The Relationship between Fair Value Accounting and Presence of Manipulation in Financial Statements

Alaryan, Laith Abdullah; Haija, Ayman Ahmad Abu; Alrabei, Ali Mahmoud

doi:10.5296/ijafr.v4i1.5405

Cited by 7 publications

(5 citation statements)

References 32 publications

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“…Previous studies document intentional bias in management estimates when the measurement is highly subjective and managers have a high degree of discretion (e.g., Aboody et al 2006;Bartov et al 2007;Alaryan et al 2014;Dong et al 2020). Suppose investors are concerned with the intentional bias in fair value estimates of investment properties.…”

Section: Literature Review and Model Developmentmentioning

confidence: 99%

An Empirical Assessment of IAS 40 Investment Property

Dong,

Tan,

Wang

et al. 2024

JAF

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This study examines the value relevance of the fair value model versus the cost model for evaluating investment properties under IAS 40 Investment Property. Contrary to the popular belief that fair value is the most relevant measurement attribute, we find that the coefficient estimate of investment properties for Chinese companies that adopted IAS 40’s fair value model is significantly smaller than its theoretical value, and is not significantly different from zero, suggesting that reported fair values are not value relevant as perceived by investors for the sample firms. Furthermore, investors tend to adjust the valuation of fair value companies’ non-investment property assets downward. The findings do not support the claim that fair value is superior to historical cost for the investment property valuation. Our findings highlight the need for more implementation guidelines from the IASB to enhance the value relevance of fair value estimates under IAS 40.

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Section: Literature Review and Model Developmentmentioning

confidence: 99%

An Empirical Assessment of IAS 40 Investment Property

Dong,

Tan,

Wang

et al. 2024

JAF

View full text Add to dashboard Cite

show abstract

“…Another study from Jordan extracted data from 45 companies' annual reports during a ten-year period (1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006) five years before and after the application of fair value to examine the relationship among the application of fair value accounting and the presence of manipulation in financial statements. The result indicates that the number of firms that manipulated information in the financial statements had increased after applying fair value accounting (Alaryan et al, 2014). "Enron's accountants (with Andersen's approval) used accounting devices to report cash flow from operations rather than financing and to otherwise cover up fair-value overstatements and losses on projects undertaken by managers whose compensation was based on fair values.…”

Section: Literature Reviewmentioning

confidence: 99%

In order to thrive, first we need to fix accounting and management Then, we must report what matters

Pantazi

2021

Proceedings of the International Conference on Business Excellence

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This paper examines the role of accounting through the information it provides to stakeholders, as well as the role of accounting in the development of our society. Accounting is vital for society, it is the main tool used to run businesses and state institutions, companies are decisive for defining culture, and culture is the basis of a developed society. Societies rely on its institutions, and the solution for a better world is found in the usage of reliable and independent data. It is well known the fact that subjective management decisions based on creative accounting led to big crises with negative consequences for all. Accounting has been used as the main tool to assess performance, but in order to be even more useful for society, the accounting system needs to modernize and unite, be transparent and totally independent from management. And it should be even more connected to the business model and responsive to the needs of society, in order to be able to provide valuable, comparable and useful information for all parties involved. The paper advocates for independent and forward-looking accounting, by giving up the flexibility, creativity and influence of managers, for decisions based on detailed and concrete information, transferred and consolidated in real time with the help of technology. Now accounting has the capacity to control the business and bring value to society through real-time and high-quality business reporting.

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“…In another study by Fattouh (2016) on "the role of replacing Fair Value Accounting with the principle of historical cost in enhancing the quality of accounting information", the study found out that Fair Value Accounting increased both the reliability and the relevance of accounting information with this making it more useful for users of accounting information in making effective decisions. Alaryan et al (2014) on the relationship between Fair Value Accounting and presence of manipulation in financial statements. Using the annual reports of forty-five (45) companies during a ten-year period of five years before and five years after the adoption and application of fair value accounting, the result of the study revealed that a higher number of firms manipulated accounting report after the adoption and application of fair value accounting compared to the number of firms before Fair Value adoption.…”

Section: Fair Value Accounting and Reliability Of Accounting Informationmentioning

confidence: 99%

Fair value accounting and reliability of accounting information of listed firms in Nigeria

Ibidunni¹,

Okere²

2019

10.5267/j.ac

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This study examined the association between fair value accounting and reliability of accounting information. The study adopted survey research along with quantitative methods. Users of the accounting information represented by corporate investment analysts and corporate portfolio managers were the respondents for the purpose of this study. The population size was one hundred and sixty-one (161) users of accounting information decomposed into one hundred (100) corporate investment analysts and sixty-one (61) corporate portfolio managers. The primary source of data was employed with the structured questionnaire as an instrument used to collect the data. Data was collected through the administration of 161 copies of the questionnaire to both corporate investment analysts and corporate portfolio managers. One hypothesis was formulated and was tested using the Pearson product moment correlation technique at a significant level of 5% and 10% while the Statistical Package for Social Science (SPSS) was engaged to analyze the data. Findings revealed a significant association between fair value accounting and reliability of accounting information of the firms in Nigeria. Hence, the study recommended that adequate and regular training programs and conferences on fair value accounting application have to be organized. This is because most of the employees of the companies in Nigeria did not understand how to use fair value in an inactive market, appropriately. Thus, it is of great importance that they were trained to understand different valuations and estimation techniques of fair value; how and when to apply them in the measurement of assets and liabilities in the financial statement.

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The Relationship between Fair Value Accounting and Presence of Manipulation in Financial Statements

Cited by 7 publications

References 32 publications

An Empirical Assessment of IAS 40 Investment Property

An Empirical Assessment of IAS 40 Investment Property

In order to thrive, first we need to fix accounting and management Then, we must report what matters

Fair value accounting and reliability of accounting information of listed firms in Nigeria

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