Fair Value and Financial Instruments

2015 ◽  
Author(s):  
Andrew Spooner
Keyword(s):  
Fair Value ◽  
Financial Instruments

Judging the Relevance of Fair Value for Financial Instruments

2011 ◽  
Vol 86 (6) ◽  
pp. 2075-2098 ◽  
Author(s):  
Lisa Koonce ◽  
Karen K. Nelson ◽  
Catherine M. Shakespeare
Keyword(s):  
Value Relevance ◽  
Fair Value ◽  
Data Availability ◽  
Financial Instruments ◽  
Counterfactual Reasoning ◽  
Financial Instrument ◽  
Relevance Judgments

ABSTRACT We conduct three experiments to test if investors' views about fair value are contingent on whether the financial instrument in question is an asset or liability, whether fair values produce gains or losses, and whether the item will or will not be sold/settled soon. We draw on counterfactual reasoning theory from psychology, which suggests that these factors are likely to influence whether investors consider fair value as providing information about forgone opportunities. The latter, in turn, is predicted to influence investors' fair value relevance judgments. Results are generally supportive of the notion that judgments about the relevance of fair value are contingent. Attempts to influence investors' fair value relevance judgments by providing them with information about forgone opportunities are met with mixed success. In particular, our results are sensitive to the type of information provided and indicate the difficulty of overcoming investors' (apparent) strong beliefs about fair value. Data Availability: Contact the authors.

Issues and challenges of IFRS 9 in Malaysian Islamic financial institutions: recognition criteria perspective

2021 ◽  
Vol 12 (2) ◽  
pp. 239-257
Author(s):  
Marziana Madah Marzuki ◽  
Abdul Rahim Abdul Rahman ◽  
Ainulashikin Marzuki ◽  
Nathasa Mazna Ramli ◽  
Wan Amalina Wan Abdullah
Keyword(s):  
Financial Institutions ◽  
Financial Reporting ◽  
Business Models ◽  
Fair Value ◽  
Financial Instruments ◽  
Structured Interviews ◽  
Content Type ◽  
Reporting Framework ◽  
Islamic Financial Institutions ◽  
Ifrs 9

Purpose The purpose of this paper is to investigate the effects and challenges of the new amendment of International Financial Reporting Standards (IFRS) 9 in Malaysia from the perspectives of regulators, auditors, accountants and academicians in Malaysian Islamic financial institutions. For the purpose of this study, this paper focuses on the recognition criteria perspective of the standard, which provides a basic understanding of the financial reporting framework. Design/methodology/approach Using 10 series of semi-structured interviews undertaken with key individuals in regulatory bodies, audit companies, full-fledged Malaysian Islamic Banks and Malaysian higher learning institutions. Findings The findings revealed that IFRS 9 strengthens International Accounting Standards 39 in terms of relevance and reliability, recognition of financial instruments and identification of business models. Nevertheless, Islamic financial institutions face challenges in terms of a faithful representation of fair value, substance over form, identification of financial instruments before recognition criteria and the extent of the role of risk management in reducing manipulation in identifying business models. Research limitations/implications This study provides implications to regulators and standard setters in Malaysia to enhance the quality of financial reporting framework and practices in Islamic financial institutions in this country using IFRS 9. Practical implications Practically, the findings of this study can be used by the regulators to resolve the issues that arise in adopting IFRS 9 among Islamic financial institutions to further enhance financial reporting quality. Originality/value The findings of this study are very important to ensure that the adoption of IFRS among Islamic financial institutions are in line with Sharīʿah principles. To date, no studies have been done on the challenges of adopting IFRS 9 among Islamic financial institutions in Malaysia.

scholarly journals FAIR VALUE APPLIED TO FINANCIAL INSTRUMENTS: A STUDY IN THE NATIONAL AND INTERNATIONAL RESEARCHES

2012 ◽  
Vol 4 (2) ◽  
Author(s):  
Tatiane Oliveira Marques ◽  
Charles Albino Schultz ◽  
Gertrudes Aparecida Dandolini ◽  
João Artur De souza ◽  
Sergio Murilo Petri
Keyword(s):  
Fair Value ◽  
Financial Instruments ◽  
Web Of Knowledge

O objetivo deste estudo foi caracterizar as publicações nacionais e internacionais sobre a aplicação do valor justo nos instrumentos financeiros. Este estudo é classificado como quantitativo com características exploratório-descritivas. As variáveis de pesquisa utilizadas foram “valor justo” e “instrumentos financeiros”. A coleta de dados foi realizada por meio de revisão sistemática da literatura. A busca de publicações internacionais foi realizada nas bases de dados ISI – Web of Knowledge e Scopus. Já a busca por publicações nacionais foi conduzida nos periódicos e anais de congressos do Brasil, elencados na área de Administração, Contabilidade e Turismo do sítio WebQualis, disponibilizado pela Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES). O tratamento dos dados foi realizado por meio de estudo bibliométrico. Os resultados apontam para a predominância estadunidense nos estudos sobre o tema. Também detectou-se a existência de uma atenção especial dos autores com a relevância da divulgação de informações sobre instrumentos financeiros avaliados a valor justo, confirmando a relevância dos artigos nesta categoria. O predomínio de termos utilizados nas palavras-chave relacionados ao disclosure de instrumentos financeiros e valor justo e a presença preponderante de estudos empíricos – que indicam a busca do entendimento dos fatos e do comportamento dos usuários externos e do mercado – também denotam a preocupação com a divulgação das informações. Contudo, percebeu-se que não há uma conclusão sobre a reação dos usuários externos e do mercado às informações sobre instrumentos financeiros avaliados pela contabilidade a valor justo. Por fim, foi identificada a existência de um grupo de autores que acreditam que a adoção integral do valor justo (a todos os itens patrimoniais) seria a melhor alternativa.

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.

A commentary on SARS’ proposed fair value tax on financial instruments

2012 ◽  
Vol 26 (1) ◽  
pp. 165-184
Author(s):  
P de Jager ◽  
S Parsons ◽  
J J Roeleveld
Keyword(s):  
Fair Value ◽  
Financial Instruments

scholarly journals Requirements for the possibility of applying international accounting standards on financial instruments-an applied study in the national bank of Baghdad

2019 ◽  
Vol 7 (1) ◽  
pp. 142-180
Author(s):  
Dilan Abdullah Mohammed ◽  
Basira Majeed Najm
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Financial Statements ◽  
Fair Value ◽  
Interest Rate Risk ◽  
International Accounting ◽  
Financial Instruments ◽  
Accounting Standard ◽  
Important Place ◽  
International Accounting Standard

The reality today proves that growth and success have become the share of financial markets that have learned how to read the road map and achieve leadership by investing in the so-called derivatives, where the center of gravity in financial markets has shifted from relying on simple financial instruments to relying on Great for innovation and creativity to create innovative financial products that cover the needs of investors. The issue of derivatives has become an important place in global markets. The importance of this study is illustrated by the nature of the accounting treatment of these instruments and how they are disclosed in the annual financial statements of companies and banks dealing with them according to the international accounting standard No. (32) and how to recognize and measure the financial instruments, and disclose them according to the International Accounting Standard No. (7-9), in order to clarify the nature of the analysis required to determine the correct accounting processing when using these instruments, as the financial statements published by the dealers of financial instruments and provided to end users must include sufficient information about them with To clarify the risks for which the transactions were carried out, the extent to which such information is covered (is it for hedging purposes or for trading purposes), the degree of risk and how to account for it, and through this process has been concluded among the most important risks to which the bank is exposed is the risk of changing interest rates, given that the net Interest income constitutes a large percentage of the bank's returns, the interest rate risk is particularly important, as the case of high interest rates creates for banks the risk of paying higher rates on deposits for the future and other bank demands compared to what they get from their glory, and the situation is quite the opposite when the Shame interest. The study recommends that the bank dealing in derivative financial instruments distinguish between the profitability of trading in these and other investment instruments, and for the instruments used for the purposes of hedging the risk of interest rates, as well as the bank to clarify the accounting methods used The bank must disclose the fair value of both hedge stake and hedge funds. 

scholarly journals Fair value accounting and earning management: The impact of unobservable inputs on earning quality. Evidence from the US

2019 ◽  
Vol 16 (2) ◽  
pp. 8-18 ◽  
Author(s):  
Marco Pompili ◽  
Marco Tutino
Keyword(s):  
Financial Reporting ◽  
Negative Impact ◽  
Evaluation Process ◽  
Strong Relationship ◽  
Fair Value ◽  
Financial Instruments ◽  
Fair Value Accounting ◽  
Earning Quality ◽  
The Impact

Accounting standard boards (IASB and FASB) are aimed at designing high-quality standards able to increase transparency and comparability of financial reporting. They have chosen fair value accounting (FVA) approach to improve the quality of financial reporting and at the same time help financial reporting users in the decision-making process. During recent years, an intense debate has arisen about the trade-off between relevance and reliability of accounting information using this approach. Many authors outline problems related to the fair value hierarchy valuation of financial instruments, in particular, the discretionary use of unobservable inputs in financial instruments valuation process in support of earnings management. Tutino and Pompili (2018) have identified a general negative correlation between the extent of FVA and earning quality. Stating this, the main objective of the paper, using the same approach of the previous one, is to identify the specific impacts of unobservable inputs on earning quality. Theory and previous literature suggest a major negative impact of unobservable inputs than observable ones on the quality of information provided within financial reporting. Results show a negative and strong relationship between FVA and earning quality for US banks that do not depend on the hierarchy of input used in the evaluation process. These results suggest new considerations on the reliability of fair value concerning the possibilities of manipulation given to the management with this approach.

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