Critical Literature Review And Content Analysis Of Fair Value Reporting Choices

by Alicia Carol White


Many issues related to the adoption of fair value as a measurement base became very significant as a result of the financial which occurred in year 2008 and 2009 such as inconsistency in measurement practices in the standards, limited choices for measurement, lack of measurement theory, limited conceptual framework and different measurement objectives between the market and entity. 

With a critical review of prior studies during the post crisis period, this study is expected to benefit future research on fair value accounting, particularly on measurement issues. This study aims to tabulate the findings on studies on pertinent factors related to the adoption of fair value by firms as well as implementation issues and challenges that arose from fair value measurement. 

The findings from the 13 reviewed articles have indicated that leverage and value relevance are the main determinants of firms’ accounting policy choice between fair value and historical cost mode. The findings from the comment letters have indicated that the banking and insurance sectors have common issues with fair value measurement which are related to liabilities (non — performance risks and restrictions) and transactions. The property industry main issues are related to valuation techniques and application to assets: highest and best use and valuation premise. The most common factor cited is national domestic GAAP standards which pre — existed before the introduction of IFRSs for country specific factors. 

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