Preview

Appropriate Application of Ias

Powerful Essays
Open Document
Open Document
14325 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Appropriate Application of Ias
FAIR VALUE ACCOUNTING AND THE MANAGEMENT OF THE FIRM * Benzion Barlev, , * Joshua Rene Haddad * Department of Accounting, School of Business Administration, Hebrew University of Jerusalem, Jerusalem, Israel
Received 15 October 2001
Accepted 20 April 2002
Available online 26 September 2002 * http://dx.doi.org/10.1016/S1045-2354(02)00139-9, How to Cite or Link Using DOI * Permissions & Reprints

Abstract
The development of accounting standards reveals that the historical cost accounting (HCA) is being replaced by the fair value accounting (FVA) paradigm. FVA, in contrast to HCA that hides the real financial position and income, is more value relevance. The relevance of financial reports should be measured, in addition to association between market and accounting returns, in terms of its contribution to the stewardship function, reduction of agency costs, enhancement of management efficiency, and providing relevant information to stakeholders and workers in their social conflict. FVA-based reports call the attention of shareholders to the value of their equity and enhance the function of stewardship. Managers will be asked to guard the value of shareholders’ equity and to account for their efforts. This will causes a basic change in managers’ perceptions of their duties. The FVA provides also a complete full disclosure and it is compatible with transparency.

Introduction
An analysis of the development of accounting standards reveals an interesting phenomenon. Along with new financial reporting innovations in sporadic areas, there is a steady process of change of a basic accounting paradigm. The old historical cost accounting (HCA) is being replaced by the new fair value accounting (FVA) paradigm. These changes reflect the needs of users of financial accounting and the efforts of accounting standards setting bodies to reverse the pattern of declining relevance of financial information ( Francis & Schipper, 1999 and Lev &



References: 1. * Aboody et al., 1999 * Journal of Accounting and Economics, 26 (1999), pp. 149–178 * 2. * APB, 1962 * Accounting Principals Board (APB), Statement by the Accounting Principles Board (New York, NY: AICPA, 1962). * APB, 1970a * Accounting Principals Board (APB), Opinion No * APB, 1970b * Accounting Principals Board (APB), Statement No * APB, 1972 * Accounting Principals Board (APB), Opinion No * Ahmed & Takeda, 1995 * A.S * Stock Market Valuation of Gains and Losses on Commercial Banks Investment Securities: An Empirical Analysis * Journal of Accounting and Economics, 20 (1995), pp * Alchian and Demsetz, 1972 * Alchian, A * AAA, 1966 * American Accounting Association (AAA), A Statement of Basic Accounting Theory (ASOBAT) (Sarasota, FL: AAA, 1966). * Amir, 1993 * E * The Market Valuation of Accounting Information: The Case of Postretirement Benefits Other than Pensions * The Accounting Review, 68 (1993), pp * Barth, 1991 * M.E

You May Also Find These Documents Helpful

  • Better Essays

    Jet2 Task 4

    • 2238 Words
    • 9 Pages

    Horngren, C. T., Harrison, W. T., Jr, W. T., & Oliver, M. S. (2008). Accounting 8th edition. Prentice Hall. Retrieved from http://wpscms.pearsoncmg.com/wps/media/objects/6716/6877765/hha08_flash_main.html?chapter=null&page=901&anchory=null&pstart=null&pend=null…

    • 2238 Words
    • 9 Pages
    Better Essays
  • Powerful Essays

    Acc 205 Week 1 Assignment

    • 1709 Words
    • 7 Pages

    Walther. (2012). Principles of Accounting: Volume I (1st ed.). San Diego, CA: Bridgepoint Education, Inc. www.ashford.edu…

    • 1709 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    Wild, John j, and Ken Shaw, and Barbara Chiappetta. Principles Of Accounting. Mc. Graw hill, .…

    • 5358 Words
    • 22 Pages
    Powerful Essays
  • Powerful Essays

    References: Walther. (2012) Principles of Accounting II San Diego, CA; Bridgepoint Education, Inc. Retrieved from…

    • 2082 Words
    • 9 Pages
    Powerful Essays
  • Good Essays

    Cited: Fontinelle, A. (2011, July 28). Introduction to Accounting Information. Retrieved May 19, 2012, from Investopedia: http://www.investopedia.com…

    • 844 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    - “The Development of financial accounting and reporting standards” retrieved from Spiceland, J. David; James F. Sepe and Mark W. Nelson, (2011) Intermediate Accounting, Sixth Edition. New York, McGraw-Hill Companies, Inc…

    • 1294 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    Adopting Ifrs in Canada

    • 4061 Words
    • 17 Pages

    Colapinto, Robert. (2005). The Future Direction of Accounting Standards. CA Magazine. Retrieved July 10, 2007 from http://www.camagazine.com/…

    • 4061 Words
    • 17 Pages
    Powerful Essays
  • Good Essays

    The author revealed three myths surrounding accounting valuation. The first is that historical accounting has no connection to current market value. The second myth is that most assets of financial institutions are marked to market. And, the third myth is that assets must be valued at current market prices even if the market is illiquid. Each of these myths do penetrate the…

    • 492 Words
    • 2 Pages
    Good Essays
  • Better Essays

    SEC 10 k paper 221

    • 1145 Words
    • 4 Pages

    References: Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2012). Accounting Principles (10th ed.). Hoboken, NJ: John Wiley & sons.…

    • 1145 Words
    • 4 Pages
    Better Essays
  • Better Essays

    Lamar Swimwear

    • 1246 Words
    • 5 Pages

    Burns Jr., W. J. (1992). The Accounting Framework, Financial Statements, and Some Accounting Concepts. 12.…

    • 1246 Words
    • 5 Pages
    Better Essays
  • Powerful Essays

    Balance Sheet and Accounting

    • 8374 Words
    • 34 Pages

    References: Armstrong, M. S. 1977. The politics of establishing accounting standards. Journal of Accountancy 143. 76-79. Ball, R. 2001. Infrastructure requirements for an economically efficient system of public financial reporting and disclosure, Brookings-Wharton Papers on Financial Services 127-169. Ball, R, S.P. Kothari and A. Robin. 2000. The effect of international institutional factors on properties of accounting earnings. Journal of Accounting & Economics 29 (February): 1-51. Basu, S. 1997. The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting & Economics 24 (December): 3-37. Beatty, A. and J. Weber. 2005. The importance of accounting discretion in mandatory accounting changes: An examination of the adoption of SFAS 142. Forthcoming in Journal of Accounting & Economics. Beaver, W. H. 1993. Conservatism. Working Paper, Stanford University (presented at the American Accounting Association Annual Meeting, San Francisco, CA.) Benston, G. J. 1969. The effectiveness and effects of the SEC’s accounting disclosure requirements. In Economic Policy and the Regulation of Corporate Securities, edited by H. G. Manne. Washington, D.C.: American Enterprise Institute. Chadwick, J. 1992. The Decipherment of Linear B. Canto edition. Cambridge, U.K. Cambridge University Press. Daines, H. C. 1929. The changing objectives of accounting. The Accounting Review 4 (June): 94-110. Dechow, P. M. 1994. Accounting earnings and cash flows as measures of firm performance: The role of accounting accruals. Journal of Accounting & Economics 18 (July): 3-42. Demers, E., P. Joos and R. L. Watts. 2005. SAB 101, unpublished working paper, University of Rochester. DeMond, C. W. 1951. Price Waterhouse & Co. in America. De Ste Croix, G. E. M. 1956. Greek and Roman accounting. In Studies in the History of Accounting, edited by A. C. Littleton, and B. S. Yamey. Homewood, IL: Richard D. Irwin Inc. DuBois, A. B. 1938. The English business company after the Bubble Act 1720-1800. The Commonwealth Fund. Ely, K. and G. Waymire. 1999. Intangible assets and equity valuation in the pre-SEC era. Unpublished working paper, University of Iowa. Fabricant, S. 1936. Revaluations of fixed assets, 1925-1934. National Bureau of Economic Research, December. Financial Accounting Standards Board (FASB), 1993. Statement of financial accounting standards no. 115. Accounting for certain investments in debt and equity securities. FASB, Norwalk, CT.…

    • 8374 Words
    • 34 Pages
    Powerful Essays
  • Powerful Essays

    Islamic Accounting

    • 3545 Words
    • 15 Pages

    3- M.W.E. Glautier & B. Underdown, Accounting Theory and Practice, Pitman Publishing, London, 1986, Reprinted 1987, 1988, pp. 9, 11…

    • 3545 Words
    • 15 Pages
    Powerful Essays
  • Powerful Essays

    CPA _ Ethics

    • 2524 Words
    • 11 Pages

    Theoretical analysis of social impact – Parker et al. (1989, p.10), Miller’s (1994), Carnegie and Napier (1996, p.8)…

    • 2524 Words
    • 11 Pages
    Powerful Essays
  • Satisfactory Essays

    Harmonization

    • 28635 Words
    • 148 Pages

    Realisation: In order to fulfil this purpose, we have chosen a descriptive approach, which is…

    • 28635 Words
    • 148 Pages
    Satisfactory Essays
  • Powerful Essays

    Hisorical Cost vs Fair Value

    • 2984 Words
    • 12 Pages

    In accounting historical cost is the original or nominal amount of money paid for asset rather than inflation adjusted price. In other words it is the resource given up or a liability incurred to acquire an asset. The historical cost principle states that the asset should be reported at it cost (cash or cash equivalent amount) at the time of exchange and should include all cost necessary to get the asset in place and ready for use. Fair value is the market value of asset or liability. According to GAAP(Generally Accepted Accounting Principles) it is the amount at which asset could be bought and sold in current transaction between willing parties other than liquidation sale. In fair value accounting companies are to report asset and liabilities at price they would receive if they sell the asset or pay for the liabilities. Fair value accounting is conflicting to prudence concept which requires not overestimating revenues and underestimating expenses. It believes in being conservative in recording the value of the asset and not to underestimate liabilities. The matter of contention that arises is that the interpretation of financial reports according to fair value is different to historical cost. The concern is to determine which is more true and dependable. The main justification for choosing historical cost is the accuracy of data whereas fair value believes in getting closer to the current value in market .…

    • 2984 Words
    • 12 Pages
    Powerful Essays