How have
            US
            banks adopted the Financial Accounting Standards Board's Level 3 fair value disclosure rules?

This study asks the following question with respect to level 3 fair value assets and liabilities: are level 3 fair value assets and liabilities being measured accurately? An argument is made that since level 3 markets do not exist (as defined in ASC 820), it is not possible to determine a level 3 value. Data is examined, both pre- and post- SFAS No. 157 with respect to a specific level 3 asset that can be found on the balance sheet of most publically traded financial institutions, mortgage loan servicing rights. The data suggests that the FASB’s attempt to clarify fair value had no effect on the levels of capitalization of mortgage loan servicing rights. An additional argument is made that the language in ASC 820 undermines the requirement that level 3 fair values reflect a “market” value rather than an “investment” value.

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Valuation Implications of FAS 159 Reported Gains and Losses From Fair Value Accounting for Liabilities

Journal of Accounting Auditing & Finance ◽

10.1177/0148558x211017837 ◽

2021 ◽

pp. 0148558X2110178

Author(s):

Sung Gon Chung ◽

Cheol Lee ◽

Gerald J. Lobo ◽

Kevin Ow Yong

Keyword(s):

Stock Returns ◽

Accounting Standards ◽

Institutional Ownership ◽

Fair Value ◽

Negative Association ◽

Financial Accounting ◽

Fair Value Accounting ◽

Economic Implications ◽

Current Period ◽

Gains And Losses

This study examines the economic implications of fair value liability gains and losses arising from the adoption of Statement of Financial Accounting Standards No. 159 (hereafter, FAS 159). We find a positive correspondence between a firm’s FAS 159 fair value liability gains and losses and current period stock returns, consistent with the notion that these gains and losses are priced by equity investors. However, further analysis indicates that fair value gains and losses from liabilities have a statistically significant negative association with future returns, suggesting that investors misprice this earnings component and subsequently correct the mispricing. We also find that the negative association for fair value gains is stronger for firms with lower levels of institutional ownership.

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Determinants and Consequences of Firms' Derivative Accounting Decisions

Journal of Financial Reporting ◽

10.2308/jfr-2019-0014 ◽

2020 ◽

Vol 5 (1) ◽

pp. 81-114 ◽

Cited By ~ 1

Author(s):

Spencer Pierce

Keyword(s):

Financial Reporting ◽

Accounting Standards ◽

Fair Value ◽

Financial Accounting ◽

Firm Risk ◽

Accounting Firms ◽

Earnings Volatility ◽

Hedge Accounting ◽

Reported Earnings ◽

Jel Classifications

ABSTRACTFinancial accounting standards require derivatives to be recognized at fair value with changes in value recognized immediately in earnings. However, if specified criteria are met, firms may use an alternative accounting treatment, hedge accounting, which is intended to better represent the underlying economics of firms' derivative use. Using FAS 161 disclosures, I examine determinants of hedge accounting use and the effects of hedge accounting on financial reporting and capital markets. I find variation in firms' hedge accounting use and provide evidence that compliance costs of applying hedge accounting affect firms' decision to use hedge accounting. Firms decrease their reported earnings volatility via derivatives that receive hedge accounting and could further decrease their earnings volatility if hedge accounting were applied to all their derivatives. Inconsistent with arguments given for using hedge accounting, I fail to find a decrease in investors' assessments of firm risk from using hedge accounting.JEL Classifications: M40; M41; G32.

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MENGUPAS PERSOALAN STANDAR AKUNTANSI KEUANGAN - GOODWIL DI BERBAGAI NEGARA : SUATU PENDEKATAN STUDI LITERATUR

Jurnal Riset Akuntansi Dan Bisnis Airlangga ◽

10.31093/jraba.v2i2.48 ◽

2017 ◽

Vol 2 (2) ◽

Author(s):

Deddy Kurniawansyah

Keyword(s):

Research Method ◽

Intangible Assets ◽

Accounting Standards ◽

Financial Statements ◽

Fair Value ◽

Financial Accounting ◽

International Accounting Standards ◽

Fair Value Accounting ◽

Literature Study ◽

Accounting Standard

This literature study explains and describe the development of the concept of goodwill from the perspective of accounting by observing and describing until the development at this time, discusses differences in accounting standards of goodwill applicable in some countries, and explains the things that contradict the goodwill. This research method used qualitative with literature study. The results of this study are in some countries, the concepts and rules on goodwill accounting have undergone various changes, including international accounting standards issued by the IASC. Initially goodwill is capitalized and amortized over no more than 20 years. But, along with the increasing use of fair value accounting in accounting standards, thetreatment for goodwill also experienced a shift that is eliminated by the amortization method is replaced by doing impairment test to goodwill. The results of this study contribute as add to the treasury of financial accounting literature, especially accounting treatment of goodwill as intangible assets in the financial statements of various countries such as Indonesia, America and the England.Keyword :Goodwiil, Impairment, Financial Accounting Standard

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A Note On Accounting For Employee Stock Options When Reporting Diluted Earnings Per Share Under The Treasury Stock Method

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v6i10.2477 ◽

2011 ◽

Vol 6 (10) ◽

Author(s):

David T. Doran

Keyword(s):

Stock Options ◽

A Priori ◽

Market Price ◽

Accounting Standards ◽

Fair Value ◽

Financial Accounting ◽

Employee Stock Options ◽

Financial Accounting Standards Board ◽

Earnings Per Share ◽

Free Environment

Firms must currently apply the fair value method in determining the amount of employee compensation incurred in the case of employee stock options.  Current GAAP also requires that for purposes of calculating diluted earnings per share (EPS), the treasury stock method be applied where the assumed proceeds from exercise of the optioned shares is used to purchase shares of the firm’s stock at its average market price of the earnings period.  These incremental shares increase the denominator for purposes of calculating diluted EPS.  These requirements are consistent across the pronouncements of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).  This study extends the work of Doran (2005) and Doran (2008).  These previous studies found that applying the treasury stock method where shares are assumed purchased at the average for the period price (instead of end of year price) understates the number of incremental shares (the denominator), which overstates diluted EPS.  However, these previous works assumed that no shares were actually purchased for the treasury during the earnings period.  The FASB indicates one reason that the average for the period price is appropriate is because if treasury shares purchases were to occur, “the shares would be purchased at various prices, not at the price at the end of the period.”  This study tests the notion that the average for the period price is appropriate under circumstances where the firm actually purchases shares for the treasury at its average market price during the earnings period.  This paper employs a simple one period model that assumes a risk free environment with complete certainty.  The model allows comparison of computed EPS with an a priori known, correct amount.  Consistent with Doran (2005) and Doran (2008), the results here again indicate that assuming purchase of treasury shares at their average market price of the earnings period understates the EPS denominator which results in EPS overstatement.  Correct diluted EPS is derived when the shares assumed purchased under the treasury stock method are acquired at the higher period ending market price.

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Fair value accounting volgens de IASB en Limperg

Maandblad Voor Accountancy en Bedrijfseconomie ◽

10.5117/mab.79.16306 ◽

2005 ◽

Vol 79 (4) ◽

pp. 125-131

Author(s):

Henk Langendijk

Keyword(s):

Accounting Standards ◽

Fair Value ◽

Financial Accounting ◽

Fair Value Accounting ◽

Zeer Veel

Fair value is een belangrijk waardebegrip wat in zeer veel International Financial Accounting Standards (IFRS) is opgenomen, waarbij in bepaalde gevallen ook de ongerealiseerde waardestijgingen in de winst- en verliesrekening worden opgenomen. Limperg zag fair value (= de directe en indirecte opbrengstwaarde) niet als een waardebegrip op de voorgrond maar op de achtergrond. Waardering tegen vervangingswaarde had voor hem het primaat. Toch kan ook volgens Limperg fair value wel worden toegepast. Hierbij moet worden gedacht aan impairments van materiële vaste activa (in zijn taalgebruik extra-afschrijvingen) en waardering van vaste activa die worden aangehouden voor de verkoop (en dus niet meer dienstbaar aan de productie). Voorts is fair value voor hem ook mogelijk als waarderingsgrondslag bij zelfstandige vruchtdragers (effecten en woonhuizen), indien deze fair value gelijk is aan de vervangingswaarde. Het direct verantwoorden van de ongerealiseerde waardestijgingen van zelfstandige vruchtdragers ging hem te ver. Deze stijgingen moeten volgens hem op een herwaarderingsreserve worden geboekt. Dit is een belangrijk verschil met de IFRSs waarbij voor bepaalde effecten en voor vastgoedbeleggingen – mits als waarderingsgrondslag voor fair value is gekozen – directe verantwoording van ongerealiseerde waardestijgingen in de winst- en verliesrekening is voorgeschreven.

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An Evaluation Of The Implementation Of Fair Value Accounting: Impact On Financial Reporting

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v9i1.934 ◽

2011 ◽

Vol 9 (1) ◽

Author(s):

Karen T. Cascini ◽

Alan DelFavero

Keyword(s):

Financial Reporting ◽

Accounting Standards ◽

Fair Value ◽

The United States ◽

Financial Accounting ◽

Financial Assets ◽

Financial Accounting Standards Board ◽

Continuous Change ◽

Fair Value Accounting ◽

The Cost

The accounting industry is in a state of continuous change.  In the United States, the historical cost principle has traditionally been the foundation of accounting.  Until recently, assets and liabilities have been required to be recorded at their acquisition prices, with the exception of designated financial assets and financial liabilities.  However, the Financial Accounting Standards Board (FASB) has now created accounting standards that are distant from the cost principle.  Statement of Financial Accounting Standards No. 157: Fair Value Measurements, issued in September 2006 (FAS157, now codified as ASC 820) and Statement of Financial Accounting Standards No. 159: The Fair Value Option for Financial Assets and Financial Liabilities, created in February 2007 (FAS159, now ASC 825-10-25), significantly increases the viability of fair value accounting. The purpose of this paper is to illustrate the benefits and pitfalls of fair value and the corresponding affects on various stakeholders.

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The FASBs Concepts Statement On Cash Flows And Present Value

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v19i4.2186 ◽

2011 ◽

Vol 19 (4) ◽

Author(s):

Stanley Martens ◽

Thomas Berry

Keyword(s):

Cash Flow ◽

Accounting Standards ◽

Fair Value ◽

Cash Flows ◽

Financial Accounting ◽

Financial Accounting Standards Board ◽

Present Value ◽

Numerical Examples ◽

Flow Information

In February 2000, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Concepts No. 7, Using Cash Flow Information and Present Value in Accounting Measurements. In this document the FASB asserts without proof that a present value computation along its lines will provide a good estimate of the fair value of an asset or liability. Using numerical examples provided by the FASB, we attempt to construct arguments in support of the FASB’s claim. We find that such arguments require strong and not at all obvious assumptions about players in hypothetical markets.

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KRITIK TERHADAP KLAIM KEANDALAN PADA HIRARKI PENGUKURAN NILAI WAJAR: Sebuah Literature Review

Wahana ◽

10.35591/whn.v21i2.142 ◽

2019 ◽

Vol 21 (2) ◽

pp. 77-87

Author(s):

Nugroho Wisnu Murti ◽

Indriyana Widyastuti

Keyword(s):

Literature Review ◽

Accounting Standards ◽

Fair Value ◽

Review Literature ◽

Financial Accounting ◽

Third Party ◽

Financial Accounting Standards Board ◽

Fundamental Study ◽

Professional Assessment ◽

Value Hierarchy

This article provide consideration for the Indonesian Financial Accounting Standards Board that requires a review of Indonesia's Financial Accounting Standards (PSAK) 68 concerning Measurement of Fair Value. Fair Value has potential misinterpretation definition between price and value. This potential misinterpretation is indicated to be the rationale put forward in the fair value hierarchy which is indicated unfair. This potential based on claims at each level which can be questioned with the existence of aggressive discretionary issues and the analogy of financial statement analysis. However, this problem had been proven getting down by involvement of independent and professional assessment. Therefore, fair value hierarchy has the same potential of reliability by the third party. If each level has the same potential, this hierarchy can be removed to avoid misinterpretation by users of financial statements. The obligation to disclose the basis of valuation is fairer to be implemented than the hierarchy which is have potensial misinterpretation. This opinion was not without foundation, because this article based on a literature review that starts from: 1) study of the relevance of the Indonesian Financial Accounting Standards concerning fair value with the Indonesian Assessment Standards; 2) fundamental study to interpret fair value based on review literature; and 3) study of allegations of the same potential submitted in the direction of fair value as regulated in PSAK 68. Keywords: fair value hierarchy, riliability, agresive discretionary, PSAK 68

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Stock Option Expense: The Sword of Damocles Revealed

Accounting Horizons ◽

10.2308/acch.2001.15.4.311 ◽

2001 ◽

Vol 15 (4) ◽

pp. 311-327 ◽

Cited By ~ 45

Author(s):

Christine A. Botosan ◽

Marlene A. Plumlee

Keyword(s):

Accounting Standards ◽

Fair Value ◽

Stock Option ◽

Financial Accounting ◽

Financial Accounting Standards Board ◽

Return On Assets ◽

Earnings Per Share ◽

Disclosure Requirements ◽

Differences Of Opinion ◽

Fortune Magazine

Statement of Financial Accounting Standards (SFAS) No. 123 is one of the most controversial accounting standards ever issued by the Financial Accounting Standards Board (FASB 1995) (SFAS No. 123, para. 376). More than five years have passed since SFAS No. 123 first required firms to either recognize or disclose stock option expense based on the fair value of options granted. In light of the fractious debate surrounding its passage and ongoing differences of opinion regarding the usefulness of stock option expense data, this paper reports how the standard impacts firm performance. This study examines the effect of stock option expense on the diluted earnings per share and return on assets of 100 firms identified by Fortune magazine as “America's Fastest-Growing Companies.” We find that stock option expense has a material impact on the performance measures for a majority of our sample firms. Moreover, our analysis predicts stock option expense will grow over the next several years, potentially doubling in magnitude during that time. We also document some noncompliance with the disclosure requirements of SFAS No. 123, finding that 12 percent of the sample firms provided incomplete information during the most recent year examined.

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