What is fair value accounting and how is it related to the accounting for trading securities?

Can anyone tell me: What is fair value accounting and how is it related to the accounting for trading securities?


Thank you!What is fair value accounting and how is it related to the accounting for trading securities?
In the futures market, fair value is the equilibrium price for a futures contract. This is equal to the spot price after taking into account compounded interest (and dividends lost because the investor owns the futures contract rather than the physical stocks) over a certain period of time.





The ';fair value'; quoted on TV refers to the relationship between the futures contract on a market index and the actual value of the index. If the futures are above fair value then traders are betting the market index will go higher, the opposite is true if futures are below fair value...What is fair value accounting and how is it related to the accounting for trading securities?
In accounting we have to rationalize relevance and reliability, as outlined in the FASB's conceptual framework. In financial reporting this means fair value vs. historical costs. On many physical assets, GAAP is recording at historical costs. However, on trading securities and many intangible assets, its irrelevant to record them at historical costs.





Companies follow a fair value hierarchy, when reporting costs. There are three levels, based on reliability.