The Problem of Proof When Using the Fair Value Measurement

Abstract

The study aims to analyze the issue of proof when measuring at fair value by reviewing
accounting thought by standing on the theoretical background of fair value, defining its concept
and clarifying its specificities, in order to test its proof mechanisms through verifiable and
objective evidence convention as it is concerned with that. The subject of the audit is then
addressed, since the task of proving lies with the auditor by gathering sufficient information and
evidence of the validity and objectivity of the fair value estimates. This is done by studying what
was stated in the Algerian financial accounting system by analyzing the various legal texts related
to it, and by analyzing what was stated in the Algerian auditing standards, especially Standard No.
540 related to this. To achieve the aim of the study, a bibliographic survey of accounting literature
is relied upon, in addition to the use of legal texts.
The study concluded that estimating the fair value according to the market does not pose any
problem in the field of evidence, objectivity and bias, but the efficient market is the only one that
expresses that. Standard No. 540 is also a guide for the auditor to help audit fair value estimates by
gathering sufficient evidence to remove the process from bias conditions. However, it remains
insufficient to address the field problems associated with estimating the fair value in the absence of
an efficient market, or its complete absence for some assets, as reliance is made on internal models
based, in particular, on the cash-flow-based measurement techniques.