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Using Fair Value Earnings to Assess Firm Value

Author

Listed:
  • Barth, Mary E.

    (Stanford University)

  • Landsman, Wayne R.

    (University of North Carolina)

Abstract

Whether fair value accounting should be used in financial reporting has been the subject of debate for many years. A key dimension to this debate is whether fair value earnings can provide information to financial statement users that is helpful in making their economic decisions. A criticism of fair value accounting is the contention that fair value earnings simply reflects "shocks" to value, and thus cannot be used to assess firm value. We show how fair value earnings can be disaggregated into components that can be used to assess firm value, as well as components that provide information about various types of shocks to value, e.g., effects of changes in expected cash flows.

Suggested Citation

  • Barth, Mary E. & Landsman, Wayne R., 2018. "Using Fair Value Earnings to Assess Firm Value," Research Papers repec:ecl:stabus:3642, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:repec:ecl:stabus:3642
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    File URL: https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/458811
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    Cited by:

    1. Mary E. Barth, 2018. "The Future of Financial Reporting: Insights from Research," Abacus, Accounting Foundation, University of Sydney, vol. 54(1), pages 66-78, March.
    2. Esraa Esam Alharasis & Hossam Haddad & Maha Shehadeh & Ahmad Saleem Tarawneh, 2022. "Abnormal Monitoring Costs Charged for Auditing Fair Value Model: Evidence from Jordanian Finance Industry," Sustainability, MDPI, vol. 14(6), pages 1-21, March.
    3. He, Liyu & Hsin-han Shen, Carl & Shiu, Cheng-Yi, 2022. "Is fair value information fairly priced? Evidence from IPOs in global capital markets✰," Journal of Banking & Finance, Elsevier, vol. 135(C).
    4. Wessel M Badenhorst & Rieka von Well, 2023. "The Value‐relevance of Fair Value Measurement for Inventories," Australian Accounting Review, CPA Australia, vol. 33(2), pages 135-159, June.

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