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Fair value measurement capabilities, disclosure, and the perceived reliability of fair value estimates: A discussion of Bhat and Ryan (2015)

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  • McDonough, Ryan P.
  • Shakespeare, Catherine M.

Abstract

Selecting an appropriate measurement basis for financial reporting is a fundamental and contentious accounting policy issue. While many argue that fair value is the most relevant measurement basis for financial reporting, other observers express concerns about the reliability (or “faithful representation”), and thus the usefulness, of fair value measurements. Bhat and Ryan (2015) consider the role of risk management technologies—in particular, market and credit risk modeling—in the estimation of fair values. In light of our discussion of Bhat and Ryan’s study, we argue that future research should aim to extend our understanding of the fair value estimation process and the factors that explain variation in the reliability of fair values as well as the channels through which investors learn about fair value measurement reliability.

Suggested Citation

  • McDonough, Ryan P. & Shakespeare, Catherine M., 2015. "Fair value measurement capabilities, disclosure, and the perceived reliability of fair value estimates: A discussion of Bhat and Ryan (2015)," Accounting, Organizations and Society, Elsevier, vol. 46(C), pages 96-99.
    • Handle: RePEc:eee:aosoci:v:46:y:2015:i:c:p:96-99
    DOI: 10.1016/j.aos.2015.05.003
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    References listed on IDEAS

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    1. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
    2. Holthausen, Robert W. & Watts, Ross L., 2001. "The relevance of the value-relevance literature for financial accounting standard setting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 3-75, September.
    3. Hodder, Leslie & Hopkins, Patrick & Schipper, Katherine, 2014. "Fair Value Measurement in Financial Reporting," Foundations and Trends(R) in Accounting, now publishers, vol. 8(3-4), pages 143-270, December.
    4. Laux, Christian & Leuz, Christian, 2009. "The crisis of fair-value accounting: Making sense of the recent debate," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 826-834, August.
    5. Venkatachalam, Mohan, 1996. "Value-relevance of banks' derivatives disclosures," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 327-355, October.
    6. Bhat, Gauri & Ryan, Stephen G., 2015. "The impact of risk modeling on the market perception of banks’ estimated fair value gains and losses for financial instruments," Accounting, Organizations and Society, Elsevier, vol. 46(C), pages 81-95.
    7. Wayne Landsman, 2007. "Is fair value accounting information relevant and reliable? Evidence from capital market research," Accounting and Business Research, Taylor & Francis Journals, vol. 37(S1), pages 19-30.
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    Cited by:

    1. Osama Samih Shaban & Atala M. Alqtish & Adel M. Qatawneh, 2020. "The Impact of Fair Value Accounting on Earnings Predictability: Evidence from Jordan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(12), pages 1466-1479, December.

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    More about this item

    Keywords

    Fair value measurement; Risk modeling; Market risk; Credit risk; Value relevance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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