N. Fargher
Changes in the Measurement of Fair Value: Implications for Accounting Earnings
Fargher, N.; Zhang, J.
Authors
J. Zhang
Abstract
With the FASB's issue of staff position papers in 2009 and the relaxation of how fair value standards are applied, there has been a change in the practice of how fair value is measured. Since the FASB staff position papers in 2009, fair value measurement by financial institutions has increasingly relied on managerial assumptions. This study examines the impact of this change on the quality of earnings. Consistent with attribute substitution theory that emphasises reliability over relevance, we find that an apparent increase in managerial discretion in fair value measurement is associated with a higher probability of earnings management and lower earnings informativeness. The results indicate that allowing more managerial discretion in fair value measurement adversely affected the quality of financial reporting. Our study highlights the issue of reliable measurement in the debate among academics and practitioners of increasing the use of fair value accounting.
Citation
Fargher, N., & Zhang, J. (2014). Changes in the Measurement of Fair Value: Implications for Accounting Earnings. Accounting Forum, 38(3), 184-199. https://doi.org/10.1016/j.accfor.2014.06.002
Journal Article Type | Article |
---|---|
Acceptance Date | Jun 13, 2014 |
Publication Date | Sep 1, 2014 |
Deposit Date | Oct 26, 2015 |
Publicly Available Date | Oct 30, 2015 |
Journal | Accounting Forum |
Print ISSN | 0155-9982 |
Publisher | Taylor and Francis Group |
Peer Reviewed | Peer Reviewed |
Volume | 38 |
Issue | 3 |
Pages | 184-199 |
DOI | https://doi.org/10.1016/j.accfor.2014.06.002 |
Keywords | Fair value measurement, Earnings quality, Reliability. |
Public URL | https://durham-repository.worktribe.com/output/1396743 |
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Copyright Statement
© 2014 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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