Advanced Search
MyIDEAS: Login

Fair Value Accounting for Financial Instruments – Conceptual Approach and Implications

Contents:

Author Info

  • Dumitru MATIS

    (Babeş-Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca, România)

  • Carmen Giorgiana BONACI

    (Babeş-Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca, România)

Registered author(s):

    Abstract

    This study complements the growing literature on the value relevance of fair value by examining the validity of the hypothesis that fair value is more informative than historical cost as a financial reporting standard for financial instruments. We therefore compare the relative explanatory power of fair value and historical cost in explaining equity values. In order to reflect fair values’ role in offering the fair view where financial instruments are concerned we briefly reviewed capital market studies that examine the usefulness of fair value accounting to investors, and discuss marking-to-market implementation issues of determining financial instruments’ fair values. In doing so, we identified several key issues, which need to be analyzed. More importantly, our results suggest that simply requiring fair value, as the reported measure for financial instruments may not improve the quality of information unless appropriate estimation methods or guidance for financial instruments that are not traded in active markets can be established. In contrast, fair value of available-for-sale securities, which are more actively traded in well-established markets, explains equity values more than historical cost. Taken together, our results are consistent with the notion that fair value is more (less) value relevant when objective market- determined fair value measures are (not) available.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.tje.uvt.ro/index.php/tje/article/download/16/pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by West University of Timisoara, Romania, Faculty of Economics and Business Administration in its journal Timisoara Journal of Economics.

    Volume (Year): 1 (2008)
    Issue (Month): 2 ()
    Pages: 191-206

    as in new window
    Handle: RePEc:wun:journl:tje:v01:y2008:i02:a05

    Contact details of provider:
    Postal: Str. J.H.Pestalozzi nr. 16, 300115, Timisoara
    Phone: 004 0256 592506
    Fax: 004 0256 5925002
    Web page: http://www.feaa.uvt.ro
    More information through EDIRC

    Order Information:
    Postal: 16 J. H. Pestalozzi Street, 300115, Timisoara, Romania
    Email:
    Web: http://www.tje.uvt.ro

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Carmen Giorgiana Bonaci & Adriana Tiron Tudor, 2011. "Fair Value Empirical Studies: An Overview On Acconting Research Literature," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(13), pages 1.
    2. Carlos León, 2012. "Implied probabilities of default from Colombian money market spreads: The Merton Model under equity market informational constraints," Borradores de Economia 743, Banco de la Republica de Colombia.
    3. Matis Dumitru & Bonaci Carmen Giorgiana, 2011. "Recent Developments Of The Financial Reporting Model: Theoretical Studies In Review," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 629-635, July.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wun:journl:tje:v01:y2008:i02:a05. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Romeo Margea).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.