scholarly journals The Critical Aspect on Fair Value Accounting and its Implication to Islamic Financial Institutions

2015 ◽  
Vol 1 (3) ◽  
pp. 210
Author(s):  
Safri Haliding
Keyword(s):  
Financial Institutions ◽  
Financial Reporting ◽  
Financial Institution ◽  
Accounting Standards ◽  
Fair Value ◽  
Fair Value Accounting ◽  
Fair Value Measurement ◽  
Islamic Financial Institutions ◽  
Value Measurement ◽  
Critical Aspects

Recently, fair value measurement and its implication in accounting standards have been increasing (Ramanna, 2006). One of the important aspects of financial reporting is measurement (Barth, 2007). Barlev and Haddad (2003) state that the fair value accounting(FVA) paradigm replaced the historical cost accounting (HCA) in the development of accounting standards that FVA is more value relevant that HCA probably did not provide the real financial information and income. However, previously studies mention that fair value accounting suffers from some serious limitations and disadvantages such as issues in market approach, income approach, and cost approach. Al-Yassen and Al-Khadash (2011) argue that accounting standard setters such as the International Accounting Standards Board (IASB) UK and the Financial Accounting Standards Board (FASB) U.S as well as other national accountingstandard setters provide high attention and long-term ambition to use fair value accounting as full measurement in all financial instruments. Islamic Financial Institutions (IFIs) that have different objectives and principles as well as have different financial products with conventional financial institution. This paper tries to explore critical aspects of the fair value accounting andits implications to Islamic Financial Institutions implications. This study concludes that that fair value accounting measurement provides many critical aspects to be implemented to Islamic Financial Institutions (IFIs). Additionally, AAOIFI proposed cash equivalent value as respond to fair value measurement that cash equivalent value when the attribute condition are present such as the relevance, reliability and understandability of the resulting information. Furthermore, fully adopting International Financial Reporting Standards (IFRS) issued by IFRSIASB, there will no specific standards for unique functions of Islamic Financial Institutions. Inaddition, the paper may be recommended to work together among Muslim countries to unity the potential harmonizing one set accounting standards for Islamic Financial Institutions such as AAOIFI?s standards.

scholarly journals The Critical Aspect on Fair Value Accounting And Its Implication To Islamic Financial Institutions.

2014 ◽  
Vol 6 (2) ◽  
pp. 283-304
Author(s):  
Jamaluddin Majid ◽  
Safri Haliding
Keyword(s):  
Financial Institutions ◽  
Accounting Standards ◽  
Fair Value ◽  
Critical Aspect ◽  
Fair Value Accounting ◽  
Historical Cost ◽  
Accounting Measurement ◽  
Islamic Financial Institutions ◽  
Value Measurement ◽  
Critical Aspects

The Critical Aspect on Fair Value Accounting And Its Implication To Islamic Financial Institutions. Fair value accounting (FVA) paradigm replaced the historical cost accounting (HCA) in the development of accounting standards that FVA is more relevant that HCA probably did not provide the real financial and income information. This paper tries to explore critical aspects of the fair value accounting and its implications to Islamic Financial Institutions implications. This study concludes that that fair value accounting measurement provides many critical aspects to be implemented to Islamic Financial Institutions (IFIs). AAOIFI proposed cash equivalent value as respond to fair value measurement that cash equivalent value when the attribute condition are present such as the relevance, reliability and understandability of the resulting information  DOI:10.15408/aiq.v6i2.1236

scholarly journals A Retrospective View Of The IFRS Conceptual Path And Treatment Of Fair Value Measurements In Financial Reporting

2011 ◽  
Vol 9 (3) ◽  
Author(s):  
Stephen B. Shanklin ◽  
Debra R. Hunter ◽  
Craig R. Ehlen
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
Theoretical Concept ◽  
International Standards ◽  
Financial Reporting Standards ◽  
Retrospective View ◽  
Fair Value Measurement ◽  
Value Reporting ◽  
Value Measurement

International Financial Reporting Standards (IFRS) require some assets, liabilities and equity instruments to be measured at fair value (IASB ED/2009/5). Thus begins the Fair Value Measurement IASB 2009 Exposure Draft. The IFRS requirement for fair value reporting has actually existed since 1975, due to the adoption of pronouncement IAS 2 (IASC/IAS 2 1975). This standard required that Inventory be valued at fair value less costs to sell for both reporting and disclosure purposes. But, as is the case in the history of many accounting standards and practice, the devil has always been in the details. This paper explores a brief historical path of fair value accounting within the venue of international accounting standards. Because of the impending plan of convergence and harmonization, plus potential global acceptance of standards of reporting and content, both the IASB and FASB have extensively explored the relevance and reliability of fair value reporting as compared with the more traditional costbased system. This exploration has been controversial because it goes to the very heart of the centuries-old cost-based foundation of financial accounting. In spite of the ongoing controversy of fair value versus historical cost accounting and the multiple uses and requirements of the fair value theoretical concept in IFRSs, there has been no definitive guidance on the various alternative calculations and appropriate uses of these differing representations of fair value. As the comment period closes on a second exposure draft directed at resolving Fair Value Measurement, this retrospective view of the international standards moves through the past standards and into the future methodology of reporting fair value. With FASBs latest exposure draft on fair value currently pending, the convergence opportunity of a more closely defined concept and its subsequent use in global practice is quite possibly at hand.

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.

The effect of accounting methods on financial reporting quality

2018 ◽  
Vol 60 (6) ◽  
pp. 1401-1411
Author(s):  
Andrain Hadiyanto ◽  
Evita Puspitasari ◽  
Erlane K. Ghani
Keyword(s):  
Financial Reporting ◽  
Palm Oil ◽  
Reporting Quality ◽  
Fair Value ◽  
Financial Information ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Historical Cost ◽  
Fair Value Measurement ◽  
Value Measurement

Purpose This study aims to examine the relationship between accounting measurement method of biological asset and financial reporting quality. Specifically, this study examines whether using fair value method or the historical cost method on biological asset provides different financial reporting quality. Design/methodology/approach This study uses data from 38 agricultural companies that are members of the Roundtable on Sustainable Palm Oil. The annual reports of 38 companies from the Palm Oil Growers over a five-year period starting from 2011 to 2014 are analysed. Findings This study shows that companies using historical cost measurement produce less reliable and less relevant information compared to the companies that are using fair value measurement. Research limitations/implications The results in this study imply that the use of fair value measurement improves the quality of financial information. Practical implications This study supports IASB’s justification of developing IAS 41 as the principle-based standard that better represents the financial information related to biological asset and subsequently lead to good accountability and harmonisation practices. Originality/value This study provides evidence on the best measurement to be used in agriculture activities using a larger sample size of few countries. In addition, this study contributes to the existing literature on the effect of accounting methods on financial reporting quality.

scholarly journals Fair Value Measurement in Financial Reporting

2012 ◽  
Vol 3 ◽  
pp. 84-90 ◽  
Author(s):  
David Alexander ◽  
Carmen Giorgiana Bonaci ◽  
Razvan V. Mustata
Keyword(s):  
Financial Reporting ◽  
Fair Value ◽  
Fair Value Measurement ◽  
Value Measurement

scholarly journals An Evaluation Of The Implementation Of Fair Value Accounting: Impact On Financial Reporting

2011 ◽  
Vol 9 (1) ◽  
Author(s):  
Karen T. Cascini ◽  
Alan DelFavero
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
The United States ◽  
Financial Accounting ◽  
Financial Assets ◽  
Financial Accounting Standards Board ◽  
Continuous Change ◽  
Fair Value Accounting ◽  
The Cost

<p class="MsoNormal" style="text-justify: inter-ideograph; text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="color: #0d0d0d; font-size: 10pt; mso-themecolor: text1; mso-themetint: 242;"><span style="font-family: Times New Roman;">The accounting industry is in a state of continuous change.<span style="mso-spacerun: yes;">&nbsp; </span>In the United States, the historical cost principle has traditionally been the foundation of accounting.<span style="mso-spacerun: yes;">&nbsp; </span>Until recently, assets and liabilities have been required to be recorded at their acquisition prices, with the exception of designated financial assets and financial liabilities.<span style="mso-spacerun: yes;">&nbsp; </span>However, the Financial Accounting Standards Board (FASB) has now created accounting standards that are distant from the cost principle.<span style="mso-spacerun: yes;">&nbsp; </span>Statement of Financial Accounting Standards No. 157: Fair Value Measurements, issued in September 2006 (FAS157, now codified as ASC 820) and Statement of Financial Accounting Standards No. 159: The Fair Value Option for Financial Assets and Financial Liabilities, created in February 2007 (FAS159, now ASC 825-10-25), significantly increases the viability of fair value accounting. The purpose of this paper is to illustrate the benefits and pitfalls of fair value and the corresponding affects on various stakeholders. <span style="mso-spacerun: yes;">&nbsp;&nbsp;</span></span></span></p>

scholarly journals THE APPLICATION OF FAIR VALUE ACCOUNTING IN BOSNIA AND HERZEGOVINA

2019 ◽  
Vol 17 (31) ◽  
Author(s):  
Amira Pobrić
Keyword(s):  
Earnings Management ◽  
Bosnia And Herzegovina ◽  
Fair Value ◽  
Financial Statement ◽  
Fair Value Accounting ◽  
Fair Value Measurement ◽  
Value Measurement ◽  
Level 2 ◽  
Infor Mation

This study investigates the application of fair value ac- counting in companies in Bosnia and Herzegovina. The study was conducted on a sample of 190 companies. The application of fair value accounting causes a lot of controversy related to the relevance and reliability of fair value information. It is believed that the extent to which fair value measurement is used reflects attitudes of financial statement preparers about the usefulness of this model at its best. The findings of this study sug- gest that most companies in Bosnia and Herzegovina do not have tendency to apply fair value accounting. It is found that half of the companies in the sample do not use fair value accounting at all. Almost half of the com- panies that use fair value accounting use it just because they own assets that require fair value measurement. Fair value accounting is much more used in financial and larger companies than in non-financial and smaller companies. Companies mostly use fair value accounting for the measurement of investment property. However, they use it for the measurement of intangible assets at a minimum. The findings also suggest that the application of fair value accounting increases the uncertainty in fi- nancial statements. The quality of fair value disclosures is very low. Numerous companies do not disclose infor- mation on fair value hierarchy and valuation techniques that were used for fair value measurement. Companies that disclose this information mostly use indirectly ob- servable inputs (Level 2) for fair value measurement and these create a lot of room for earnings management.

scholarly journals Formation of Financial Statements at Islamic Financial Institutions

2018 ◽  
pp. 128-132
Keyword(s):  
Financial Institutions ◽  
Financial Reporting ◽  
Financial Institution ◽  
Financial Statements ◽  
Financial Accounting ◽  
Accounting Standard ◽  
Charitable Foundations ◽  
Islamic Financial Institutions ◽  
Further Development ◽  
Traditional Economy

Conceptually, the key approaches to the formation of financial reporting for an Islamic financial institution (IFI) have much in common with approaches developed for economic entities in the traditional economy. At the same time, the AAOIFI Concept and the Financial Accounting Standard No. (1) provide for Islamic financial institution-specific provisions and reporting forms that reflect the requirements of the Sharia. Disclosure of methods in published accounts is intended to help its users distinguish between changes in the financial position of an Islamic financial institution, the results of its operations, cash flow, limited investment managed by it, the sources and use of Zakat (poor-due) and Kard funds and charitable foundations. Further development of the regulation of the issues on the formation of financial statements seems to us in the making common approaches to its formation closer for companies operating in the traditional economy and Islamic financial institutions.

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