scholarly journals Information Asymmetry of Fair Value Accounting and Loan Loss Provisions During the Global Financial Crisis

2010 ◽  
Author(s):  
Lin Liao ◽  
Helen Kang ◽  
Richard Donald Morris ◽  
Qingliang Tang
Keyword(s):  
Financial Crisis ◽  
Information Asymmetry ◽  
Global Financial Crisis ◽  
Fair Value ◽  
Fair Value Accounting ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
The Global Financial Crisis

Accounting Standards in the U.S. Banking Industry during the Financial Crisis

2016 ◽  
pp. 141-154
Author(s):  
Jorge A. Romero
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Global Financial Crisis ◽  
Fair Value ◽  
Fair Value Accounting ◽  
Subprime Mortgage ◽  
Real Estate Bubble ◽  
Mortgage Backed Securities ◽  
Real Estate Prices ◽  
The Global Financial Crisis

The global financial crisis became evident when U.S. house prices fell related to the subprime mortgage-backed securities crisis. In the years preceding the financial crisis of 2008, there was a real estate bubble that pushed U.S. real estate prices to high levels, and at the same time financial institutions were holding large amounts of subprime mortgage-backed securities. Fair value accounting (FVA) and its link to the recent global financial crisis has been a focus of discussion and interest for accounting researchers, financial analyst and policy makers. During the financial crisis, a large percentage of assets in the balance sheets of banks were calculated using fair value. The main concern was that those assets were calculated using mark-to-model accounting (Goh, Ng, & Yong 2009). There are still contradictory conclusions on the implications of fair value accounting and the global financial crisis (Laux & Leuz, 2009). The main objective of this chapter is to provide a better understanding of the global financial crisis and of the mechanisms of fair value accounting.

scholarly journals The relationship between the financial crisis and the measurement of fair value in financial statements

2014 ◽  
pp. 43-51
Author(s):  
Birutė Gudonytė ◽  
Kristina Rudžionienė
Keyword(s):  
Financial Crisis ◽  
Information Disclosure ◽  
Global Financial Crisis ◽  
Relevant Information ◽  
Fair Value ◽  
Financial Reports ◽  
Value Evaluation ◽  
True Value ◽  
The Global Financial Crisis ◽  
Value Measurement

Literature suggests that the main goal of fair value evaluation is more reliable and relevant information disclosure to external users. However, in 2007, at the beginning of the global financial crisis, the benefits of fair value, as well as the opportunity to provide information about the true and fair view of a company, were called into question. Opponents of the fair value claim that the fair value was the main reason for the global financial crisis, but the advocates disagree; therefore, the correlation between the fair value and crisis is controversial. It reflects the problem of the thesis: how the system of fair value accounting influenced the financial crisis? Object of the paper: the method of true value measurement. Aim of the paper: to evaluate the measurement of fair value and its potential impact on the financial crisis in Lithuania. After analysing the evaluation of 25 Lithuanian listed companies by disclosure of fair value, it can be state that stock companies evaluate more property than liabilities by disclose the fair value. A correlation coefficient was determined while assessing the correlation between the application of fair value in financial reports and financial crisis in Lithuania, but it disapproved the correlation.

scholarly journals Fair Value Accounting and Implications for the Auditing Profession: Historical Overview

2020 ◽  
Vol 9 (3) ◽  
pp. 31
Author(s):  
Esraa Esam Alharasis ◽  
Maria Prokofieva ◽  
Rateb Mohammad Alqatamin ◽  
Colin Clark
Keyword(s):  
Literature Review ◽  
Global Financial Crisis ◽  
Historical Analysis ◽  
Audit Fees ◽  
Fair Value ◽  
Theoretical Explanation ◽  
Economic Downturn ◽  
Fair Value Accounting ◽  
Global Institutions ◽  
The Global Financial Crisis

This paper explores the link between the introduction of fair value measurements (FVM) and the development of the Global Financial Crisis (GFC) in 2008-9. The paper aims to provide an historical analysis of the development of the Enron scandal with a focus on fair value accounting (FVA) and provides a narrative literature review of the subsequent economic downturn, its effect on the auditing profession and audit fees arrangements, implications for FVA, and response of global institutions and standard setters. It provides a theoretical explanation of the underlying antecedents using existing accounting theories. For each reviewed stream of research, the paper establishes the theoretical underpinning and discusses its application supported by the context. The content analysis using NVivo software was employed to analyse existing research and available published information. Based on the comprehensive literature review, the study arrives at two main findings. First, the paper concludes with the controversial use of FVM and establishes a direct connection between Enron’s collapse, the GFC, and improper FVM practices. Secondly, the study identifies the current pricing strategy for audit as an industry response to the abuse of external audit arrangements regarding FVA. Supported by the literature review findings, the paper contributes to the audit research by providing deep insights into the connection between FVA practices, the GFC and development of the audit profession. The paper addresses the lack of foundational research in FVA and establishes a solid background for further studies on FVA and audit profession development in general.

Information asymmetry of fair value accounting during the financial crisis

2013 ◽  
Vol 9 (2) ◽  
pp. 221-236 ◽  
Author(s):  
Lin Liao ◽  
Helen Kang ◽  
Richard D. Morris ◽  
Qingliang Tang
Keyword(s):  
Financial Crisis ◽  
Information Asymmetry ◽  
Fair Value ◽  
Fair Value Accounting

Enron, fair value accounting, and financial crises: a concise history

2018 ◽  
Vol 31 (1) ◽  
pp. 25-50 ◽  
Author(s):  
Stephen Haswell ◽  
Elaine Evans
Keyword(s):  
Global Financial Crisis ◽  
World View ◽  
Fair Value ◽  
Fair Value Accounting ◽  
Professional Literature ◽  
Content Type ◽  
Congressional Hearings ◽  
Political Actors ◽  
Global Standards ◽  
The Global Financial Crisis

Purpose While the debate about fair value accounting (FVA) and the global financial crisis (GFC) of 2008-2009 has been explored in the academic and professional literature, there has been little debate about the consequences of FVA being implicated in the crash of Enron around 2001, and the effect of this on later FVA developments and the GFC. The purpose of this paper is to examine how well regulators, political actors, and other commentators may have understood the use, misuse, effects and consequences of FVA at the time of Enron, and to examine how this collective understanding (or lack thereof) has influenced later accounting policy, especially that going into and arising from the GFC. Design/methodology/approach Using content analysis, the commentary about FVA is traced through documents, primarily the US Congressional Hearings’ examination of the collapse of Enron that took place between December 2001 and December 2002. An assessment of the knowledge of and attitudes toward FVA is made from these and is then traced through later developments including policy responses before, during and after the GFC. Findings Links are found between the collapse of Enron and adjustments to FVA in the mid-2000s, which in turn became implicated in the GFC. These linkages are explored in the context of a fair value world view held by global standards setters in the mid-2000s. During the timeline from the 1990s to the mid-2000s, those advocating and adopting FVA as part of this world view, may have had collectively an insufficient understanding of the consequences or effects of FVA technology. Originality/value The study provides evidence of a direct link between Enron, the response of global standard setters, and the GFC controversy.

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