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Fair Value Accounting (fair + value_accounting)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting80%

Selected Abstracts

Fair Value Accounting and the Financial Crisis: Messenger or Contributor?,

ACCOUNTING PERSPECTIVES, Issue 3 2009
Michel L. Magnan
ABSTRACT This commentary discusses how fair value accounting (FVA) affects the nature of financial reporting, especially for financial institutions that were deeply affected by the 2007-9 financial crisis. Toward that end, I address four questions. First, I review FVA's role in financial reporting, emphasizing its development over time. While the commentary's focus is on the interface between financial instruments and FVA, its reach extends well beyond financial instruments. Thereafter, I discuss the measurement and valuation challenges that arise from the use of FVA in financial reporting. Then, I analyze the evidence, analytical and empirical, on the role that FVA may have played in the financial crisis of 2007-9. Since, to some extent, the crisis is still unfolding, there is limited yet very insightful empirical evidence on this issue. The evidence does suggest that FVA, in combination with its use by regulators, may have severely undermined the financial condition of some institutions. The effect was amplified for institutions holding assets in markets that saw their liquidity dry up during the crisis. In other words, FVA may have amplified the crisis. Finally, I discuss some implications that we can draw from the crisis about the merits and risks underlying FVA. For instance, I conclude that, in a search for relevance, the use of FVA in financial reporting may accelerate its disconnection from a firm's business reality. [source]

The contribution of international accounting standards to implementing NPM in developing and developed countries

PUBLIC ADMINISTRATION & DEVELOPMENT, Issue 5 2007
Andrés Navarro Galera
Abstract In recent years, numerous countries have undertaken administrative reforms to implement New Public Management (NPM) postulates. The implementation of NPM involves new information needs for decision taking by public managers. In this context, public sector accounting plays a key role as an information system for the successful implementation of NPM. The International Federation of Accountants (IFAC) is undertaking an international accounting harmonisation project to establish high-quality public sector standards to meet the new information requirements under NPM worldwide. This article examines the capability of IFAC accounting measurement bases to meet information needs under NPM postulates, in both developing and developed countries, analysing the differences between these types of countries. The National Accounting Standard Setters (NASS) of 47 countries were asked about the usefulness and viability of Fair Value Accounting (FVA) to implement NPM postulates, especially those concerning improved efficiency, enhanced information transparency and benchmarking analysis. Copyright © 2007 John Wiley & Sons, Ltd. [source]

Valuation-based accounting research: Implications for financial reporting and opportunities for future research

ACCOUNTING & FINANCE, Issue 1 2000
Mary E. Barth
This paper discusses the relation between financial reporting research and practice, particularly standard setters. Many studies addressing financial reporting issues use a valuation approach. The paper describes alternative approaches to valuation research and summarises the findings relating to four major current issues: fair value accounting for financial, tangible, and intangible assets, cash flows versus accruals, recognition versus disclosure, and international harmonisation of accounting standards. The summaries include identifying what standard setters and others would like to learn from research, what we have learned, and what is left to learn. The paper concludes with observations about future financial reporting academic research. [source]

Fair Value Accounting and the Financial Crisis: Messenger or Contributor?,

ACCOUNTING PERSPECTIVES, Issue 3 2009
Michel L. Magnan
ABSTRACT This commentary discusses how fair value accounting (FVA) affects the nature of financial reporting, especially for financial institutions that were deeply affected by the 2007-9 financial crisis. Toward that end, I address four questions. First, I review FVA's role in financial reporting, emphasizing its development over time. While the commentary's focus is on the interface between financial instruments and FVA, its reach extends well beyond financial instruments. Thereafter, I discuss the measurement and valuation challenges that arise from the use of FVA in financial reporting. Then, I analyze the evidence, analytical and empirical, on the role that FVA may have played in the financial crisis of 2007-9. Since, to some extent, the crisis is still unfolding, there is limited yet very insightful empirical evidence on this issue. The evidence does suggest that FVA, in combination with its use by regulators, may have severely undermined the financial condition of some institutions. The effect was amplified for institutions holding assets in markets that saw their liquidity dry up during the crisis. In other words, FVA may have amplified the crisis. Finally, I discuss some implications that we can draw from the crisis about the merits and risks underlying FVA. For instance, I conclude that, in a search for relevance, the use of FVA in financial reporting may accelerate its disconnection from a firm's business reality. [source]

Commentary: Business,Black Swans,and the,Use and Abuse,of a Notion

AUSTRALIAN ACCOUNTING REVIEW, Issue 2 2010
Graeme Dean
Historical enquiry reveals how ideas mutate. This paper traces how ideas and practices underpinning initial understandings of fair value accounting (FVA) have changed as the concept drifted from the utility rate-setting context to that of corporate financial reporting. The recall of history for the purpose of ,learning lessons from the past' has frequently resulted in misunderstandings of the historical record and misapplication of so-called lessons. A more fruitful approach to recalling history is to gain insights into the development of the ideas (good and bad) that have contributed to current predicaments. Initially fair value was the basis for specific pricing calculations related to companies with a highly restricted scope of operations. Later, more by accident than design, the concept became a general purpose application used in the financial statements of highly and freely adaptive companies. The mark-to-market (MtM) dispute emerging in the global financial crisis (GFC) has given rise to a further mutation of the use of FVA. Discarding MtM contradicts what history tells us was the purpose of adopting fair value into accounting for adaptive companies. This analysis also highlights how conducive accounting theory and practice are subject to politicisation. Accounting is an apparently unresisting victim of interested parties' special pleading, resulting in the corruption of its technical function , in this case primarily because it is inconvenient to have accounting data,tell it how it is. [source]