Valuation Implications of FAS 159 Reported Gains and Losses from Fair Value Accounting for Liabilities

Chung, Sung Gon; Lobo, Gerald J.; Yong, Kevin Ow

doi:10.2139/ssrn.2978730

Cited by 9 publications

(17 citation statements)

References 15 publications

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“…In contrast to the above results, Chung et al. (2017b) and Cedergren, Chen, and Chen (2019) find some evidence in support of measuring liabilities at fair value by demonstrating that changes in the value of US financial firms’ liabilities measured at fair value are generally value relevant to investors. Regardless, neither of these studies considers whether and how investors or analysts view assets measured at fair value differently than liabilities measured at fair value.…”

Section: Usefulness Of Fair Value Measurementsmentioning

confidence: 74%

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Fair value accounting: Current practice and perspectives for future research

McDonough

Panaretou

Shakespeare

2020

Business Fin & Account

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A fundamental issue debated in the accounting literature centres on the appropriate basis for measuring firms' assets and liabilities.During the last several decades, scholars have generated a growing body of important insights about the use of the fair value measurement attribute in financial reports around the globe. In this paper, we provide an overview of the institutional background of fair value accounting and the associated accounting standards that prescribe the use of fair value measurements under International Financial Reporting Standards and Generally Accepted Accounting Principles in the US. We discuss and document the extent to which firms across different industries and accounting regimes recognize and disclose in their financial reports assets and liabilities measured at fair value and we reflect on aspects of the fair value accounting literature. In doing this, we identify several areas in which additional research can further our understanding of fair value measurements and disclosures. K E Y W O R D SFair value accounting, FASB, IASB

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Section: Usefulness Of Fair Value Measurementsmentioning

confidence: 74%

“…In a sample of US financial firms, Chung et al. (2017b) investigate the value relevance of DVAs and find a positive relationship between DVAs and stock returns, while Cedergren et al. (2019) find insignificant results in their sample of 47 US BHCs.…”

Section: Usefulness Of Fair Value Measurementsmentioning

confidence: 99%

Fair value accounting: Current practice and perspectives for future research

McDonough

Panaretou

Shakespeare

2020

Business Fin & Account

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“…This suggests that investors price the wealth transfer from debtholders to shareholders that DVAs represent correctly when firms do not recognize DVAs. Chung et al (2017) find that investors potentially misprice DVAs but perceive them as value-relevant. Cedergren et al (2015) add to the latter finding by showing that investors also understand the offsetting relation between DVAs and corresponding changes in unrecognized intangible assets.…”

Section: Prior Literaturementioning

confidence: 96%

“…At the same time, recent empirical studies do not find that DVAs' perceived ''counterintuitiveness'' results in adverse capital market effects. Instead, the evidence suggests that investors perceive DVAs as value-relevant (Chung et al 2017), that investors understand the relation between DVAs and incomplete fair value accounting (Cedergren et al 2015), and that DVAs do not increase information asymmetry between investors (Schneider and Tran 2015;Fontes et al 2018).…”

Section: Introductionmentioning

confidence: 97%

“…Yet, the young stream of DVA literature provides little evidence on basic characteristics of DVAs such as their occurrence, size, and reporting. The scarce evidence in this regard comes mostly in the form of scaled measures (see, e.g., Schneider and Tran 2015;Fontes et al 2018) or from potentially incomplete samples (Cedergren et al 2015;Chung et al 2017). Prior evidence on DVAs' reporting stems from only two studies.…”

Section: Introductionmentioning

confidence: 99%

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“Some fuzzy math”: relational information on debt value adjustments by managers and the financial press

Kaumanns

2018

Bus Res

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This study provides comprehensive descriptive evidence on the occurrence, size, and reporting by managers and the financial press of debt value adjustments due to a change in own credit risk (DVAs). The study is motivated by a public debate about DVAs in which critics describe them as ''counterintuitive'' and claim that managers disclose DVA information strategically to make firms ''look good''. Analyzing a sample of 405 firm-quarters of 19 US financial firms that report DVAs between 2007 and 2014, I found that positive and negative DVAs appear similarly often and with similar magnitude. I further found that managers provide more information on large negative DVAs compared to positive DVAs. Managers also provide more DVA information when they have strategic incentives to do so. Examining newspaper articles on 202 firm-quarters, I found that the financial press is more likely to cover large positive DVAs and DVAs about which managers provided more information. Analyzing the articles' content, I found that the press is more likely to provide new DVA information if managers' press releases contain little information. The findings are in line with popular claims of asymmetric DVA reporting by managers. They are further consistent with the financial press acting as a counterweight to such asymmetric reporting.

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The implication of unrecognized asset value on the relation between market valuation and debt valuation adjustment

Cedergren

Chen

2019

Rev Account Stud

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Valuation Implications of FAS 159 Reported Gains and Losses from Fair Value Accounting for Liabilities

Cited by 9 publications

References 15 publications

Fair value accounting: Current practice and perspectives for future research

Fair value accounting: Current practice and perspectives for future research

“Some fuzzy math”: relational information on debt value adjustments by managers and the financial press

The implication of unrecognized asset value on the relation between market valuation and debt valuation adjustment

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