The Economic Impact of SFAS NO. 157

Bhamornsiri, Sak; Guinn, Robert E.; Schroeder, Richard G.

doi:10.1007/s11294-009-9242-7

Cited by 4 publications

(2 citation statements)

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“…The majority (70%) of FV estimates rely on market inputs (Level 2), with market prices (Level 1) representing 23.5% of FV estimates and model. based estimates (Level 3), only 6.5% of FV estimates [12]. Investors assign different valuation coefficients depending upon the hierarchy level being used [13].…”

Section: Literature Reviewmentioning

confidence: 99%

A Consistent Implementation of IFRS 13 and IAS 36 for Non-current Assets

Patsis

Liapis

Christos

2023

KSS

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There is much debate for both the academic community and accounting professionals with respect to the use of fair value and cost accounting, as well as the application of impairment to current and non-current assets. Fair value and impairment are two related concepts, the reason being that in order to proceed with the latter, the current market price of an asset should first be measured. IAS 36 came into force to stipulate that no asset should be valued above its current actual value. Assets’ revaluation affects not only the companies’ outcome but also the applied depreciation method, which must be adjusted accordingly to the new data. Assets that cannot be measured to their fair value, in accordance with the IAS instructions, are grouped to form identifiable units within the company that was able to generate cash inflows and be tested for impairment as a whole. In this article, we focused on presenting a methodology from a technical approach on these issues, whilst at the same time remaining compatible with the principles of both accounting and finance. Real-life data from existing companies have been used not only for the valuation of the same following their transformation into cash-generated units, but also for non-current assets by controlling both the impairment and the depreciation process. We use cash flow generation models through the business plan process and apply certainty and uncertainty techniques such as sensitivity analysis and Monte Carlo simulation. After having reviewed the estimations and bearing in mind the structure of the model, we have concluded that specific parameters are affecting the fair value measurement on non-current assets. The value of this article is to develop a methodology that can be easily applied to different companies and is compatible with the spirit and provisions of both the international accounting standards as well as those of financial accounting. Keywords: FVA, cost accounting, finance, impairment, OR

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Section: Literature Reviewmentioning

confidence: 99%

A Consistent Implementation of IFRS 13 and IAS 36 for Non-current Assets

Patsis

Liapis

Christos

2023

KSS

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“…Different industries' reactions to FV are also different (Bhamornsiri, Guinn, & Schroeder, 2010). It is known that the availability of fair value information and the level of fair value measurements depend on the level of market development; it is reasonable to expect that the higher the fair value input level, the more value-relevant financial information will be obtained in a well-developed market.…”

Section: The Motivation For Hypothesismentioning

confidence: 99%