The localised accounting environment in the implementation of fair value accounting in Indonesia

Purpose This case study aims to investigate the role of actors in the implementation of fair value standards in an emerging country, Indonesia. Design/methodology/approach This study uses semi-structured interviews with important actors within the local accounting profession, standard setting and regulatory environment, to analyse fair value accounting implementation. This study also incorporates information from press releases and newspapers, to provide a more comprehensive picture of fair value implementation. Findings First, professionals undertake routine actions, cultivate interests and strategically navigate their environment during the process of fair value standard implementation. Second, the role of appraisers becomes more prominent during this process. Third, government involvement is significant in ensuring the successful implementation of global accounting standards. Research limitations/implications First, differing localised contexts, including communities and actors, may shape how an emerging country undertakes the diffusion and implementation of global standards, which in turn can also lead to institutional change. Second, government involvement is crucial in supporting the implementation of global accounting standards within emerging economies. Third, implementing market-based measurements within emerging economies characterised by a lack of an active and liquid market may present challenges. Practical implications Third, implementing market-based measurements within emerging economies characterised by a lack of an active and liquid market may present challenges. Originality/value This study applies the concept of Institutional Work within Institutional Theory to explain how fair value standards are implemented within a localised emerging economy characterised by unique actor roles and goal-directed action.

“Unreliable Accounts: How Regulators Fabricate Conceptual Narratives to Diffuse Criticism” by Karthik Ramanna: A Comment on Ideological Capture

Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism’ considers how the Financial Accounting Standards Board (FASB) justified a conjunctural break from historic cost accounting (HCA) to Fair Value Accounting (FVA). Karthik’s paper explores how the US Financial Accounting Standards Board (FASB) legitimized the introduction of fair value accounting (FVA). This fundamental reorientation of financial reporting practice can, he argues, be understood within a framing device: conceptual veiling. Firstly, the FASB is (suspected to be) captured by the interests of investors and capital market actors. Secondly, the FASB needed to construct new narratives to enable this reorientation in accounting practice and this was achieved with changes to the governing conceptual framework. An alternative framing device is offered in this review, that of the financialization of company financial reporting and implications for company viability as opposed to a capital market efficiency perspective. Financialized accounting facilitates the valuation of a range of asset classes to a market value. These asset valuations are speculative in nature. FVA accounting imports speculative capital market risk onto company balance sheets and this can threaten company financial stability and viability for a going concern.

Application of B-theory for numerical method of functional differential equations in the analysis of fair value in financial accounting

Financial accounting, the use of historical cost of assets, is an important basic principle of historical cost, which is to become the dominant mode of accounting measurement. Background analyses, as well as the historical cost basis and fair value, result from the development of the theory of historical cost and fair value. Historical cost and fair value measurement model has its own advantages and problems. Based on this background, the paper applies B-theoretical numerical methods to differential equations pan function analysis for calculation of fair value accounting and conducts theoretical analysis of their stability and convergence. Finally, numerical examples with different methods of calculating an approximate solution are provided and a comparison of the various methods is done based on the results obtained. The results show fair value accounting better meets the needs of the target –decision-making availability, compared to historical cost or fair value, more in line with the requirements of Accounting Information Quality.

The Possibility of Applying Fair Value According to IFRS 13 to Achieve Tax Justice in Determining Taxable Income in Iraq: An Applied Study

The research aims to determine the importance of adopting the General Tax Authority in Iraq fair value accounting in determining taxable income by highlighting the failure to apply the historical cost that leads to misleading the users of the financial statements because of the unrealistic and inappropriate information they contain, as well as explaining the role of applying fair value in achieving The basic qualitative characteristics of accounting information in a manner that leads to determining taxable income more closely to justice after being amended according to the applicable income tax law. And analyzing the company's reports so that income is measured according to the fair value on the basis of the IFRS 13, which is subsequently modified according to the applicable income tax law to reach the measurement of taxable income in Iraq as well as the preparation of the Balance sheet In light of this, this measurement is generalized to all Contracting companies listed in the market. The researcher reached a set of conclusions, the most important of which is that the use of fair value accounting in accordance with the IFRS 13 in the contracting sector contributes to providing consistency in accounting measurement and disclosure practices, providing relevance and faithful representation information that is the basis for achieving fairness in tax accounting and recommendations.

The Effect of using Audit Procedures in Accordance with the IAS 545 in Assessing Audit Risk

The current research aims to determine the effect of using audit procedures in accordance with the International Auditing Standard (IAS. No.545) in auditing measurement and disclosure on the basis of fair value in assessing audit risk, as the questionnaire was used to identify the opinions of the sample in the statement of the impact of the use of audit procedures in accordance with the IAS 545 in auditing measurement and disclosure on the basis of fair value in the assessment of audit risk. Nevertheless, after analyzing the study variables and testing the hypothesis, the research reached the most important conclusions, which are that most auditors lack the skills necessary to audit fair value accounting estimates because there are no fixed bases for measuring fair value, which creates difficulty for the auditor to understand the models used in preparing fair value estimates by the administration, and this affects in assessing audit risk. The most important recommendations were that work should be done to provide specific bases and clear models for measuring fair value, to reduce dependence on personal judgment for fair value estimates. Therefore, the auditor should use the same measurement models used by management when auditing fair value estimates, which contributes to improving the audit risk assessment.

The Impact of Implementing Fair Value Accounting for Evaluating Economic Value of Establishments’ Fixed Capital: A Field Study at Public-Benefit Corporations in Yemen

The study aimed to identify the impact of implementing fair value accounting for evaluating the economic value of establishments’ fixed capital at public benefit corporations that represent the population of the study. The population was 11 benefit corporations operating in Yemen and included telecommunications, gas and transportation sectors. To achieve the study objective, the structural equation modeling (PLS-SEM) was adopted and the questionnaire was used for data collection. The questionnaire was distributed to a sample of (369) participants. Only (278) questionnaires were valid for analysis and Smartpls3 v 3.3.3 was used to analyze the data. The study findings revealed that the implementation of fair value accounting had impact on the evaluation of the economic value of the fixed capital of establishments at the public benefit corporations. The study recommended that benefit corporations should pay more attention to fair value accounting in all its dimensions because of its strong and effective role in evaluating economic value of establishments’ fixed capital.

The Nuances of fair value history: A rejoinder to Cardao-Pito

Cardao-Pito (2020) critically reviewed Donleavy’s (2019) article on the origins of the use of the word ‘fair’ in fair value accounting. This article is a rejoinder to the criticisms in that review.

Trust in Fair Value Accounting: Evidence from the Field

We survey stakeholders in the financial reporting process to examine trust in fair value accounting. Though respondents demonstrate high confidence in financial statements, they believe that fair value accounting decreases trust in financial reporting and that preparing fair value numbers is costly but beneficial. They also strongly believe in the Conceptual Framework underlying standard setting. Using multivariate regression analyses, we find that perceiving fair value accounting as beneficial is positively associated with trust in it, consistent with the theory of reasoned action that people engage in behavior (e.g., trust) based on expected positive outcomes of that behavior. We find that this positive association increases with stronger beliefs in the Conceptual Framework. Our paper contributes to the fair value literature by providing general insights on trust in fair value accounting and a specific and novel assessment of how the perceived benefits of fair value accounting increase stakeholders’ trust in it.