scholarly journals The Financial Accounting Standards Board’s Fair Value Mandate: Are Level 3 Assets and Liabilities Being Measured Accurately?

2018 ◽  
Vol 7 (2) ◽  
pp. 33
Author(s):  
Robert J. Cochran
Keyword(s):  
Financial Institutions ◽  
Balance Sheet ◽  
Accounting Standards ◽  
Market Value ◽  
Fair Value ◽  
Financial Accounting ◽  
Mortgage Loan ◽  
Specific Level ◽  
Additional Argument ◽  
Level 3

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.

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

2018 ◽  
Vol 60 (S1) ◽  
pp. 693-727 ◽  
Author(s):  
Walied Keshk ◽  
Hung‐Yuan (Richard) Lu ◽  
Vivek Mande
Keyword(s):  
Accounting Standards ◽  
Fair Value ◽  
Financial Accounting ◽  
Level 3 ◽  
Disclosure Rules

Disclosure versus recognition: the value relevance of pensions

2021 ◽  
pp. 1-28
Author(s):  
Luca Larcher
Keyword(s):  
United States ◽  
Pension Fund ◽  
Value Relevance ◽  
Balance Sheet ◽  
Accounting Standards ◽  
Market Value ◽  
Equity Market ◽  
Financial Accounting ◽  
Market Participants ◽  
Pension Liabilities

Abstract This paper compares how pension obligations impact the market value of United States corporations under two accounting regimes. Using a sample of firms that disclosed pension liabilities under Statement of Financial Accounting Standards (SFAS) No. 87 from 2001 to 2005 and recognized them under SFAS No. 158 from 2006 to 2014, I find that equity market participants take into account the net position of the pension fund only if it is recognized on the sponsor's balance sheet, thus mispricing the pension deficit/surplus under the disclosure regime. I also provide evidence suggesting that investors' perception of pension deficits/surpluses changed with the introduction of SFAS No. 158 in 2006.

Auditing Intangible Assets and Evaluating Fair Market Value: The Case of Reacquired Franchise Rights

2009 ◽  
Vol 24 (1) ◽  
pp. 45-61 ◽  
Author(s):  
Mark J. Kohlbeck ◽  
Jeffrey R. Cohen ◽  
Lori L. Holder-Webb
Keyword(s):  
Accounting Standards ◽  
Market Value ◽  
Fair Value ◽  
Restaurant Industry ◽  
Financial Accounting ◽  
Intangible Asset ◽  
Auditor Judgment ◽  
Market Values ◽  
Fair Market ◽  
Fair Market Value

ABSTRACT: The Roman Holiday Pizza Paradise case provides a setting that requires students to understand and perform procedures related to the audit of a fair value estimate in connection with the impairment of an unusual intangible asset, reacquired franchise rights, in the pizza restaurant industry. The case focuses on one key aspect—auditing fair market values—a concept that is increasing in importance as financial accounting standards evolve toward a fair value basis and one that requires the development of auditor judgment. Planning activities as well as performance of year-end auditing procedures are included in this self-contained module that incorporates client interaction and obtained external evidence.

scholarly journals MELIHAT PERLUNYA PEMERINTAH MELAKUKAN PROGRAM REVALUASI ASET BARANG MILIK NEGARA

2020 ◽  
Vol 1 (2) ◽  
pp. 1-8
Author(s):  
Agung Yuniarto
Keyword(s):  
Central Government ◽  
Balance Sheet ◽  
Accounting Standards ◽  
Fair Value ◽  
Financial Accounting ◽  
Government Accounting ◽  
Fixed Assets ◽  
Acquisition Costs ◽  
The Government ◽  
Financial Balance

ABSTRACTThe Revaluation of State Assets (BMN) asset program is a revaluation of assets that belong to the state, the purpose is to increase the validity of the value of BMN in the central government balance sheet, to become the underlying assets for the issuance of State Sharia Securities (SBSN), as well as building a BMN database better. The object of revaluation is fixed assets in the form of land, buildings and buildings, roads, irrigation and networks. This study explains and analyzes the problems of implementing the BMN Asset Revaluation in Indonesia. The results of this study are the government's initial efforts to improve the administration and fair value of BMN in the form of fixed assets, then presented in the central government's financial balance sheet to improve the quality of the central government's financial statements (LKPP). But this decision to revaluate is contrary to the Financial Accounting Standards and Government Accounting Standards (SAK / SAP), which adhere to asset valuations based on acquisition costs or exchange rates. However, it was concluded that the Government Accounting Standards Committee (KSAP) letter. support reporting the results of the 2017 fixed assets revaluation into LKPP, and revaluation by the government is indeed needed. ABSTRAKProgram Revaluasi aset Barang Milik Negara (BMN) adalah penilaian kembali aset-aset yang menjadi milik negara, tujuannya adalah meningkatkan validitas nilai BMN pada dalam laporan keuangan pemerintah pusat, sebagai underlying aset dalam penerbitan Surat Berharga Syariah Negara (SBSN), sekaligus pembentukan data base BMN yang lebih baik. Objek yang dilakukan revaluasi adalah berupa aset tetap Tanah, Bangunan, Jaringan, Jalan, dan Irigasi. Studi ini menganalisa serta menjelaskan permasalahan pelaksanaan Revaluasi Aset BMN di Indonesia. Dari hasil studi ini menjadi kerja keras pemerintah untuk memperbaiki nilai wajar  dan penatausahaan atas BMN aset tetap, yang disajikan dalam laporan keuangan pemerintah pusat dalam meningkatkan kualitas laporan keuangan pemerintah pusat (LKPP). Tetapi keputusan melakukan revaluasi ini bertentangan dengan Standar Akuntan Keuangan dan Standar Akuntansi Pemerintah (SAK/SAP), dimana menganut penilaian aset berdasarkan harga perolehan atau harga pertukaran. Akan tetapi telah disimpulkan bahwa surat Komite Standar Akuntansi Pemerintah (KSAP). mendukung pelaporan hasil revaluasi aset tetap 2017 kedalam LKPP, dan revaluasi yang dilakukan pemerintah memang diperlukan. 

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

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.

Determinants and Consequences of Firms' Derivative Accounting Decisions

2020 ◽  
Vol 5 (1) ◽  
pp. 81-114 ◽  
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.

scholarly journals Constructive Capitalization of Operating Leases in the Hong Kong Fast-Food Industry

2013 ◽  
Vol 3 (1) ◽  
pp. 128 ◽  
Author(s):  
Benjamin Y. Tai
Keyword(s):  
Hong Kong ◽  
Fast Food ◽  
Balance Sheet ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Return On Assets ◽  
Fast Food Industry ◽  
Operating Leases ◽  
Lease Contracts

The current study is undertaken to investigate the potential problems resulting from the proposed adoption of a new accounting standard concerning mandatory capitalization of all lease contracts.  In 2010, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued a joint exposure draft (ED2010/9) on accounting for leases.  Under the new standard, lessees are required to capitalize all lease contracts as assets and liabilities.  The distinction between operating leases and capital (finance) leases will no longer exist.  The long-standing off-balance sheet treatment of operating leases will be prohibited.  After the adoption of the proposed standard, companies with significant operating leases are likely to experience an increase in assets, increase in liabilities, and decrease in equity, resulting in the deterioration of their return-on- assets and debt-to-equity ratios.  This research examines two large fast-food restaurant chains based in Hong Kong; and through constructive capitalization, demonstrates how the companies’ key financial ratios are negatively impacted if the new standard is implemented.  The results indicate that both the return-on-assets and debt-to-equity ratios of the two companies, under various discount rates assumptions, suffer serious deterioration when their operating leases are capitalized.

scholarly journals Valuing An Emerging International Technology Company

2011 ◽  
Vol 7 (1) ◽  
Author(s):  
John Zimmerman
Keyword(s):  
Balance Sheet ◽  
Cumulative Effect ◽  
Fair Value ◽  
Financial Accounting ◽  
Publicly Traded ◽  
Accounting Standard ◽  
Financial Valuation ◽  
Accounting Principle ◽  
Fair Valuation ◽  
Interim Period

The requirements of Financial Accounting Standard Board (FASB) 142 provide an excellent opportunity to examine various financial valuation methods used to determine a company’s value.  Under FASB 142, goodwill and intangible assets with indefinite useful lives are no longer amortized, but instead tested for impairment at least annually in accordance with the provisions. Any impairment loss has to be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in an organization’s first interim period. The impairment test requires an accurate and fair valuation of the asset in question.  This case is based upon the valuation dilemma faced by Integrated Silicon Solution (NASDAQ: ISSI), a publicly traded international technology company, in late 2008. ISSI had made several acquisitions and carried substantial goodwill. Since ISSI was publicly traded, a public market value was available but the financial crisis of 2008 caused the company to consider other methods, as is allowed under FASB 142. The case uses both the income and comparable market approaches to arrive at a fair value, and this value is used to determine if impairment for the goodwill the company carried on its balance sheet existed.

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

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

Fair Value Accounting and Earnings Persistence: Evidence from International Banks

2017 ◽  
Vol 17 (1) ◽  
pp. 47-68 ◽  
Author(s):  
Daifei (Troy) Yao ◽  
Majella Percy ◽  
Jenny Stewart ◽  
Fang Hu
Keyword(s):  
Strong Association ◽  
Balance Sheet ◽  
Fair Value ◽  
Institutional Factors ◽  
Earnings Persistence ◽  
Legal Enforcement ◽  
International Banks ◽  
Level 3 ◽  
Fair Value Measurements ◽  
Level 2

ABSTRACT Using hand-collected data from a sample of 210 international banks during the period 2009 to 2013, we investigate whether fair value exposure, the proportion of financial assets measured at fair values, is associated with earnings persistence and whether the reliability of fair value measurements influences earnings persistence. We also examine whether the association between fair value measurements and earnings persistence is a function of institutional factors such as legal enforcement, the audit environment, and country-level auditor industry expertise. Results suggest that the use of fair values for balance sheet financial instruments enhances earnings persistence. Also, we find that the nondiscretionary fair value Level 1 assets (measured with observable inputs) are positively associated with earnings persistence, whereas the Level 2 assets (measured with indirectly observable inputs) and Level 3 assets (measured using unobservable inputs) are not associated with earnings persistence. We provide further evidence that there is a strong association between factors reflecting countrywide institutional structures and the predictive power of fair values based on discretionary measurement inputs (Level 2 and Level 3 assets) and we find that the moderating effect from these institutional factors is greater for Level 3 assets than for Level 2 assets. Additional tests suggest that the association between fair value estimates and earnings persistence is moderated by the classification of fair value assets (that is, through profit and loss versus other comprehensive income) and the reliability of fair value estimates.

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