well as the list of the prior market values is a very big plus.

Also, the use of fair market values is a big plus because it also follows the accounting principle of conservatism. Conservatism means that the investor or corporation must present financial accounting data that has the least effect on the shareholders’ equity portion of the financial statement, more specifically the balance sheet. Conservatism means that the people accomplishing the financial accounting data must recognize all estimated future losses but must not record estimated future gains.

In this light, the fair market values are a good example of the application of the conservatism principle. For, the fair market value is the agreed price that the seller and the seller of an asset that includes a derivative or two. Conservatism is applied here because the accountant or other accounting personnel generates accounting data recorded what has transpired which is the agreed selling and purchase price of the asset. Also, the financial statement is a plus if fair market values are used because it follows the accounting principle of adequate disclosure.

Implementing adequate disclosure means that the company or the person responsible for the financial statements must present all relevant, reliable as well as understandable information needed to make an informed decision. Simply, the preparers of the financial statements must present the accounting information with the end in mind that the financial data must not be misleading. This shows that presenting financial data with total disregard of the fair market values would definitely make the financial statements a bit misleading.

The use of the fair market values would produce a big plus in the preparation of the notes to the financial statements because the notes would be more realistic. Whereas, not using the fair market values would not be a plus. For, only a few investors would be interested in using a financial accounting data that is based on the estimates mathematically done in the head of the accountant or other persons working in the corporation with the responsibility of presenting financial accounting information.

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