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The Decision Usefulness of Financial Accounting Measurement Concepts: Evidence from an Online Survey of Professional Investors and their Advisors

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  • Joachim Gassen
  • Kristina Schwedler

Abstract

In their current framework project, the IASB and the FASB identify decision usefulness as the objective of financial reporting. Unfortunately, accounting research has neither yet come up with an undisputed measure of decision usefulness, nor with a satisfying method to rank competing measurement concepts, such as fair value or historical cost, with regard to their relative decision usefulness. Thus, assessing the decision usefulness of different accounting measurement concepts ultimately poses an empirical question. We provide evidence to this question by surveying an important user group, namely professional investors and their advisors, about their opinions on the decision usefulness of different accounting measurement concepts. We find that our respondents clearly differentiate between mark-to-market and mark-to-model fair values. While they consistently rank mark-to-market fair values as most decision-useful, they generally rank mark-to-model fair values as least decision-useful. In addition, the ranking differs across asset classes.

Suggested Citation

  • Joachim Gassen & Kristina Schwedler, 2010. "The Decision Usefulness of Financial Accounting Measurement Concepts: Evidence from an Online Survey of Professional Investors and their Advisors," European Accounting Review, Taylor & Francis Journals, vol. 19(3), pages 495-509.
    • Handle: RePEc:taf:euract:v:19:y:2010:i:3:p:495-509
    DOI: 10.1080/09638180.2010.496548
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    2. Jannis Bischof & Holger Daske & Christoph Sextroh, 2014. "Fair Value-related Information in Analysts’ Decision Processes: Evidence from the Financial Crisis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(3-4), pages 363-400, April.
    3. Andersson, Patric & Hellman, Niclas, 2020. "Analysts’ evaluations of acquisitions: Swedish survey evidence on IFRS knowledge and the use of accounting information for valuation purposes," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 41(C).
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    6. Cascino, Stefano & Clatworthy, Mark A. & Osma, Beatriz Garcia & Gassen, Joachim & Imam, Shahed, 2021. "The usefulness of financial accounting information: evidence from the field," LSE Research Online Documents on Economics 107569, London School of Economics and Political Science, LSE Library.
    7. Christoph Kuhner & Christoph Pelger, 2015. "On the Relationship of Stewardship and Valuation—An Analytical Viewpoint," Abacus, Accounting Foundation, University of Sydney, vol. 51(3), pages 379-411, September.
    8. Hasan, Iftekhar & Kim, Incheol & Teng, Haimeng & Wu, Qiang, 2022. "The effect of foreign institutional ownership on corporate tax avoidance: International evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).
    9. Tadeusz Dudycz & Jadwiga Praźników, 2020. "Does the Mark-to-Model Fair Value Measure Make Assets Impairment Noisy?: A Literature Review," Sustainability, MDPI, vol. 12(4), pages 1-24, February.
    10. Karola Bastini & Rainer Kasperzak, 2013. "Erkenntnisfortschritt in der Rechnungslegung durch experimentelle Forschung? — Diskussion methodischer Grundsatzfragen anhand der Entscheidungsnützlichkeit des Performance Reporting," Schmalenbach Journal of Business Research, Springer, vol. 65(7), pages 622-660, December.
    11. Lin Liao & Helen Kang & Richard D. Morris, 2021. "The value relevance of fair value and historical cost measurements during the financial crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2069-2107, April.
    12. Árni Claessen, 2021. "Relevance of Level 3 fair value disclosures and IFRS 13: a case study," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(4), pages 378-390, December.
    13. Soenke Sievers & Christopher F. Mokwa & Georg Keienburg, 2012. "The Relevance of Financial versus Non-Financial Information for the Valuation of Venture Capital-Backed Firms," European Accounting Review, Taylor & Francis Journals, vol. 22(3), pages 467-511, September.
    14. Knauer, Thorsten, 2010. "Relevanz, Qualität und Determinanten der externen Unternehmenspublizität zum Humankapital: Eine empirische Bestandsaufnahme der HDAX-Unternehmen," Arbeitspapiere des Lehrstuhls für Betriebswirtschaftslehre, insbesondere Controlling 13-1, University of Münster, Chair of Management Accounting.
    15. Fülbier, Rolf Uwe & Klein, Malte, 2013. "Financial accounting and reporting in Germany: A case study on German accounting tradition and experiences with the IFRS adoption," Bayreuth Working Papers on Finance, Accounting and Taxation (FAcT-Papers) 2013-01, University of Bayreuth, Chair of Finance and Banking.
    16. Georgiou, Omiros & Jack, Lisa, 2011. "In pursuit of legitimacy: A history behind fair value accounting," The British Accounting Review, Elsevier, vol. 43(4), pages 311-323.
    17. Christoph Pelger & Nicole Spieß, 2017. "On the IASB’s construction of legitimacy – the case of the agenda consultation project," Accounting and Business Research, Taylor & Francis Journals, vol. 47(1), pages 64-90, January.
    18. Yong, Kevin Ow & Lim, Chu Yeong & Tan, Pearl, 2016. "Theory and practice of the proposed conceptual framework: Evidence from the field," Advances in accounting, Elsevier, vol. 35(C), pages 62-74.
    19. Tiago Cruz Gonçalves, 2021. "The Impact of Discretionary Measurement Criteria on Investors’ Judgement and Decisions," Games, MDPI, vol. 13(1), pages 1-14, December.
    20. Karen Handley & Sue Wright & Elaine Evans, 2018. "SME Reporting in Australia: Where to Now for Decision†usefulness?," Australian Accounting Review, CPA Australia, vol. 28(2), pages 251-265, June.
    21. Couch, Robert & Thibodeau, Nicole & Wu, Wei, 2017. "Are fair value options created equal? A study of SFAS 159 and earnings volatility," Advances in accounting, Elsevier, vol. 38(C), pages 15-29.

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