scholarly journals Fair value accounting en toepassing van de fair value-hiërarchie door een populatie van Europese banken

2011 ◽  
Vol 85 (1) ◽  
pp. 64-79
Author(s):  
Bert-Jan Bout ◽  
Ralph Ter Hoeven
Keyword(s):  
Best Practices ◽  
Fair Value ◽  
Financial Instruments ◽  
Fair Value Accounting ◽  
Ifrs 7 ◽  
Level 1

In deze bijdrage wordt onderzocht in hoeverre de populatie banken binnen de ‘FTSE Eurofirst 300’-index voldoet aan de voorschriften van het in maart 2009 gepubliceerde IFRS 7-amendement ‘Improving disclosures about financial instruments’. Dit amendement bepaalt met name dat tegen fair value gewaardeerde financiële instrumenten op grond van een fair value-hiërarchie (level 1, 2, 3) moeten worden geclassificeerd. Tevens dienen specifieke toelichtingen met betrekking tot deze hiërarchie gegeven te worden. De hiërarchie die in het licht van de kredietcrisis versneld in IFRS 7 is opgenomen, dient de gebruiker van de jaarrekening beter inzicht te geven in de waarderingsmethodiek en inherente onzekerheid van respectievelijk op fair value gewaardeerde financiële activa en financiële verplichtingen. Naast het empirisch jaarrekeningonderzoek met betrekking tot de kwaliteit van naleving van de voorschriften, worden vermeldenswaardige toelichtingen en best practices gepresenteerd en van commentaar voorzien. Voorafgaand aan het empirisch onderzoek wordt de inhoud van het amendement besproken. Deze bijdrage wordt afgesloten met een nabeschouwing inclusief aanbevelingen.

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.

scholarly journals User Views On The Complex Accounting For Financial Instruments

2011 ◽  
Vol 4 (12) ◽  
Author(s):  
Chyi Woan Tan ◽  
Greg Tower ◽  
Phil Hancock ◽  
Ross Taplin
Keyword(s):  
User Experience ◽  
Financial Institutions ◽  
Fair Value ◽  
User Preferences ◽  
Financial Instruments ◽  
Fair Value Accounting ◽  
General Support ◽  
Accounting Model ◽  
Topical Area

This paper examines Australian and Singaporean users views on fair value accounting for all financial instruments in financial institutions via a survey on various aspects of contention in this debate. Overall, users showed general support for fair value accounting for all financial instruments. In addition, the findings revealed that users will support fair value accounting so long as there is no perceived difference between the banking and trading books, fair values of non-traded financial instruments are reliable and volatility in earnings will not be misunderstood. It was also found that user experience increases the level of support for the proposed fair value accounting model. These results highlight actual user preferences with noticeable support for arguments from both sides of the debate (JWG and JWGBA) in this highly contentious and topical area of accounting for financial instruments.

Fair Value Accounting for Financial Instruments: Does It Improve the Association between Bank Leverage and Credit Risk?

2013 ◽  
Vol 88 (4) ◽  
pp. 1143-1177 ◽  
Author(s):  
Elizabeth Blankespoor ◽  
Thomas J. Linsmeier ◽  
Kathy R. Petroni ◽  
Catherine Shakespeare
Keyword(s):  
Credit Risk ◽  
Fair Value ◽  
Financial Instruments ◽  
Fair Value Accounting

Fair value accounting and the future of financial instruments

Balance Sheet ◽  
2000 ◽  
Vol 8 (5) ◽  
pp. 10-13 ◽  
Author(s):  
Patricia Jackson ◽  
David Lodge
Keyword(s):  
Fair Value ◽  
Financial Instruments ◽  
Fair Value Accounting ◽  
The Future

scholarly journals Fair value accounting and management opportunism on earnings management in banking sector: First evidence

2018 ◽  
Vol 15 ◽  
pp. 59-69 ◽  
Author(s):  
Marco Tutino ◽  
Marco Pompili
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Banking Sector ◽  
Strong Relationship ◽  
Fair Value ◽  
Financial Instruments ◽  
Fair Value Accounting ◽  
Valuation Process ◽  
Earning Quality ◽  
Short Termism

Accounting standard boards (IASB and FASB) have chosen fair value accounting (FVA) approach to help financial reporting users in the decision-making process. During recent years, an intense debate arose about the trade-off between relevance and reliability of accounting information in this approach. Even if fair value based information could be considered highly relevant and helpful from an investor’s perspective, many authors outline problems related to fair value hierarchy valuation of financial instruments. In particular, the discretionary use of unobservable inputs in financial instruments valuation process can support earnings management strategy underlying the risk for emerging agency problems, moral hazard behaviour and management short-termism. Stating that, after providing a literature review focused on management behaviour related to FVA, the main objective of the paper is identifying possible relationships between FVA valuations and earning quality observing a sample of US and European banks listed in the period 2011-2016 based on Šodan model (Sodan, 2015). Results show a negative and strong relationship between FVA and earning quality for US banks; results for European listed banks do not provide any strong evidence.

scholarly journals A Stakeholder’s Perspective on the Implications of IFRS and Fair Value Accounting on Valuation of Securities

2013 ◽  
Vol 3 (2) ◽  
Author(s):  
Glynis Milne and Dr. Eloisa Perez
Keyword(s):  
Financial Reporting ◽  
Market Value ◽  
Fair Value ◽  
Financial Instruments ◽  
Fair Value Accounting ◽  
Optimal Method ◽  
Historical Cost ◽  
Financial Reporting Standards ◽  
Illiquid Markets ◽  
Fair Market Value

Due to the complexity of modern financial instruments, accurate valuation can prove difficult even in optimal market conditions. Traditionally International Financial Reporting Standards (IFRS) have allowed securities to be valued based on their historical cost, which results in financial instruments being held on the books at the initial cost paid, until the point at which they are sold. However, this practice may be viewed as problematic when the market value of the financial instrument has not appreciated. Furthermore, market valuation becomes even more difficult to substantiate in illiquid markets, as it may oftentimes be difficult to secure a buyer at any price. Opponents of the historical cost methodology argue that in these circumstances it is unreasonable to allow firms to continue to hold their financial instruments at historical cost, and advocate for a valuation framework that requires the holders of securities to mark their book value to the best estimate of fair market value available. This viewpoint is countered by those who believe that in illiquid markets or markets in crisis, marking to market value is unfair as no functional market exists. In light of the subprime mortgage crisis the new iteration of IFRS requires the use of fair value accounting and marking to market for investment products of all types, with the exception of those held to maturity (bonds). Through a review of current literature, we sought to determine the optimal method for valuation of investment products. Our goal was to determine a reliable and representationally faithful method of valuation that will balance the needs and requirements of all stakeholders and provide transparency in accounting.

scholarly journals Fair value hierarchy in financial instrument disclosure. Is there transparency for investors? Evidence from the banking industry

2012 ◽  
Vol 1 (4) ◽  
pp. 23-38 ◽  
Author(s):  
Enrico Laghi ◽  
Sabrina Pucci ◽  
Marco Tutino ◽  
Michele Di Marcantonio
Keyword(s):  
Fair Value ◽  
Annual Reports ◽  
Financial Instruments ◽  
Financial Instrument ◽  
Sfas 157 ◽  
Ifrs 7 ◽  
Research Questions ◽  
Points Of View ◽  
Value Hierarchy ◽  
Fair Value Measurements

The debate on fair value accounting is still open although the last 20 years have been spent in looking for solutions by academics, practitioners and institutions. After long and continuous discussion both on the basic concepts and the information level contained in fair value measurements and on the different solutions that are possible to adopt in mark to market measurements, IASB and FASB have recently issued new standards on fair value measurements applying some principles not only to financial instruments but also to property and other investments. To verify if the solutions adopted in these Standards really improve the disclosure level and the “usefulness of data for investors”, this paper analyzes the actual level of transparency and the “usefulness” of the “fair value hierarchy” (which from some points of view synthesized the Board’s way of thinking regarding to fair value) which has already been introduced for financial instruments by IFRS 7, Financial Instruments: Disclosure. The paper presents results of an empirical investigation on a sample of domestic and foreign listed banks that adopted fair value hierarchy in line with SFAS 157 and IFRS 7 recommendations. Research questions can be summarized as follows: (i) does fair value hierarchy improve transparency in financial instrument evaluation in bank annual reports, or can it be considered as a tool for earnings management?

Managerial ability and fair value accounting: evidence from nonfinancial firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wray Bradley ◽  
Li Sun
Keyword(s):  
Design Methodology ◽  
Fair Value ◽  
Managerial Ability ◽  
Fair Value Accounting ◽  
Content Type ◽  
Level 3 ◽  
Level 1 ◽  
The Impact ◽  
Nonfinancial Firms ◽  
Level 2

Purpose The purpose of this study is to examine the relation between managerial ability and fair value inputs (measured as fair value intensity) for nonfinancial firms. Design/methodology/approach This study uses regression analysis to investigate the impact of managerial ability on the level of fair value inputs. Findings This study finds significant and positive relations between managerial ability and use of Level 1 and Level 2 fair value inputs. On the other hand, this study finds an insignificant relation between managerial ability and Level 3 inputs. Originality/value The findings contribute to two research streams. To the best of the author’s knowledge, this is perhaps the first study that directly examines the link between managerial ability and fair value inputs.

scholarly journals The impact of IFRS 7 on the significance of financial instruments disclosure

2016 ◽  
Vol 29 (3) ◽  
pp. 241-273 ◽  
Author(s):  
Yasean A. Tahat ◽  
Theresa Dunne ◽  
Suzanne Fifield ◽  
David M. Power
Keyword(s):  
Balance Sheet ◽  
Accounting Standards ◽  
Fair Value ◽  
Listed Companies ◽  
International Accounting ◽  
International Accounting Standards ◽  
Financial Instruments ◽  
Content Type ◽  
Ifrs 7 ◽  
The Impact

Purpose The main aim of this paper is to investigate Financial Instruments (FIs) disclosures provided by Jordanian listed companies under International Financial Reporting Standard No. 7 (IFRS 7) as compared to those supplied under International Accounting Standards (IAS) 30/32. Design/methodology/approach A sample of 82 Jordanian listed companies is used in this monograph. A disclosure index checklist was constructed to measure FI information provided by the sample companies. Findings The study finds that a larger number of Jordanian listed companies provided a greater level of FI-related information after IFRS 7 was implemented. Specifically, the sample firms provided 47 per cent of the disclosure index items after implementing IFRS 7 as compared to 30 per cent under IAS 30/32. In addition, the industrial analysis of FI disclosure revealed that the highest level of disclosure was provided by firms in the banking sector over the two periods; these companies disclosed 44 per cent of FI-related items pre-IFRS 7 and 69 per cent of items post-IFRS 7. Moreover, the industrial analysis of FI disclosure pre-and post-implementation of IFRS 7 revealed specific aspects of usefulness. In particular, some components of FI disclosure (Balance Sheet and Fair Value) showed no significant differences within and across sectors post the implementation of IFRS 7, suggesting that the new standard may have enhanced the comparability of such information. Research limitations/implications The results provide timely findings to Jordanian authorities who may be trying to evaluate the current reforms adopted; stringent enforcement mechanisms are needed to ensure full compliance with accounting standards. However, the present investigation was conducted on a single nation (Jordan); the circumstances in Jordan gave rise to the importance of the current study. A cross-country comparative analysis is needed in order to examine the application of IFRS 7 in a developing country context. Practical implications The results of the current study have a number of implications for policymakers. First, they provide a great deal of insight for the International Accounting Standards Board about the relevance of its standards to countries outside the Western context. In addition, the findings provide valuable insights for policymakers in Jordan who are concerned about the implications of mandatory disclosures. Originality/value The analysis of FI disclosure in developing countries in general, and in Jordan in particular has been overlooked by the extant literature and therefore this study is the first of its kind to examine this research issue for a sample of Jordanian firms.

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