Final answer:
Arguments for market value accounting for DTIs include accurate reflection of current market conditions, improved transparency and relevance for investors, and better capture of the present discounted value which aids in economic decision-making, contributing to more efficient markets.
Step-by-step explanation:
Arguments for the use of market value accounting, also known as fair value accounting, for Deferred Tax Items (DTIs) include the premise that this method reflects current market conditions and provides a more accurate and relevant valuation of a company's financial status. Market value accounting allows for the immediate recognition of gains and losses based on current market prices, making financial statements more transparent and useful for investors. Importantly, using market values can improve decision-making by providing a clearer picture of potential investment rewards and risks, thereby influencing the effective allocation of resources in the economy.
Furthermore, market value accounting can create a stronger correlation between a company's reported financial status and its underlying economic realities. This is because market value better captures the present discounted value of future cash flows, thus enhancing the comparability and relevance of financial information. By reflecting the present discounted value, market value accounting aligns with fundamental economic principles that underpin a multitude of non-finance areas, like evaluating capital investments, government proposals, and environmental policies.
Ultimately, market value accounting can contribute to more dynamic and responsive financial markets, where prices better reflect emerging information and investors can make more informed decisions. Consequently, the market is likely to reach equilibrium with greater efficiency due to the timely reflection of information in financial statements.