scholarly journals Fair value measurements of exchange-traded funds

2015 ◽  
Vol 23 (3) ◽  
pp. 331-347 ◽  
Author(s):  
Wessel Marthinus Badenhorst
Keyword(s):  
Value Relevance ◽  
Fair Value ◽  
Recent Change ◽  
Exchange Traded Funds ◽  
Content Type ◽  
Bid Ask Spread ◽  
Fair Value Measurement ◽  
Investment Portfolios ◽  
Value Measurement ◽  
Fair Value Measurements

Purpose – This paper aims to investigate the extent to which different prices within the bid-ask spread are used for fair value measurements and evaluate the potential consequences thereof. Design/methodology/approach – The paper investigates different Level 1 fair value measurements of exchange-traded funds’ (ETFs) equity investments. Using descriptive methods, it compares actual and stated fair value measurement policies. In addition, comparative value relevance of these measurements is investigated in regression analysis. Findings – Most fair value measurements are based on closing prices, but stated accounting policies and actual measurements frequently differ. Results also show that the bid-close spread of underlying investments is value-relevant in determining the bid-close spreads of ETFs themselves. Research limitations/implications – Findings are specific to unleveraged ETFs, the sample country and sample period used and only apply to investments in listed equities. Conclusions from this study may assist in predicting market perceptions of the risk of listed equity portfolios. Practical implications – This paper sheds light on the practical impact of the recent change in fair value measurement guidance. Originality/value – This study provides evidence on the size of the bid-ask spread of actual investment portfolios and its potential impact. It shows that bid-close spreads of underlying investments are used to price the bid-close spreads of ETFs themselves and that stated and actual accounting policies often differ. Findings imply that standard-setters might be influenced by actual accounting practices.

Fair value, corporate governance, social responsibility disclosure and banks’ performance

2019 ◽  
Vol 19 (1) ◽  
pp. 30-47 ◽  
Author(s):  
Yi Zhang ◽  
Gin Chong ◽  
Ruixin Jia
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Social Responsibility ◽  
Fair Value ◽  
Content Type ◽  
Fair Value Measurement ◽  
Level 3 ◽  
Value Measurement ◽  
Fair Value Measurements ◽  
Corporate Disclosures

Purpose The purpose of this paper is to investigate the interaction between mandatory disclosures and voluntary disclosures of banks and the information content of corporate disclosures on firm performance. Design/methodology/approach Based on the US-listed banks from 2007 to 2015, this paper examines the interplay among the fair-value measurement, corporate governance disclosure and voluntary social responsibility disclosure. In addition, the paper examines the extent of such disclosure of mandatory items (fair-value measurement) versus voluntary items (corporate governance and social responsibility issues) on banks’ performance in terms of their return on equity and return on asset. Findings This paper finds that banks with a higher social responsibility disclosure score and stronger corporate governance tend to have lower percentages of Level 3 fair-value assets. Banks with a higher Level 3 fair-value asset disclosure have a lower financial performance. Practical implications This paper provides evidence of the interplay of various corporate disclosures by banks and implies that banks use fair-value measurements to disguise their poor performance. The findings provide insights for the policymakers, investors and regulators to assess banks’ disclosure. Originality/value This paper extends the study of banks’ fair-value measurements and is the first study to examine the interaction between voluntary and mandatory disclosures. This study sheds lights on the theories of performativity, agency and stakeholder by demonstrating the information contents of corporate disclosures on firm performance.

The effect of accounting methods on financial reporting quality

2018 ◽  
Vol 60 (6) ◽  
pp. 1401-1411
Author(s):  
Andrain Hadiyanto ◽  
Evita Puspitasari ◽  
Erlane K. Ghani
Keyword(s):  
Financial Reporting ◽  
Palm Oil ◽  
Reporting Quality ◽  
Fair Value ◽  
Financial Information ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Historical Cost ◽  
Fair Value Measurement ◽  
Value Measurement

Purpose This study aims to examine the relationship between accounting measurement method of biological asset and financial reporting quality. Specifically, this study examines whether using fair value method or the historical cost method on biological asset provides different financial reporting quality. Design/methodology/approach This study uses data from 38 agricultural companies that are members of the Roundtable on Sustainable Palm Oil. The annual reports of 38 companies from the Palm Oil Growers over a five-year period starting from 2011 to 2014 are analysed. Findings This study shows that companies using historical cost measurement produce less reliable and less relevant information compared to the companies that are using fair value measurement. Research limitations/implications The results in this study imply that the use of fair value measurement improves the quality of financial information. Practical implications This study supports IASB’s justification of developing IAS 41 as the principle-based standard that better represents the financial information related to biological asset and subsequently lead to good accountability and harmonisation practices. Originality/value This study provides evidence on the best measurement to be used in agriculture activities using a larger sample size of few countries. In addition, this study contributes to the existing literature on the effect of accounting methods on financial reporting quality.

Issues on the application of IFRS9 and fair value measurement for Islamic financial instruments

2016 ◽  
Vol 7 (3) ◽  
pp. 202-214 ◽  
Author(s):  
Zurina Shafii ◽  
Abdul Rahim Abdul Rahman
Keyword(s):  
Cash Flow ◽  
Fair Value ◽  
Financial Assets ◽  
Financial Instruments ◽  
Fixed Rate ◽  
Accounting Standard ◽  
Content Type ◽  
Starting Point ◽  
Fair Value Measurement ◽  
Value Measurement

Purpose This paper aims to examine some issues in IFRS9 with regards to classification and measurement of Islamic financial assets. In addition, the paper discusses the Shariah concerns on the use of fair value to measure financial assets. Design/methodology/approach This paper adopts qualitative method via the study of documents and textual analysis of Shariah opinions of scholars and relevant accounting standards. Findings The paper found that the classification and measurement of equity-based Islamic financial assets do not fit into the “default” classification category of amortised cost, as the future cash flow receivable does not constitute solely the payment of principal and interest (fixed rate payment). With regards to fair value measurement, Shariah concern arises during the adoption of fair value at Level 2 (reference of asset values from input other than quoted prices in active markets) and Level 3 (use of discounted cash flow method to arrive to asset valuation) because of the existence of in uncertainty or gharar as compared to Level 1 (fair value referred to quoted prices of similar assets). Practical implications Findings of the paper provide a starting point for a debate and extensive research on issues related to classification and measurement of Islamic financial assets and the use of fair value as a method of subsequent revaluation of Islamic financial assets. The Shariah analysis in the paper is useful for International Accounting Standard Board to engage with Islamic financial institutions and local accounting standard setters to reflect the unique nature of Shariah-compliant financial instruments. The paper serves as a basis to devise technical solutions to address accounting and reporting issues of Islamic financial instruments. Originality/value The paper offers Shariah analysis on the issue of classification, measurement and impairment model for Islamic financial assets. The paper is considered as the first paper that examines areas of possible tensions when applying IFRS9 to the accounting of Islamic financial assets. In addition, the paper has contributed to the literature in Islamic accounting and auditing.

The Impact of Fair Value Measurement for Bank Assets on Information Asymmetry and the Moderating Effect of Own Credit Risk Gains and Losses

2018 ◽  
Vol 93 (6) ◽  
pp. 127-147 ◽  
Author(s):  
Joana C. Fontes ◽  
Argyro Panaretou ◽  
Kenneth V. Peasnell
Keyword(s):  
Credit Risk ◽  
Information Asymmetry ◽  
Fair Value ◽  
Data Availability ◽  
Bid Ask Spread ◽  
Fair Value Measurement ◽  
Gains And Losses ◽  
Value Measurement ◽  
The Impact

ABSTRACT We examine whether the use of fair value measurement (FVM) for bank assets reduces information asymmetry among equity investors (bid-ask spread) and how this is affected by the recognition of own credit risk gains and losses (OCR). Our findings show that FVM of assets is associated with noticeably lower information asymmetry, and that this reduction is more than twice as large when banks also recognize OCR. In addition, we find that the bid-ask spread is incrementally lower for banks that provide more detailed narrative disclosures on OCR. The findings also indicate that the effects of asset FVM and OCR recognition on the bid-ask spread do not simply capture the differences in the characteristics of the banks and the quality of their information environments. Data Availability: All data are available from public sources.

scholarly journals The impact of legal efficacy on value relevance of the three-level fair value measurement hierarchy

2020 ◽  
Vol 59 ◽  
pp. 101259 ◽  
Author(s):  
Lin Liao ◽  
Daifei (Troy) Yao ◽  
Helen Kang ◽  
Richard D. Morris
Keyword(s):  
Value Relevance ◽  
Fair Value ◽  
Fair Value Measurement ◽  
Value Measurement ◽  
The Impact

Challenges in auditing fair value measurement and accounting estimates

2020 ◽  
Vol 18 (1) ◽  
pp. 51-75
Author(s):  
Babajide Oyewo ◽  
Ebuka Emebinah ◽  
Romeo Savage
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Fair Value ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Content Type ◽  
Significant Difference ◽  
Accounting Estimates ◽  
Fair Value Measurement ◽  
Value Measurement

Purpose Following the issuance of International Financial Reporting Standard 13 on fair value measurement (which became operational from January 2013), this study aims to investigate post-implementation challenges in the audit of fair value measurement and accounting estimates in the Nigerian context. Design/methodology/approach Data-collection was through a structured-questionnaire administered on 400 auditors from diverse backgrounds in terms of audit firm size, international affiliation and global presence. Findings Empirical data obtained from 277 auditors were analysed using descriptive statistics, factor analysis, one-way ANOVA, cluster analysis, independent sample t-test and one-way multivariate analysis of co-variance. It was observed that the two highest-ranking and most-prevalent challenges of auditing fair value measurement and accounting estimates are the tendency for managers to manipulate earnings owing to the inability of auditor to effectively test fair value estimates; and the difficulty in testing unobservable inputs due to the application of assumptions and judgement in arriving at estimates by preparers of financial reports. Originality/value While there is no significant difference in the perception of auditors on the audit challenges associated with fair value measurement and accounting estimates, there is a significant difference in the magnitude of audit challenges faced in verifying fair value measurements and accounting estimates across industry sectors. Concerned stakeholders (including but not limited to accounting regulators, auditing standard setters, audit firms, researchers) are importuned to come up with robust and pragmatic measures to curtain these challenges, as the inability of auditors to rigorously verify fair value estimates may jeopardize the very essence of fair value measurement which is to elevate financial reporting quality.

Content and context: “fair” values in China

2017 ◽  
Vol 30 (2) ◽  
pp. 352-377 ◽  
Author(s):  
Ferdinand Balfoort ◽  
Rachel Francis Baskerville ◽  
Rolf Uwe Fülbier
Keyword(s):  
Financial Reporting ◽  
Fair Value ◽  
Governance Structure ◽  
Future Research ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Fair Value Measurement ◽  
Western Market ◽  
Value Measurement ◽  
The Impact

Purpose The evolution of International Financial Reporting Standards (IFRS) was nurtured by economists and accountants loyal to the philosophical basis of what is often referred to as “Western” market economies, being classical and neoclassical contracting theories. The purpose of this paper is to illustrate how a particular Asian cultural attribute (guānxì ) impacts on the efficacy of fair value measurement. Design/methodology/approach Using a literature review and research of studies of the adoption of IFRS in China, studies of both guānxì and fair value in Chinese accounting research, this study unbundles Williamson’s governance structure and contracting theory to examine how guānxì is positioned orthogonally to fair value (market-oriented valuation) principles for financial reporting. This is followed by a case study of the events surrounding the collapse of China Medical Technologies. Findings Guānxì is integral to Asian economies and economic transactions. Resulting conditions, characterised by relational contracting, may not meet the qualitative characteristics of neutrality and faithful representation in fair value measurement of assets and liabilities. The same may be true when insider or “trusted party transaction” values prevail for large ticket transactions among entities in any jurisdiction. Research limitations/implications Future research on the impact of guānxì may be constrained by its often hidden, and yet dynamic, character; and the varieties of its manifestations. Originality/value This study highlights how difficult it may be to achieve both comparability and relevance in the asset and liability recognition and measurement rules in Asian (and possibly also other) economies adopting accounting principles that are developed in a Western context.

scholarly journals Role of Corporate Governance in Increasing the Value Relevance of Earning and Fair Value Measurement of Non-Financial Asset in Indonesia Company

2019 ◽  
Vol 6 (1) ◽  
pp. 91
Author(s):  
Ananta Dian Pratiwi ◽  
Sutrisno Sutrisno ◽  
Aulia Fuad Rahman
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Stock Prices ◽  
Value Relevance ◽  
Accounting Information ◽  
Fair Value ◽  
Financial Assets ◽  
Fair Value Measurement ◽  
Value Measurement

Accounting information is one of many informations that is used in making decisions by investors. Accounting information has value relevance when the information raises investor reactions, meaning that the information is used for decision making that affects stock prices. This study aimed to examine the value relevance of earning value and the fair value measurement of non-financial assets, along with the role of corporate governance in increasing the value relevance of both informations. This study used 142 companies listed on the Indonesia Stock Exchange during 2012-2017 as study samples. Moedaretd Regression Analysis was used as an analytical tool to test the relationship of study variables. The results showed that earning and the fair value measurement of non-financial assets had value relevance. Both of these informations are considered useful by investors for their decision making. Corporate governance was found to play a role in increasing the value relevance of earning and the fair value measurement of non-financial assets. Corporate governance is able to reduce agency conflicts that can cause information to be biased for investors. The existence of corporate governance provides assurance that informations has been fairly presented to investors, thereby increasing value relevance.

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