Voluntary fair value disclosures beyond SFAS 157’s three-level estimates

Chung, Sung Gon; Goh, Beng Wee; Ng, Jeffrey; Yong, Kevin Ow

doi:10.1007/s11142-016-9384-9

Cited by 41 publications

(46 citation statements)

References 54 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Their study suggests that greater exposure to more opaque financial instruments leads to higher information risk, and consequently, resulted in a higher cost of capital. These results are consistent with the findings of other studies showing that investors attribute a lower value relevance for Level 3 fair values [6,14].…”

Section: Fair Value Hierarchysupporting

confidence: 93%

“…This issue is important because much of the controversy regarding fair value accounting stems from concerns regarding the reliability of inputs that are used in measuring fair values (Ryan 2008). While Level 1 fair value measurements are less controversial, the use of Level 2 and Level 3 fair value inputs (otherwise known as the mark-to-model approach) has generated tremendous concern and interest among standard setters, regulators and academics because the measurement of fair values based on these inputs are perceived to involve a certain degree of subjectivity and uncertainty [6,26,32,34].…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study

Lim¹,

Pan²,

Yong³

2020

JFA

View full text Add to dashboard Cite

Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether crosscountry differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level of trust, tighter security regulations and higher level of disclosure requirements. These results apply to Level 1 assets but not to Level 2 and Level 3 assets. We also document that these crosscountry factors improve the trading volume of our sample banks. Our study provides early evidence suggesting that fair value measurements across the fair value hierarchy are impacted by a country's institutional background and financial development as well as the extent of its securities regulation and disclosure level. Our study suggests that there are ongoing concerns toward opaque fair values which are not fully eliminated by institutional differences. In addition, these differences matter in influencing investor willingness to trade in these stocks.

show abstract

Section: Fair Value Hierarchysupporting

confidence: 93%

Section: Introductionmentioning

confidence: 99%

Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study

Lim¹,

Pan²,

Yong³

2020

JFA

View full text Add to dashboard Cite

show abstract

“…Consistent with a firm's information environment playing a central role in determining the decision usefulness of fair value information to capital market participants, academic research considers the effect of fair value‐related disclosures on the usefulness of fair value estimates. Chung, Goh, Ng, and Yong (2017a) examine a sample of 681 US financial firms and find that voluntary fair value‐related disclosures are associated with higher market pricing and lower information risk for Level 3 fair value estimates, while Clor‐Proell, Proell, and Warfield (2014) find in an experimental setting that making fair value changes more salient in the income statement allows users to better incorporate disclosed fair value‐related information in their judgements. However, Griffin's (2014) findings in an experimental setting suggest that auditors are less likely to require adjustments to Level 3 fair value estimates when supplemental footnote disclosures are provided by a firm, suggesting that supplemental disclosures may have unintended consequences related to the auditing of fair values recognized in the financial statements.…”

Section: Analysis Of the Extent Of Fair Value Use In Practicementioning

confidence: 99%

Fair value accounting: Current practice and perspectives for future research

McDonough

Panaretou

Shakespeare

2020

Business Fin & Account

View full text Add to dashboard Cite

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

show abstract

“…This is consistent with the insignificant estimated coefficients on the risk modeling disclosure measures in the regressions reported in Tables 4 through 6. Another possibility, however, is that investors learn about the reliability of fair value measurements through contemporaneous disclosures that discuss, among other things, the controls, processes, and procedures designed to mitigate fair value measurement concerns (see Chung, Goh, Ng, & Yong, 2015). Unfortunately, the authors do not control for contemporaneous disclosures that could influence the relation between returns and fair value gains and losses.…”

Section: Disentangling the Risk Modeling And Disclosure Effectsmentioning

confidence: 99%