Graeber Companies, Inc.: Examining Impairment of Equity-Owned Investments

ABSTRACT The Graeber Companies, Inc. case illustrates the implications of the Fair Value Measurements Standard (FASB ASC 820 or IFRS 13) and the Fair Value Option for Financial Assets and Financial Liabilities (FASB ASC 825 or IAS 39) on the accounting and auditing issues regarding fair value accounting. Based on an actual company's experience, the case provides an application of the new standards on fair value measurement, which is one major achievement of the FASB/IASB convergence project. Graeber Companies, Inc. is a 100-year-old financial boutique firm that, through its wholly owned and partially owned subsidiaries, is engaged in financial service activities. One of Graeber's proprietary investments is an equity investment in Advisor Group, Inc. (AGI)—an early stage development company. Students evaluate AGI's financial performance and strategic activities, including operating losses, issuance of preferred stock and proposed acquisitions by another investor company relative to its materiality, and potential impairment of Graeber Companies' equity-owned investment. The case study requires a determination of materiality of the equity investment and introduces students to the different valuation techniques such as Discounted Cash Flow Analysis, Public Market Analysis, Precedent Transaction Analysis, and the waterfall schedule method. The usefulness of these methods is then analyzed in determining the fair value of an investment in the situation where there have been no recent market transactions. Through analysis of the financial statements, relevant footnotes, and obtaining/obtained fair market value using different valuation approaches, students make a recommendation on materiality and on the fairness of the Graeber Companies management conclusion that no impairment of its investment in Advisor Group has taken place.

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Valuation of Start-Up Company Using Real and Financial Assets Rate of Return

HOLISTICA – Journal of Business and Public Administration ◽

10.2478/hjbpa-2020-0035 ◽

2020 ◽

Vol 11 (3) ◽

pp. 120-132

Author(s):

Ika Yanuarti Loebiantoro ◽

Jeunifer Nia Listiawan

Keyword(s):

Flow Analysis ◽

Fair Value ◽

Rate Of Return ◽

Financial Assets ◽

Discounted Cash Flow ◽

Asset Return ◽

Start Up ◽

Property Price ◽

Beta Risk ◽

Risk Free Rate

AbstractThe objective of this research is to analyse and describe the valuation of start-up company using the Discounted Cash Flow Analysis. There are several combination of discount rates, including combination of beta, risk free rate and market return. There are several market returns applied in the calculation of the discount rate, such as gold price, crude oil, property price index and IDX composite. The object of research is PT. XYZ, which is a start-up company engaged in the field of software (System & Mobile Application). The results showed that PT. XYZ is a start-up that has a systematic risk (Beta) of 5.1 point, which is lower than the average beta of hi-tech start-up companies. The fair value of PT. XYZ is Rp 3,729,416,128,911. Using a confidence level of 95%, the deviation of company’s value is between Rp102,726,286,407 and Rp7,356,105,971,415. It is concluded that valuing the start-up using real and financial asset return as a benchmark will provide high fair value. The reason is the return in those assets are lower because of lower risk. The lower rate of return will make the value of the start-up company higher. Therefore, investors will request the start-up company to provide higher value.

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

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-03-2016-0031 ◽

2016 ◽

Vol 7 (3) ◽

pp. 202-214 ◽

Cited By ~ 4

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.

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Revised Model for Presentation in Statement(s) of Financial Performance: Potential Implications for Measurement in the Conceptual Framework

Accounting Horizons ◽

10.2308/acch-51543 ◽

2016 ◽

Vol 30 (4) ◽

pp. 485-498 ◽

Cited By ~ 24

Author(s):

Thomas J. Linsmeier

Keyword(s):

Financial Performance ◽

Relevant Information ◽

Fair Value ◽

Measurement Model ◽

Financial Assets ◽

Historical Cost ◽

Performance Reporting ◽

Other Comprehensive Income ◽

Potential Basis ◽

Value Measurement

SYNOPSIS: Current financial performance reporting has led to a focus on earnings per share and a proliferation of both non-GAAP measures and items reported in other comprehensive income. I examine characteristics of some of the more common non-GAAP earnings adjustments to propose a financial performance reporting model that consistently presents information with those characteristics separately. This reporting model focuses on distinguishing operating results from nonoperating results and within those categories presenting recurring amounts separately from nonrecurring amounts. I next explore potential implications for measurement. This analysis identifies conditions when the recognition of incremental unrealized gains or losses (UGLs) in income under a fair value measurement model improves relevance of reported information. The analysis suggests that UGLs provide most relevant information when there are no internal or external constraints affecting management's ability to sell an asset or transfer a liability before maturity or the end of its useful life. When assets/liabilities are constrained from being sold/transferred before maturity or the end of their useful lives, reported UGLs will reverse to zero over time, limiting relevance. This analysis supports measurement of financial assets and investment properties at fair value and provides a potential basis for measuring other assets and liabilities at historical cost.

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Exploring the Relevance and Reliability of Fair Value Accounting

Accounting Economics and Law - A Convivium ◽

10.1515/ael-2020-0086 ◽

2020 ◽

Vol 0 (0) ◽

Author(s):

Yoshitaka Fukui ◽

Shizuki Saito

Keyword(s):

Measurement Method ◽

Fair Value ◽

Faithful Representation ◽

Financial Assets ◽

Financial Instruments ◽

Fair Value Accounting ◽

Fair Value Measurement ◽

Value Measurement ◽

Qualitative Characteristics ◽

Relevance And Reliability

AbstractWhile the FASB had regarded relevance and reliability as two of the most important qualitative characteristics for years, it replaced reliability with faithful representation revising its Concepts Statement No. 2 in 2010. Even if fair values are relevant for the measurement of assets and liabilities, these figures are not necessarily reliable or verifiable. We believe this point is the central message of Ramanna, K. (2019). Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism. Accounting, Economics and Law: A convivium forthcoming. The application of fair value measurement has been substantially extended recently to income recognition of not-for-trading financial instruments and even non-financial assets. Is this extension due to the primacy of relevance over reliability, or the relaxing of requirement for reliability toward faithful representation? Whatever measurement method we use, it is absolutely necessary to construct a system of concepts on which the purpose of measurement should be established. In spite of the fact that any measurement method is a means to intended purposes, if we first chose a particular method and applied it to every situation slavishly, we would become similar to a bogus doctor selling a fake drug as panacea valid for any disease.

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Representing the market perspective: Fair value measurement for non-financial assets

Accounting Organizations and Society ◽

10.1016/j.aos.2014.12.004 ◽

2017 ◽

Vol 56 ◽

pp. 55-67 ◽

Cited By ~ 26

Author(s):

Richard Barker ◽

Sebastian Schulte

Keyword(s):

Fair Value ◽

Financial Assets ◽

Fair Value Measurement ◽

Value Measurement ◽

Market Perspective

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

International Journal of Multicultural and Multireligious Understanding ◽

10.18415/ijmmu.v6i1.507 ◽

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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