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Fair Value Accounting

Implications for Users of Financial Statements


Kristian Bachert

Fair value accounting is viewed as a major feature of IFRS and several standards either require assets to be measured at fair value or at least provide an option to fair value measurement instead of applying historical cost. While it is argued that fair values provide more timely and relevant information, the global financial crisis led to a considerable debate about the usefulness of fair value accounting. The study examines the implications of fair value accounting for financial analysts and nonprofessional investors. It provides evidence that, even if financial analysts find it challenging to produce accurate forecasts under a fair value regime, nonprofessional investors make larger investments and are more confident with their judgments for fair value firms.


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7 Conclusion


This research work examines the implications of fair value accounting for users of finan- cial statements. After theory and the empirical results of two empirical studies have been presented in the previous chapters, this chapter concludes the research by presenting the main findings of the research (chapter 7.1). Implications and the contribution of the re- search are reported in chapter 7.2. In addition, limitations and perspectives for the future of fair value accounting are presented (chapter 7.3). 7.1 Summary and main findings Fair value accounting is of growing importance in accounting research and practice. IFRS became mandatory for the consolidated financial statements of capital-market oriented companies in the European Union in 2005. This did not only bring about convergence in accounting, but also introduced the fair value approach for certain assets and liabilities as fair value accounting was not possible under many local GAAP systems. Especially the financial crisis caused the fair value discussion, which has before been mainly of interest for accounting academics and practitioners, into a debate of public interest. However, fair values are not only relevant for financial instruments. Indeed, IFRS allows fair value ac- counting for a wide range of assets or liabilities, including for example investment proper- ty or assets of PPE. The growing importance of fair value accounting is also reflected by the fact that the IASB released the new standard IFRS 13 Fair Value Accounting, which must be applied from 2013 on. The new IFRS is part of the Memorandum of Under- standing...

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