Iscussions: Fair value accounting & Indirect vs. Direct method for reporting cash flows.
Please just answer and discuss the following (1 page for each prompt):
1) What is the evidence of the trend toward fair value accounting? What are some potential disadvantages of fair value accounting?
2) For the current year, Bearings Company decided to switch from the indirect method to the direct method for reporting cash flows from operating activities on the statement of cash flows. Will the change cause the amount of net cash flow from operating to be (a) larger, (b) smaller, or (c) the same as if the indirect method had been used? Explain.
Warren, C. S., Reeve, J. M., & Duchac, J. E. (2012). Financial accounting. (12th ed.). Mason, OH: South-Western Cengage Learning.