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Fair Value, Accounting Aggregation and Multiple Sources of Information

In: Essays in Accounting Theory in Honour of Joel S. Demski

Author

Listed:
  • John Christensen

    (University of Southern Denmark)

  • Hans Frimor

    (University of Southern Denmark)

Abstract

Accounting information is formed by an aggregation of the information available to the accounting system. Introduction of fair value accounting represents a new solution to the accounting aggregation problem as market information is merged into the accounting system. Multiple sources of information are available to market participants and accounting information is but one of these sources. Fair value information is available to the accounting system, to the public, and to individual market participants, hence, the aggregate information available in the economy — aggregate informativeness — depends on the confluence of accounting information and other sources of information. Particularly, the price process might well be informative but is influenced by the accounting policy chosen and, hence, it is not obvious the introduction of fair value accounting leads to an improvement in aggregate informativeness. Fair value accounting may destroy the aggregation mechanism of the market.

Suggested Citation

  • John Christensen & Hans Frimor, 2007. "Fair Value, Accounting Aggregation and Multiple Sources of Information," Springer Books, in: Rick Antle & Frøystein Gjesdal & Pierre Jinghong Liang (ed.), Essays in Accounting Theory in Honour of Joel S. Demski, chapter 0, pages 35-51, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-30399-4_2
    DOI: 10.1007/978-0-387-30399-4_2
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