Fair value accounting

While market prices can be useful tools for bank regulation, recent theoretical work argues that reliance on prices can be counterproductive when secondary markets are stressed and illiquid. Evidence from the financial crisis unearthed by Bhat et al. (in press) provides empirical validation of these arguments. Though Bhat et al. do not fully acknowledge it, their findings suggest that forcing banks to count liquidityinduced unrealized losses in securities holdings against regulatory capital destroys value and exposes bank creditors, including taxpayers, to more risk. Policy makers contemplating greater regulatory reliance on market prices ignore these findings at their peril.

While the global convergence of accounting standards is making steady progress, certain issues stand out as challenges. A major area where an international accounting standard has not gained universal acceptance is that of financial instruments. The European Union's refusal to adopt all of International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement, highlights that fact. The International Accounting Standards Board continues to address financial instruments in efforts to remedy this situation. Thus, it is important to better understand issues affecting the development of an international financial instruments accounting standard. The purpose of this study is to find out what issues are important to respondents in their comment letters regarding the Financial Instruments Discussion Paper (FIDP), and whether stakeholder groups differ in positions and the reasons given to support their views. The FIDP represented a major step toward approval of IAS 39 and proposed fair value accounting for all financial instruments. Over 1500 pages of comment letters were generated by the 168 respondents, who represented over 20 countries and several different stakeholder groups. While most respondents disagreed with the FIDP, differences in support and the specific issues used to support those positions were found by stakeholder interest group (accounting profession, regulators, standard-setters, financial analysts, and preparers) and by stakeholder nationality.

The ultimate point of origin of the great financial crisis of 2007-2009 can be traced back to an extremely indebted US economy. The collapse of the real estate market in 2006 was the close point of origin of the crisis. The failure rates of subprime mortgages were the first symptom of a credit boom tuned to bust and of a real estate shock. But large default rates on subprime mortgages cannot account for the severity of the crisis. Rather, low-quality mortgages acted as an accelerant to the fire that spread through the entire financial system. The latter had become fragile as a result of several factors that are unique to this crisis: the transfer of assets from the balance sheets of banks to the markets, the creation of complex and opaque assets, the failure of ratings agencies to properly assess the risk of such assets, and the application of fair value accounting. To these novel factors, one must add the now standard failure of regulators and supervisors in spotting and correcting the emerging weaknesses. Accounting data fail to reveal the full extent of the financial maelstrom. Ironically, according to these data, US banks appear to be still adequately capitalized. Yet, bank undercapitalization is the biggest stumbling block to a resolution of the financial crisis.

This paper provides preliminary evidence of the impact on financial ratios caused by the transition to International Financial Reporting Standards (IFRS) in Canada. The main features of IFRS are explained in the context of a shift from Canadian Generally Accepted Accounting Principles (GAAP) while the main differences between the two sets of rules are underscored – heavier reliance of IFRS on fair value accounting and comprehensive income, and the use of the entity theory for consolidation. The effects of IFRS on financial ratios in the areas of liquidity, leverage, coverage and profitability are discussed and verified using a sample cohort of early adopters in Canada. The preliminary evidence reveals significantly higher volatility to most of the ratios under IFRS when compared to those derived under pre-changeover Canadian GAAP. While the means and medians of IFRS ratios differ from the means and medians of the same ratios under pre-changeover Canadian GAAP, the differences are no...

Over the last thirty years in particular, a number of papers have examined various issues concerning the Japanese accounting system. However, previous research has largely ignored the importance of Japanese contextual factors. As such, the objective of this paper is to develop a holistic theoretical contextual framework for examining the Japanized process of convergence, which aims at integrating the Japanese-specific accounting system with the Anglo-American model, thereby achieving de facto (actual) convergence. This framework includes three heterogeneous genealogies, namely, Accounting Monism, Economic Monism, and Economic and Accounting Dualism, and four contextual dimensions, including legal, historical, political, and economic environments. The results show that because Japan has both globalized large-scale capital markets and well-organized related infrastructures, which include financial systems, governance structures, related laws, auditing standards, and standards-setting bodies, it would be futile to adopt International Financial Reporting Standards (IFRS) without reforming these and related facilities and resources. The findings also show that Economic and Accounting Dualism aims at reconciling heterogeneous concepts in accounting practices, such as future and past measurement attributes, asset-liability and revenue-expense based income, ex ante and ex post income calculation, and information providing role and reconciliation role of financial reporting. Excessive emphasis on Economic Monism and fair value disregards the fact that Japan is undergoing a prolonged, complex, and controversial process for aligning its entire accounting system with IFRS. Importantly, the partial suspension of fair value measurement and the swing-back towards historical cost measurement caused by the recent global financial crisis revealed that fair value is not unconditionally fair. We suggest that social, historical, political, and economic factors cannot be ignored in this rush towards global convergence of financial reporting. We further argue that accounting research can be enhanced by examining the contextual factors in which the uniqueness of accounting system is embedded.

The purpose of this paper is to study in the French context the impact of the application of fair value on the shareholder value creation by comparing the information's relevance of accounting indicators of French corporate groups in the industrial sector included in the CAC All-Tradable between pre-fair value period (2001)(2002)(2003) and the post-fair value (2005)(2006)(2007). Using the method of logistic regression permits us to demonstrate, firstly, that the variables of traditional character still retain their rank as key indicators determining stock return whatever the accounting principle relating thereto, and we noticed, on the other hand, that there is a marked improvement in information content of variables if and only they were submitted as understandable and uncomplicated under the model of fair value.

Issuing this standard that had to be applied for the first time for the financial statements started after 1.01.2003 meant a change of direction from two points of view: on one hand, through IAS 41 was issued for the first time an extensive standard typical for this sector and, on the other hand, for the first time were included in

Dewasa ini peranan laporan keuangan sebagai informasi keuangan yang dapat menggambarkan kondisi perusahaan semakin penting. Apalagi bagi perusahaan – perusahaan menengah dan perusahaan besar yang melantai di Bursa Efek Indonesia, laporan keuangan yang mereka buat setiap tahunnya sangatlah diperlukan bagi para stakeholder baik di dalam maupun luar perusahaan untuk membuat suatu keputusan ekonomik, misalnya saja lembaga perbankan yang bertindak sebagai kreditor bagi perusahaan. Laporan keuangan yang relevance dan reliable tercermin dari jumlah asset dan kewajiban pada Laporan Posisi Keuangan ( Neraca ). Sebelum Indonesia mengacu pada IFRS yang telah diterbitkan IASB ( Badan Standar Akuntansi Internasional ) sebagai Standar Pelaporan Keuangan Internasional ( dimana sejak 27 Agustus 2008 lebih dari 113 negara di seluruh dunia, termasuk seluruh Eropa mengadopsi IFRS ) , Indonesia mengacu pada US – GAAP yang diterbitkan oleh FASB ( Amerika Serikat ).  Ketika mengacu pada US-GAAP pengukuran terhadap asset dan kewajiban perusahaan menggunakan metode historical cost yakni dengan mencatat asset berdasarkan harga perolehan yang kemudian disusutkan setiap tahunnya menggunakan metode penyusutan dan kewajiban sebesar jumlah yang tertera pada surat hutang. Sedangkan dengan metode Fair Value artinya laporan keuangan yang dibuat oleh perusahaan dapat mencerminkan kondisi sesungguhnya bagi perusahaan.

Consistent with the Financial Reporting Standards Board's international convergence and harmonization policy it is proposed that a new accounting regime will prescribe the financial reporting practice and minimum disclosure requirements for agricultural activities, including the fair value of biological assets. In any financial report, the inclusion of biological assets may confuse the reality of the income profit and the wealth profit. There are many reasons it may provide misleading figures, the most obvious would be because the entity may have reported the value of heritage properties that do not actually generate any income but rather they are properties, which actually generate expenses for the entity, for example in maintenance costs. For any regime that requires entities to account and report on biological assets there should be a clear classification system that takes into account the different types of ownership structures in a society. Therefore in Romania, it is important that any financial reporting regime on biological assets should provide for the difference between business assets and cultural assets.

Uluslararası finansal piyasalarda, özellikle türev ürünlerdeki gelişim nedeniyle finansal
araçların muhasebeleştirilmesi ve sunumu ile ilgili çeşitli yaklaşımlar ortaya
çıkmıştır. Finansal araçların raporlanmasında Uluslararası Muhasebe Standartlar
Kurulu (IASB) ve Finansal Muhasebe Standartlar Kurulu (FASB) tarafından çeşitli
standartlar yayımlanmış ve gerçeğe uygun değer esas alınmıştır.
Yaşanan son finansal kriz, gerçeğe uygun değer muhasebesinin avantaj ve dezavantajları
ile ilgili önemli tartışmalara neden olmuştur.
Bu çalışmanın amacı ise son yıllarda yaşanan finansal kriz ışığında gerçeğe uygun
değer muhasebesine yönelik eleştirileri ve IASB ile FASB tarafından yapılan revizyonları
açıklamaktır.

Numéro spécial "Juste valeur et évaluation des actifs". Working paper : CASTA J. F. - La comptabilité en " juste valeur " permet-elle une meilleure représentation de l'entreprise ?, Cahier de Recherche CEREG, n° 2003-7, Université Paris Dauphine, 2003. http://www.dauphine.fr/cereg/cahiers.php

Abstract: The application of fair value for measuring forest assets is a complex process
that involves different actors: accountants, valuators and auditors. The objective
of this paper is to analyze the construction process of fair value in biological forest
assets discussing subjectivity and conflct issues among the actors involved in this
process by the perspective of trust and risk presented by Giddens’ work (1990). The
phenomenographic research has been used to capture the conception of this evaluation
model among the involved actors. Across the interviews, three categories of outcomes
were identifid: “model”, that means the process of how information is generated and
treated until it turns to monetary values; impacts on earnings; and fially disclosure
and validation. The “model” constitutes the core element in reliability´s debate;
therefore it should involve and drive all the actors to a consensus on fial value of the
biological assets. Nevertheless, to achieve this model validation, critical factors should
be considered, such as, the selection of future prices of an asset - not always from an
active market; the impacts on earnings; that weakens the validation process. Another
negative aspect regarding the model validation is the business model used to manage
that asset – that can be either a raw material, or a product, raising conflcts in the
interpretation of this information, undermining the informational capacity of income.
It be concluded that reliability in fair value context is more linked to the consensus
of the involved actors then to the verifibility of the documents, reinforcing that the
accounting is a social construction process.

The paper addresses two distinct aspects of disharmony in international accounting standards setting. The first aspect relates to the political economic context of financial accounting standards. This is illustrated by the Chinese standards setters' decision to allow the pooling of interests method of accounting for business combinations despite the prohibition of this method by both the FASB and the IASB. This decision by the Chinese standards setters appears to have been based on political economic factors related to the need for industrial reorganization in China rather than a desire to serve the needs of global capital markets. The second aspect of disharmony relates to the role played by differential understandings of the fundamental objectives of financial reporting in an international context. The IASB's goal of producing one set of global accounting standards to serve the needs of global capital markets has led to a reduction in the number of permissible accounting methods and a move towards the fair value accounting model. In particular, the IASB concluded that the acquisition method of accounting for business combinations should be the only method allowed for business combinations. In contrast, the Chinese standards setters have recognized the existence of both mergers and acquisitions, and in response they created two different methods of accounting for business combinations. Effectively, the Chinese standards setters developed an alternative approach to accounting for business combinations which challenges the IASB's goal of achieving international accounting convergence through the fair value model. (Q. Zhang). 1 The joint FASB/IASB conceptual framework project states that: "The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers. Capital providers are the primary users of financial reporting" .

This study examines the liability hedging characteristics of both direct and indirect real estate with the advent of fair value accounting obligations for pension funds. We explicitly model pension obligations as being subject to interest and inflation risk to analyze the ability of real estate investments in hedging the fair value of pension liabilities and to quantify its role in an asset liability management (ALM) portfolio. We find that the portfolio composition differs depending on the definition of liability return. When liability returns solely follow actuarial changes, the mean-variance efficient portfolio allocations toward direct real estate and fixed income decrease compared to the asset-only optimization. When accounting for nominal liability obligations, real estate offers hedging benefits against interest rates for short holding periods but not for long-term institutional portfolios. The inclusion of inflation risk renders a limited role for direct real estate in an ALM portfolio, while indirect real estate obtains no allocation. Inflation is at the heart of the discrepancy between reported and predicted pension plan allocations. Once accounting for inflation, the projected allocations come close to reported ones. *

GAAP is a contributing factor to accounting irregularities. A universal tool used by corporate management operating within an accounting system that has been created by accountants to serve the "user needs" of their corporate masters. This paper provides a synthesis of literature that focuses on the contributions of Robert R. Sterling, and the significance of exit values to contain earnings management and improve value relevance for the objectives of decision making and assessing management's stewardship of the entity's economic resources.

The ultimate point of origin of the great financial crisis of 2007-2009 can be traced back to an extremely indebted US economy. The collapse of the real estate market in 2006 was the close point of origin of the crisis. The failure rates of subprime mortgages were the first symptom of a credit boom tuned to bust and of a real estate shock. But large default rates on subprime mortgages cannot account for the severity of the crisis. Rather, low-quality mortgages acted as an accelerant to the fire that spread through the entire financial system. The latter had become fragile as a result of several factors that are unique to this crisis: the transfer of assets from the balance sheets of banks to the markets, the creation of complex and opaque assets, the failure of ratings agencies to properly assess the risk of such assets, and the application of fair value accounting. To these novel factors, one must add the now standard failure of regulators and supervisors in spotting and correcting the emerging weaknesses. Accounting data fail to reveal the full extent of the financial maelstrom. Ironically, according to these data, US banks appear to be still adequately capitalized. Yet, bank undercapitalization is the biggest stumbling block to a resolution of the financial crisis.

The Critical Aspect on Fair Value Accounting And Its Implication To Islamic Financial Institutions. Fair value accounting (FVA) paradigm replaced the historical cost accounting (HCA) in the development of accounting standards that FVA is more relevant that HCA probably did not provide the real financial and income information. This paper tries to explore critical aspects of the fair value accounting and its implications to Islamic Financial Institutions implications. This study concludes that that fair value accounting measurement provides many critical aspects to be implemented to Islamic Financial Institutions (IFIs). AAOIFI proposed cash equivalent value as respond to fair value measurement that cash equivalent value when the attribute condition are present such as the relevance, reliability and understandability of the resulting information.

A topic of recent interest in accounting research has been the investigation of the role of fair value accounting (FVA) in the global financial crisis. This research focused on finding a link during the crisis time-period and often states that “accounting is only a messenger”. The model presented in this paper emphasises finding the link before the crisis and “accounting as money.” Use is made of an accounting model of the economy due to the inability of standard models of monetary transmission to incorporate global financial crisis characteristics such as feedback effects, systemic risk and the centrality of the financial sector in the crisis. The model shows FVA in banks to be an accelerator that amplifies the financial cycle upswing. Feedback effects noted in the model include changes in the demand for financial instruments and changes in demand in the real economy. Minsky-like, crisis is shown to be endogenous to the model, working through the fragility of balance sheets in the real sector as well as in the financial sector. Bank balance sheet fragility is caused by bad capital driving out good capital, banks reaching for yield and the inversion of the yield curve. The model shows that the practice of not meeting rising credit demand with increasing credit supply is an essential control mechanism in the financial cycle.

The paper develops and tests accounting-based valuation models for commercial banks. Based on Begley et al. (2006) framework we propose a valuation model where goodwill is generated by virtually all commercial and investment banking activities. Key features of our model are: developing a relationship between the stream of future cash flows from fee income and value that depends on lending, borrowing and off-balance sheet business; and allowing proprietary investment and trading securities to be positive net present value activities.

ABSTRACT: Different accounting regimes create different information sources that are disclosed through accounting reports. A combination of these sources with other sources of information will be the basis for the expected returns for investors. In this study, expected return errors and real returns are used as a proxy for evaluating the accounting valuation error. Using panel data analysis with fixed effects, it measures the aggregation of information in accounting reports based on different accounting regimes. The results of 187 companies from all 572 companies listed in Tehran Stock Exchange between 2009 and 2015, show using transaction-based accounting system for reporting information, the information aggregation will be much higher and also the discrepancies of non-accounting-based residual returns indicate market participants do not have enough information for undoing accounting information from market information. In words, in some situations, fair value accounting, improves information aggregation, but generally, using transaction-based accounting, the combination of accounting information and information from other sources raise the information aggregation in the market.

The purpose of this paper is to study in the French context the impact of the application of fair value on the shareholder value creation by comparing the information's relevance of accounting indicators of French corporate groups in the industrial sector included in the CAC All-Tradable between pre-fair value period (2001-2003) and the post-fair value (2005-2007). Using the method of logistic regression permits us to demonstrate, firstly, that the variables of traditional character still retain their rank as key indicators determining stock return whatever the accounting principle relating thereto, and we noticed, on the other hand, that there is a marked improvement in information content of variables if and only they were submitted as understandable and uncomplicated under the model of fair value.

How does the management and resolution of the current crisis compare with the response of the Nordic countries in the early 1990s, widely regarded as exemplary? We argue that, while intervention has been prompter, the measures taken so far remain less comprehensive and in-depth. In particular, the cleansing of balance sheets has proceeded more slowly, and less attention has been

This paper uses the annual reports of companies of the STOXX 50 index to analyse their accounting practices for financial instruments and compare them to the measurement, recognition and disclosure requirements stipulated in IAS 32 and IAS 39. We use a list of 120 categories of inquiry and 370 possible responses and apply content analysis technique to the companies' annual reports. Our aim is to conclude in which areas the companies are farther away from IAS requirements. The results show that companies have a quite long way to go through in terms of accounting and disclosure of financial instruments activity, namely derivatives. This study brings important insights in the context of Regulation 1606/2002.

This study presents a pension model geared to the typical pension contract in the Netherlands. It is based on a defined benefit/average earnings pension system. Nominal benefits are guaranteed and indexation is intended. The model provides a framework for analysing adjustments to such factors as the asset mix, retirement age, returns and the method of discounting, premium setting and indexation.

This paper examines the choice of asset valuation rules from a managerial control perspective. A manager creates value for a firm through his effort choices. To support its operating activities, the firm also engages in financing activities such as credit sales to its ...

Abstract
An accounting construct such as historical cost represents facts at a certain point in time. It is supposed to represent economic and accounting facts in a “trustworthy” way. Representation problems arise because after the construct has represented them, the facts continue their own evolution. This is one of the reasons why Nietzsche considered that science, when defining, “petrifies” the facts. That is, the constructs would end up fossilizing the representation.
When we compare the representation of accounting constructs and those of economics, we could assert that accounting is subject to many more pressures of representational immediacy. The accounting records are a clear example of a near real-time representation, whereas, for example, the growth of the real gross domestic product of an economy represents the growth of an economy with a longer lag.
Despite this immediacy, the accounting representation has also been challenged by the temporality of the events, since the constructs are not always as stable as expected; they may also lag behind the development of their actual correlates. The representation of constructs such as historical cost, even though it is quite reliable (and stable), can be broken when, for example, the assets it represents suffer the consequences of severe market changes and volatility. Fortunately, accounting formulated a construct to account for this volatility of facts with the concept of fair value, and von Mises is honored as an important precursor of the concept.
In this essay, it is proposed that the debates around defense and attacks on one or the other may be fruitless, as it diverts the discussion from a crucial approach identified by Mattessich: the use of historical cost or fair value does not depend fundamentally on crucial ontical properties per se (nor from the arguments of its supporters) but from the objectives set by the managers of the organizations that apply the fair value. Here some of the epistemological problems and solutions are examined and it is proposed that Mattessich's teleological approach helps guide the discussion in a much more rigorous way.

Resumen
Un constructo contable como el de costo histórico representa hechos en un momento determinado del tiempo. Se supone que representa hechos económicos y contables de una manera “fidedigna”. Problemas de representación surgen porque después de que el constructo los ha representado, los hechos continúan su propio devenir. Este es uno de los motivos por los cuales Nietzsche consideró que la ciencia, al definir, “petrifica” los hechos. Es decir, los constructos terminarían fosilizando la representación.
Cuando comparamos entre la representación de los constructos contables y los de la economía, podríamos aseverar que la contabilidad está sujeta a muchas más presiones de inmediatez de representación. Los registros contables son un claro ejemplo de una representación prácticamente en tiempo real, mientras que, por ejemplo, el crecimiento del producto interno bruto real de una economía representa el crecimiento de una economía con un rezago más extenso.
A pesar de esta inmediatez, la representación contable también ha sido desafiada por la temporalidad de los hechos, pues no siempre los constructos son tan estables como se espera; también pueden rezagarse en relación con el desarrollo de sus correlatos reales. La representación de constructos como el de costo histórico, aun cuando es bastante fidedigna (y estable), puede romperse cuando por ejemplo los activos que representa sufren las consecuencias de severos cambios y volatilidad propias del mercado. Afortunadamente, la contabilidad formuló un constructo para dar cuenta de esta volatilidad de los hechos con el concepto de valor razonable y se honra a von Mises como un importante precursor del concepto.
En este ensayo se propone que los debates en torno a la defensa y los ataques a uno u otro puede ser infecunda, pues desvía la discusión de un enfoque crucial identificado por Mattessich: el uso del costo histórico o del valor razonable no depende fundamentalmente de propiedades ónticas cruciales per se (ni de los argumentos de sus partidarios), sino de los objetivos fijados por los directivos de las organizaciones que aplican el valor razonable. Aquí se examinan algunos de los problemas y soluciones epistemológicas y se propone que el enfoque teleológico de Mattessich contribuye a orientar la discusión de una manera mucho más rigurosa.

In the Netherlands, the typical pension contract nowadays comprises an average earnings defined benefit pension in which only nominal benefits are guaranteed, but with the intention to provide wage indexation. In the new supervisory regime, the guaranteed pension rights, based on market valuation, are subject to risk-based solvency requirements. Provisioning is not required for conditiona l pension rights, though contributions have to be consistent with the indexation ambition, as communicated with the participants. This paper analyses to what extent indexation is indeed likely, given different indexation and contribution policies. Thereby, it explains how intergenerational risk sharing in defined benefit pension plans can provide a reasonable insurance of pension benefits against wage or price inflation. Moreover, it illustrates the tenability of defined benefit pension plans under ageing, the new fair-value accounting regimes, and possible volatility on financial markets. The analysis is based on a stochastic Pension Asset and Liability Model for the Netherlands (PALMNET). According to the PALMNET simulations, voluntary provisioning for indexation is to be recommended. Without reservin g, indexation cuts may be severe and the solvency requirements incidentally lead to extreme premiums. Fully guaranteed indexation is virtually unaffordable under the new supervisory regime, because the real discount rate is generally both very low and volatile .

Banque de France• Financial Stability Review• No. 12–Valuation and financial stability• October 2008 75 Regulation, valuation and systemic liquidity AVINASH D. PERSAUD Chairman Intelligence Capital Limited It is a commonly held view that International Financial Reporting ...

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.

We thank the risk managers that attended KBC, ING, FORTIS, and DEXIA presentations and also the participants of the AFFI and EFA conference meetings for constructive comments. We explicitly thank James O'Brien, Janet Mitchell, and Oliver Entrop for extremely useful comments on an earlier draft of this paper. The views and findings of this paper are entirely those of the authors and do not necessarily reflect the views of the Abstract How should we value and manage deposit accounts where deposits have a zero contractual maturity, but which, in practice, remain stable through time and are remunerated below market rates? Does the economic value of the deposit account differ from the face value and can we reliably measure it? To what extent is the economic value sensitive to yield curve changes? In this paper, we try to answer the above questions. The valuation is performed on yield curve, deposit rate and deposit balance data between December 1994 and June 2005 for a sample of Belgian bank retail savings deposits accounts.

The ultimate point of origin of the great financial crisis of 2007-2009 can be traced back to an extremely indebted US economy. The collapse of the real estate market in 2006 was the close point of origin of the crisis. The failure rates of subprime mortgages were the first symptom of a credit boom tuned to bust and of a

In the Netherlands, the typical pension contract nowadays comprises an average earnings defined benefit pension in which only nominal benefits are guaranteed, but with the intention to provide wage indexation. In the new supervisory regime, the guaranteed pension rights, based on market valuation, are subject to risk-based solvency requirements. Provisioning is not required for conditiona l pension rights, though contributions have to be consistent with the indexation ambition, as communicated with the participants. This paper analyses to what extent indexation is indeed likely, given different indexation and contribution policies. Thereby, it explains how intergenerational risk sharing in defined benefit pension plans can provide a reasonable insurance of pension benefits against wage or price inflation. Moreover, it illustrates the tenability of defined benefit pension plans under ageing, the new fair-value accounting regimes, and possible volatility on financial markets. The analysis is based on a stochastic Pension Asset and Liability Model for the Netherlands (PALMNET). According to the PALMNET simulations, voluntary provisioning for indexation is to be recommended. Without reservin g, indexation cuts may be severe and the solvency requirements incidentally lead to extreme premiums. Fully guaranteed indexation is virtually unaffordable under the new supervisory regime, because the real discount rate is generally both very low and volatile .

Fair value accounting and IAS 39 are at the core of a debate between regulators, institutions and supervisors. We add to this debate at a conceptual and empirical level. First we discuss the advantages and disadvantages of fair values for banks and insurance companies. Then we explore the differences between fair values and book values and the implications thereof based

The main objective of this paper is to provide an analysis on whether mark-to-market accounting magnifies financial crises. Even though the results of numerous studies on this topic offer various conclusions, the majority of them conclude that fair value accounting, or mark-to-market accounting, does not cause financial crises. Most studies that had similar conclusions dealt with the 2006-2008 period, whereas we focus our research on period from 1881 to present day. Primarily, we will point out the historical context of the implementation of mark-to-market accounting and consequences it has, since it seems that some lessons from the past have been forgotten. We consider the long term relationship between US GDP and the S&P 500 index values and key historical developments to conclude that implementation of mark-to-market accounting contributes to creating of asset bubbles and assets overestimations. Even though mark-to-market accounting does not cause financial crises, it does magnify fundamental procyclicality which is inherent in efficient markets.

This study investigates the application of fair value accounting in companies in Bosnia and Herzegovina. The study was conducted on a sample of 190 companies. The application of fair value accounting causes a lot of controversy related to the relevance and reliability of fair value information. It is believed that the extent to which fair value measurement is used reflects attitudes of financial statement preparers about the usefulness of this model at its best. The findings of this study suggest that most companies in Bosnia and Herzegovina do not have tendency to apply fair value accounting. It is found that half of the companies in the sample do not use fair value accounting at all. Almost half of the companies that use fair value accounting use it just because they own assets that require fair value measurement. Fair value accounting is much more used in financial and larger companies than in non-financial and smaller companies. Companies mostly use fair value accounting for the measurement of investment property. However, they use it for the measurement of intangible assets at a minimum. The findings also suggest that the application of fair value accounting increases the uncertainty in financial statements. The quality of fair value disclosures is very low. Numerous companies do not disclose information on fair value hierarchy and valuation techniques that were used for fair value measurement. Companies that disclose this information mostly use indirectly observable inputs (Level 2) for fair value measurement and these create a lot of room for earnings management.

The inadequacy of historical cost measurement has been unto capture current market information and conditions have given rise to the increased use of fair value measurement. However, there has been a controversy as to whether Fair Value Accounting actually satisfies this need it purports to in respect of necessary conditions and benefits for its usage. The study specifically analyzed the reliability of fair value estimations in financial statement disclosures and the availability of active markets for fair value allocation. The respondents consisted of professional accountants in business and public practice and academics in Anambra State. The study was anchored upon the efficient market hypothesis and the agency theory. Disproportionate stratified random sampling technique was used to select the sample from each stratum; the study used simple random Original Research Article

1 Norme IAS 32 (1995), Instruments financiers : Informations à fournir et présentation. De son côté, la norme SFAS 107 (1991), Disclosures about Fair Value of Financial Instruments donne la définition suivante : « la juste valeur est le montant contre lequel un actif peut être échangé dans le cadre d'une transaction courante entre deux parties volontaires, en dehors de tout contexte de vente ou de liquidation forcées ». 2 La valeur de marché est le « prix que pourrait obtenir le vendeur (ou qu'accepterait de verser l'acquéreur) … sur un marché actif ».

In an earlier paper titled 'Mark-to-market accounting as a magnifier of financial crises', we advocated that fair value or mark-to-market accounting magnifies financial crises by creating a feedback loop between figures from financial reports and financial markets. We proposed a simple method for assessing how overpriced the US stock market is, which included a comparison between fixed base indexes of the S&P 500 and nominal US GDP. In this paper, we reiterate the role that fair value accounting is expected to play in both the creating and bursting of financial bubbles, putting it in the context of theories of 'reflexivity' and 'almost self-fulfilling equilibria'. We reassess the level of the US stock market, showing that a substantial stock market bubble (the third in the last two decades) has been formed recently and that significant market corrections may happen in 2016.

How do certain risk measurements in organizations come to be seen as more reliable and acceptable than others? Taking a multiple-control perspective, I investigate the aftermath of a control debacle at a financial services company (MultiBank), focusing on its insurance division (EurInsurance), which suffered large losses in the European insurance crisis of 2002-2003. At MultiBank, the insurance crisis opened up a field of contestability in which new control agents got the opportunity to become implicated in divisional control. The struggle for custody over divisional control was a micropolitical process of interprofessional competition, played out between accountants and risk controllers who promoted conflicting measures of the key strategic uncertainty, EurInsurance’s capital adequacy. The control agents engaged in credentializing strategies (Power, 1992); they mobilized and drew on different cultural resources to construct the reliability of their techniques and to discredit and “...