An extremely interesting summary. "Fair value." Therein lies the rub! I think there are three means of determining "fair" value. One, is a documented publicized amount, such as a stock's share price reported in the newspaper on a given day. Two, in the absence of such a specific amount, is a comparative amount -- as realtors estimate the value of a house by observing the recent sales prices of similar homes nearby. Three, a value determined by a company's internal mechanism or formula. That third is just one of the factors that torpedoed Enron, numerous of its contracts valued and reported on the basis of what management wanted -- management wanting the values that would yield for them the highest salary bonuses. (When Enron was putatively soaring, a skeptical hedge fund guy named Jim Chanos studied the company's financial statement footnotes, finding the sentence, "The market prices used to value these transactions reflect management's best estimates." Chanos immediately thought, "A license to print money." This goes out to CPA firm Arthur Andersen, now deceased and deservedly so.)
An extremely interesting summary.
"Fair value." Therein lies the rub!
I think there are three means of determining "fair" value. One, is a documented publicized amount, such as a stock's share price reported in the newspaper on a given day. Two, in the absence of such a specific amount, is a comparative amount -- as realtors estimate the value of a house by observing the recent sales prices of similar homes nearby. Three, a value determined by a company's internal mechanism or formula. That third is just one of the factors that torpedoed Enron, numerous of its contracts valued and reported on the basis of what management wanted -- management wanting the values that would yield for them the highest salary bonuses.
(When Enron was putatively soaring, a skeptical hedge fund guy named Jim Chanos studied the company's financial statement footnotes, finding the sentence, "The market prices used to value these transactions reflect management's best estimates." Chanos immediately thought, "A license to print money." This goes out to CPA firm Arthur Andersen, now deceased and deservedly so.)
Great summary Pete 👌