As the international economic landscape has become increasingly integrated, the argument for the development of uniform global accounting standards now exists. In an effort to achieve this objective, the Financial Accounting Standards Board, as part of the ongoing Convergence Project with the International Accounting Standards Board, released groundbreaking accounting standards, FAS157 & FAS159, in 2006 and 2007, respectively. Modeled after an international accounting standard, these standards pertain to the use of fair value accounting (FVA), and are the first of their kind as they provide a definition of FVA and an option to expand its use to certain financial instruments. While FVA has been argued to enhance financial reporting, there has also been significant controversy as to its application and ambiguity. The focus of this teaching note is to discuss FVA’s application to assets and liabilities, and to present the various effects that the election of the FV Option may have on an entity’s financial statements