Fair value accounting: Skyld i finanskrisen?

Joachim Munch

Student thesis: Diploma thesis


The main concern of the Thesis is to find out to which extent the use fair value accounting affected the financial crises and whether the society is stronger regarding to the financial reporting afterwards. To solve the main concern the Thesis describes the theory behind fair value accounting and the IASB/FASB development of the conceptual framework phase c – measurement. The chapter ending up with a description of the fair value measurement project based on exposure draft ED 5/2009. With a few changes the exposure draft led to a new published IFRS 13 standard on the 12th of may 2011. This chapter is the main foundation of the Thesis and further on the subject of impairment test and the financial crises are prescribed. Regarding to the presentation of the financial statement the extent of impairment has a larger effect then before the financial crises. Impairment is to ensure that the assets of an entity are carried at no more than the recoverable amount. An asset is carried at more than its recoverable amount if the carried amount exceeds the amount recovered through use or sale of the asset. The financial crises have led to difficulty of the valuation of an assets recoverable amount. Valuation based on the amount of which an asset can be sold, is only possible if the entity has an offer from a potential buyer or the marked is active based on quoted prices. Because of the financial crises no markets are active and quoted prices may not reflect the value of an asset. Therefore entities must base their valuation on estimation the amount recovered through use of the asset. By analyzing the valuation technique for estimating the amount recovered through use the extent of which the financial crises would affect the outcome was critical. After the analysis of impairment there are discovered several variables of which a financial crises would affect leading to a lower valuation. Based on the above mentioned the financial crises, has consequences for the valuation of assets. This leads to a less objective and reliable valuation at a time when users of the financial reporting need reliable information the most. Aside the less objective and reliable valuation of assets the lower amount result in a lower profit of the entity. In booms the valuation of assets raises which leading to profit but in bust the value falls which lead to lower profit. Because of these facts the use of fair value accounting has been accused of being pro-cyclical and as such attributing to worsening the financial crises. A lot of suggestions have been made regarding to better preparing the market for future crises and avoiding pro-cyclicality. The suggestions regard financial- and capital regulations for financial institutes. As to financial regulations the IASB made some change to IAS 39 Financial instuement – Recognition and measurement and IASB and FASB are current developing IFRS 9 – Financial Instruments which may lead to high provisions.

EducationsGraduate Diploma in Financial and Management Accounting, (Diploma Programme) Final Thesis
Publication date2011
Number of pages85