Re-Exploring Fair Value Accounting and Value Relevance: An Examination of Underlying Securities

This study examines whether investors use the fair value of real estate investments in the balance sheet, and unrealized fair value gains and losses in the income statement, in their price setting process. Drawing on sample firms from the real estate development industry in New Zealand, the results of the current study suggest that: (1) unrealized fair value gains and losses on real estate investments have incremental value relevance compared to historical cost earnings, controlling for the method of recognition of the fair value gain or loss; and (2) current fair value of real estate investments has incremental value over historical book value of real estate investments. Such investigation is important given the current international debate concerning fair value accounting

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Does Fair Value Accounting Provide More Useful Financial Statements than Current GAAP for Banks?

The Accounting Review ◽

10.2308/accr-52007 ◽

2018 ◽

Vol 93 (6) ◽

pp. 257-279 ◽

Cited By ~ 8

Author(s):

John M. McInnis ◽

Yong Yu ◽

Christopher G. Yust

Keyword(s):

Measurement Error ◽

Value Relevance ◽

Financial Statements ◽

Relevant Information ◽

Fair Value ◽

Financial Instruments ◽

Fair Value Accounting ◽

Book Value ◽

Gains And Losses ◽

Relevant Measurement

ABSTRACT Standard setters contend that fair value accounting yields the most relevant measurement for financial instruments. We examine this claim by comparing the value relevance of banks' financial statements under fair value accounting with that under current GAAP, which is largely based on historical costs. We find that the combined value relevance of book value of equity and income under fair value is less than that under GAAP. We also find that fair value income is less value-relevant than GAAP income because of the inclusion of transitory unrealized gains and losses in fair value income. More surprisingly, we find that book value of equity under fair value is not more value-relevant than under GAAP, due both to divergence between exit value and value-in-use and to measurement error in fair value estimates. Overall, our results suggest that financial statements under fair value accounting provide less relevant information for bank valuation than financial statements under current GAAP.

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Do women on management board increase fair value relevance?

Corporate Governance and Sustainability Review ◽

10.22495/cgsrv1i1p1 ◽

2017 ◽

Vol 1 (1) ◽

pp. 6-16 ◽

Cited By ~ 12

Author(s):

Patrick Velte

Keyword(s):

Positive Impact ◽

Value Relevance ◽

Stock Exchange ◽

Gender Diversity ◽

Fair Value ◽

Fair Value Accounting ◽

Management Board ◽

Level 3 ◽

Level 1 ◽

Level 2

The purpose of this paper is the link between women on management board and the value relevance of fair value accounting according to IFRS 13. The empirical quantitative study covers a sample of German companies listed at the Prime Standard of the Frankfurt Stock Exchange for the business years 2013-2015 (411 firm-year observations). Value relevance is measured by the modified Ohlson (1995) model and we separate fair value accounting in level 1, level 2 and level 3 fair values. Multiple regressions state that female members in the man-agement board do have a positive impact on the value relevance of fair value accounting according to IFRS 13. Surprisingly, gender diversity only has a significant impact on the value relevance of fair valued assets on level 1 and 2 (“mark to market”) but not on level 3 (“mark to model”).

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