scholarly journals The relationship between the financial crisis and the measurement of fair value in financial statements

2014 ◽  
pp. 43-51
Author(s):  
Birutė Gudonytė ◽  
Kristina Rudžionienė
Keyword(s):  
Financial Crisis ◽  
Information Disclosure ◽  
Global Financial Crisis ◽  
Relevant Information ◽  
Fair Value ◽  
Financial Reports ◽  
Value Evaluation ◽  
True Value ◽  
The Global Financial Crisis ◽  
Value Measurement

Literature suggests that the main goal of fair value evaluation is more reliable and relevant information disclosure to external users. However, in 2007, at the beginning of the global financial crisis, the benefits of fair value, as well as the opportunity to provide information about the true and fair view of a company, were called into question. Opponents of the fair value claim that the fair value was the main reason for the global financial crisis, but the advocates disagree; therefore, the correlation between the fair value and crisis is controversial. It reflects the problem of the thesis: how the system of fair value accounting influenced the financial crisis? Object of the paper: the method of true value measurement. Aim of the paper: to evaluate the measurement of fair value and its potential impact on the financial crisis in Lithuania. After analysing the evaluation of 25 Lithuanian listed companies by disclosure of fair value, it can be state that stock companies evaluate more property than liabilities by disclose the fair value. A correlation coefficient was determined while assessing the correlation between the application of fair value in financial reports and financial crisis in Lithuania, but it disapproved the correlation.

Role of Accounting and Audit in the Recent Financial Crisis

2013 ◽  
pp. 91-98
Author(s):  
Alev Dilek Aydin
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Fair Value ◽  
Financial Reports ◽  
Historical Cost ◽  
The Public ◽  
Creative Accounting ◽  
Recent Financial Crisis ◽  
Audit Reports

This study aims to assess the role of accounting and auditing in the recent financial crisis. After each crisis, there have been serious discussions concerning the reasons behind those crises. However, no consensus has yet been achieved until now. In this context, the analysis of the relationships among financial crisis, accounting, and auditing is of utmost importance in better evaluating the structural reasons behind the crisis. There are several points that this chapter aims to analyze to indicate the contributions of accounting and auditing to the recent global financial crisis. These points are: impacts of disregarding the main principles of accounting, the wide use of fair value accounting over cost-based accounting, incorrect and misleading financial and audit reports, applications of creative accounting, and lack of transparency and weaknesses of the auditing process. The debates generally concentrate on the use of fair value (mark-to-market) accounting in the financial reports as opposed to the historical cost method. It should be emphasized that accounting is very important as a key mechanism of market economies, because of its crucial role in the functioning of the markets in accordance with the public interest. The chapter concludes with several suggestions by taking the fact into consideration that accounting and auditing systems should be revised for the better protection of interests of the third parties such as investors, potential investors, and the state.

Role of Accounting and Audit in the Recent Financial Crisis

2013 ◽  
pp. 1496-1503
Author(s):  
Alev Dilek Aydin
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Fair Value ◽  
Financial Reports ◽  
Historical Cost ◽  
The Public ◽  
Creative Accounting ◽  
Recent Financial Crisis ◽  
Audit Reports

This study aims to assess the role of accounting and auditing in the recent financial crisis. After each crisis, there have been serious discussions concerning the reasons behind those crises. However, no consensus has yet been achieved until now. In this context, the analysis of the relationships among financial crisis, accounting, and auditing is of utmost importance in better evaluating the structural reasons behind the crisis. There are several points that this chapter aims to analyze to indicate the contributions of accounting and auditing to the recent global financial crisis. These points are: impacts of disregarding the main principles of accounting, the wide use of fair value accounting over cost-based accounting, incorrect and misleading financial and audit reports, applications of creative accounting, and lack of transparency and weaknesses of the auditing process. The debates generally concentrate on the use of fair value (mark-to-market) accounting in the financial reports as opposed to the historical cost method. It should be emphasized that accounting is very important as a key mechanism of market economies, because of its crucial role in the functioning of the markets in accordance with the public interest. The chapter concludes with several suggestions by taking the fact into consideration that accounting and auditing systems should be revised for the better protection of interests of the third parties such as investors, potential investors, and the state.

THE CRISIS AND FAIR VALUES: ECHOES OF EARLY TWENTIETH CENTURY DEBATES?

2014 ◽  
Vol 41 (1) ◽  
pp. 35-60 ◽  
Author(s):  
Garen Markarian
Keyword(s):  
Twentieth Century ◽  
Financial Crisis ◽  
Conceptual Framework ◽  
Global Financial Crisis ◽  
Fair Value ◽  
Lessons Learned ◽  
Fair Value Measurement ◽  
Value Measurement ◽  
Secondary Characteristic

The recent global financial crisis has led to extensive criticism of the role of accounting and its use of fair value measurement in causing and spreading the crisis. This paper argues that the debate surrounding fair value vs. historic cost, and relevance versus reliability, is nothing new; it was at the center of early accounting discussions in the AAA (especially by A.C. Littleton and W.A. Paton), the AICPA (especially G.O. May), and the SEC. Although prominent accounting scholars and practitioners in postdepression 1929 focused on the use of historic cost, the paper discusses the decision of the IASB/FASB to move reliability to a secondary characteristic in its recent conceptual framework. This action ignores lessons learned from a century of research, teaching, and practice of accounting.

Accounting Standards in the U.S. Banking Industry during the Financial Crisis

2016 ◽  
pp. 141-154
Author(s):  
Jorge A. Romero
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Global Financial Crisis ◽  
Fair Value ◽  
Fair Value Accounting ◽  
Subprime Mortgage ◽  
Real Estate Bubble ◽  
Mortgage Backed Securities ◽  
Real Estate Prices ◽  
The Global Financial Crisis

The global financial crisis became evident when U.S. house prices fell related to the subprime mortgage-backed securities crisis. In the years preceding the financial crisis of 2008, there was a real estate bubble that pushed U.S. real estate prices to high levels, and at the same time financial institutions were holding large amounts of subprime mortgage-backed securities. Fair value accounting (FVA) and its link to the recent global financial crisis has been a focus of discussion and interest for accounting researchers, financial analyst and policy makers. During the financial crisis, a large percentage of assets in the balance sheets of banks were calculated using fair value. The main concern was that those assets were calculated using mark-to-model accounting (Goh, Ng, & Yong 2009). There are still contradictory conclusions on the implications of fair value accounting and the global financial crisis (Laux & Leuz, 2009). The main objective of this chapter is to provide a better understanding of the global financial crisis and of the mechanisms of fair value accounting.

Transparency of Monetary Policy in the Postcrisis World

2019 ◽  
pp. 286-334
Author(s):  
Nergiz Dincer ◽  
Barry Eichengreen ◽  
Petra Geraats
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Information Disclosure ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Forward Guidance ◽  
Policy Tool ◽  
The Us ◽  
The Global Financial Crisis ◽  
Monetary Policy Transparency

This chapter analyzes whether and to what extent central banks have continued to be more transparent in their conduct of monetary policy in the postcrisis period. It presents a monetary policy transparency index, that measures the degree of information disclosure about various aspects of the policymaking process for 112 central banks from 1998 until 2015. Compared to previous research, the index has been updated, revised and refined to better capture developments since the global financial crisis, with and explicit focus on monetary policy, more emphasis on the timely disclosure of information, and greater granularity, including for forward guidance. The development and challenges of increasing monetary policy transparency are further analyzed in case studies of the European Central Bank, the US Federal Reserve and the Bank of England, which illustrate how these prominent central banks have deployed greater transparency as a policy tool in the aftermath of the financial crisis.

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