Acta Universitatis Danubius. Œconomica, Vol. 8, No. 1
Abstract
This research paper evaluates the impact of level three valuations in accordance with FAS
157 and its impact on investors, auditors’ work, and valuation. The objective of this research is to
demonstrate that the fair value measurements should not be suspended. The standards provide for
measurement of fair value in all market conditions. Therefore, level 3 measurements or mark-tomodel
is an answer for many issuers that are not sure how to measure their assets and liabilities at the
fair value. The paper concludes that fair value measurement has not caused the current crisis and has
no pro-cyclical effect and suggests several recommendations for policy makers and regulators.
References
Reexamination of Capital Management, Earnings Management and Signaling Effects. Journal of
Accounting and Economics, 28(1): 1–25.
American Institute of Certified Public Accountants (AICPA). (2004) AU Section 312. Audit Risk and
Materiality in Conducting an Audit. New York” NY: AICPA.
Allen, Franklin, and Elena Carletti. (2008). Mark-to-Market Accounting and Liquidity Pricing.
Journal of Accounting and Economics, 45(2-3): 358–378.
Benston, George J. (2008). The Shortcomings of Fair-Value Accounting Described in SFAS 157.
Journal of Accounting and Public Policy, 27(2): 101–114.
Brunnermeier, Markus K. (2009). Deciphering the Liquidity and Credit Crunch 2007–2008. Journal
of Economic Perspectives, 23(1): 77–100.
Dean Baker (2008). The Housing Bubble and the Financial Crisis. Real-World Economic Review, 46,
20 May 2008, pp. 73-81.
Davis-Friday, P. Y., C.-S. Liu, & H. F. Mittelstaedt. (2004). Recognition and Disclosure Reliability:
Evidence from SFAS No. 106. Contemporary Accounting Research 21(2) pp: 399-430.
Dechow, Patricia M., Myers, Linda A. & Shakespeare, Catherine (2009). Fair Value Accounting and
Gains from Asset Securitizations: A Convenient Earnings Management Tool with Compensation Side-
Benefits. February, pp. 71-90.
(2003). Financial Accounting Standards Board (FASB). Consolidation of Variable Interest Entities.
Interpretation No. 46. Stamford, CT: FASB.
Gigler, F. and T.Hemmer (1998). On the Frequency, Quality,and Informational Role of Mandatory
Financial Reports. Journal of Accounting Research, 36, pp. 117-147.
Imhoff, E.A., R.C. Lipe, & D. W.Wright. (1991). Operating Leases: Impact of Constructive
Capitalization. Accounting Horizons 5 (1) pp: 51-63.
Landsman, Wayne R. (2007). Is fair value accounting information relevant and reliable? Evidence
from capital market research. Accounting and Business Research, Special Issue: International
Accounting Policy Forum: 19–30.
Libby, Robert, Nelson, Mark W. and Hunton, James E. (2005). Recognition v. Disclosure and Auditor
Misstatement Correction. The Cases of Stock Compensation and Leases. 44, pp. 115-126.
Nelson, M. W., J. A. Elliott, and R. L. Tarpley. (2002). Evidence from Auditors About Managers’ and
Auditors’ Earnings Management Decisions. The Accounting Review 77 (Supplement), pp. 175-202.
Plantin, Guillaume, Haresh Sapra, and Hyun Song Shin. (2008). Marking-to-Market: Panacea or
Pandora’s Box? Journal of Accounting Research, 46(2): 435–460.
Downloads
Published
How to Cite
Issue
Section
License
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
