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Can investors misprice the shares of a firm

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Reference no: EM132794741

Problem 1: International Accounting Standards promote using fair value accounting. One of the objectives of fair value accounting is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability). In the case of an active market for an asset or liability, the fair value would be the current prices which are obtained from the market. Assume that the market is semi-strong form efficient, and accounting under non-ideal conditions is used. Can investors misprice the shares of a firm if they were measured at fair value?

Reference no: EM132794741

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