Interpreting 'legally permissible in applying fair value guidelines

When issued, FASB Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, sought to bring a consistent definition and framework to the deployment of fair value measurements in accounting. It is expected that the fair value frontier will continue to push outward and eventually encompass more than just financial assets and liabilities. Revisiting the previous definition, it seems clear enough that the land must be accounting-valued based upon its agricultural usage. Agriculture is the only legally permissible use. Transaction costs are the incremental direct costs required to transact in the principal or most advantageous market. As a general rule, such costs do not reduce the fair value of an asset. They ordinarily relate to commissions, legal fees, and other closing costs. Careful judgment is needed in applying fair value accounting rules. A literal interpretation of selected rules can result in deviations from the logical principles upon which they are based.