Fair Value Accounting Fraud New Global Risks and Detection Techniques

Essential guidance on the new fair value rules for accounting managers, auditors, and fraud investigators

Fair Value accounting is emerging as the next prime opportunity for financial statement fraud. Explaining the many complex applications of fair value accounting in the preparation of financial statements, Fair Value Accounting Fraud offers timely guidance on an up-and-coming issue as U.S. and international accounting rules pertaining to the use of fair value accounting continue to change.

You'll find discussion of
* U.S. GAAP and IFRS rules on fair value accounting issues, highlighting the areas most vulnerable to fraud
* Explanations of 75 categories of fair value accounting fraud schemes
* Fraud risk checklist that you can put to immediate use
* Practical detection techniques useful for auditors, investigators and others who rely on financial statements
* Expert advice from Gerard Zack, CFE, CPA, author of Fraud and Abuse in Nonprofit Organizations: A Guide to Prevention and Detection

Comparing US accounting standards to International Financial Reporting Standards-thereby making this book useful worldwide- Fair Value Accounting Fraud helps you understand the new rules and develop new auditing and investigative techniques to enable you to detect potential fraud.

This book will explain the many applications of fair value accounting in connection with accounting for assets, liabilities, revenue and expenses, as well as fair value disclosures in financial statements. To prove fraud, it must be shown that the accounting standards that the financial statements claim to be in conformity with are actually not being complied with they have been intentionally violated or misapplied in some way. Therefore, in each of several categories of financial statement fraud involving fair value issues, the book will: (1) explain US accounting standards (2) compare US accounting standards to International Financial Reporting Standards (thereby making this book marketable worldwide) (3) explain and illustrate how these accounting rules can be exploited to perpetrate financial statement fraud. Specific mis-applications of the accounting rules will be explained and illustrated. The book will also identify red flags of each of the major categories of fair value frauds and include a chapter on fair value fraud issues in non-business financial statements such as with nonprofit organizations (although the vast majority of the book will focus on commercial businesses, since that is where most of the fair value fraud will be). Finally, the book will also explain auditor responsibilities pertaining to fair value issues, as well as best-practices for internal controls over fair value accounting applications.

Preface. Acknowledgments. Part I: Introduction to Fair Value Accounting Fraud. Chapter 1: Overview of Financial Statement Fraud and Fair Value Accounting. Introduction to Financial Reporting Fraud. What Makes It Fraud? Why Financial Reporting Fraud Is Perpetrated. Using One Fraud to Hide Another. Chapter 2: The Use of Fair Value in Financial Statements. Historical Cost versus Fair Value. Sources of Accounting Principles. U.S. GAAP versus IFRS. Fair Value Option Added for U.S. GAAP. Fair Value Defined. International Convergence. Some Principles of Financial Statement Presentation. Effective Dates of Accounting Standards. Impact of Fraud on Financial Statements. Chapter 3: Methods of Determining Fair Value. Introduction. Market Approach. Income Approach. Cost Approach. Internal versus Externally-Developed Valuations. Inputs to Valuation Methods. Fair Value Guidance under IFRS. Availability of Market Evidence. Part II: Asset-Based Schemes. Chapter 4: Investments in Debt and Publicly Traded Equity Securities. Scope of Investments Covered. Sources of U.S. GAAP and IFRS. Classification and Treatment U.S. GAAP. Classification and Treatment IFRS. Reclassifications in General. Reclassifications from the Held-to-Maturity Category. Determination of Fair Value. Active versus Inactive Markets. Temporary versus Other-Than-Temporary Impairments U.S. GAAP. Impairment Losses IFRS. Summary of Fraud Risks. Chapter 5: Ownership Interests in Nonpublic Entities. Sources of U.S. GAAP and IFRS. Introduction. Consolidated Financial Statements. Jointly Controlled Entities versus Jointly Controlled Assets. Equity Method Investments. Proportionate Consolidation. Chapter 6: Loans and Receivables. Sources of GAAP and IFRS. Recognition and Measurement U.S. GAAP. Recognition and Measurement IFRS. Chapter 7: Intangible Assets and Goodwill. Sources of U.S. GAAP and IFRS. Asset versus Expense. Web Site Costs. Measurement. Finite Life Intangible Assets. Residual Value. Indefinite Life Intangible Assets. Impairment Losses. Concluding Remarks. Chapter 8: Business Combinations. Sources of U.S. GAAP and IFRS. Business Combination versus Asset Acquisition. Accounting for Business Combinations. Identification of Intangible Assets. Business Combinations Achieved in Stages. Chapter 9: Asset Impairments. Sources of U.S. GAAP and IFRS. Definition of an Impairment Loss. When to Test for Impairment. Indicators of Impairment of Assets. Extent of Impairment Loss. Reversal of Previous Impairment Losses. Chapter 10: Property and Equipment (Including Investment Properties). Sources of U.S. GAAP and IFRS. Initial Recognition. Measurement after Initial Recognition. Investment Property. Impairment Losses. Part III: Liability-Based Schemes. Chapter 11: Debt Obligations. Sources of U.S. GAAP and IFRS. Measurement. Fair Value Option. Valuation of Debt. Chapter 12: Deferred Revenue. Sources of U.S. GAAP and IFRS. Recognition Customer Loyalty Programs. Multiple Deliverable Arrangements. Chapter 13: Asset Retirement Obligations. Sources of U.S. GAAP and IFRS. Recognition U.S. GAAP. Recognition IFRS. Can a Reliable Estimate Be Determined? Measuring and Recording an Asset Retirement Obligation. Summary Comparison of U.S. GAAP and IFRS. Chapter 14: Guarantees. Sources of U.S. GAAP and IFRS. Recognition U.S. GAAP. Measurement. Recognition IFRS. Part IV: Other Fair Value Accounting Fraud Issues. Chapter 15: Derivatives and Hedging. Sources of U.S. GAAP and IFRS. Definitions and Treatment U.S. GAAP. Definitions and Treatment IFRS. Measurement. Embedded Derivatives. Chapter 16: Assets or Liabilities of Sponsors of Employee Benefit Plans. Sources of U.S. GAAP and IFRS. Recognition and Measurement U.S. GAAP. Recognition and Measurement IFRS. Chapter 17: Contingencies and Provisions. Sources of U.S. GAAP and IFRS. Recognition U.S. GAAP. Amount of Loss to Be Recognized. Recognition IFRS. Measurement. Comparison of U.S. GAAP and IFRS. Chapter 18: Share-Based Transactions. Sources of U.S. GAAP and IFRS. Recognition U.S. GAAP. Measurement U.S. GAAP. Recognition IFRS. Measurement IFRS. Chapter 19: Nonmonetary Transactions. Sources of U.S. GAAP and IFRS. Recognition and Measurement U.S. GAAP. Recognition and Measurement IFRS. Advertising Barter Transactions U.S. GAAP. Advertising Barter Transactions IFRS. Chapter 20: Special Fair Value Issues of Not-for-Profit Organizations. Introduction. Non-Cash Contributions of Assets. Contributed Use of Assets. Promises to Give. Contributed Services. Matching Requirements. Chapter 21: Fair Value Disclosure Issues. Introduction. Sources of Disclosure Requirements. Financial Instruments. Impairment Losses. Uncertainties. Part V: Detection of Fair Value Accounting Fraud. Chapter 22: A Framework for Detecting Fair Value Accounting Fraud. Assessing the Risk of Fraud. Understanding How Fair Value Impacts the Financial Statements. External Factors That Indicate Risk. Internal Risk Factors. Materiality. Internal Controls over Fair Value Accounting. The Risk of Management Override. Framework for Fair Value Accounting Fraud Detection. Auditing Standards. Auditor Independence. Chapter 23: Use of Ratios and Other Analytical Procedures. Analytical Procedures as a Fraud Detection Tool. Horizontal Analysis. Vertical Analysis. Operating Ratios. Customized Ratios. Appendix A: Summary Checklist of Fair Value Accounting Fraud Risks. Appendix B: SEC Office of the Chief Accountant and FASB Staff Clarifications on Fair Value Accounting. Appendix C: Outline of Internal Controls. Bibliography. About the Author. Index.