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A comparative analysis of the usefulness of fair value in measuring the financial instruments of South African banks

  • Authors: Jooste, Cilliers Johan Cornel
  • Date: 2012-07-04
  • Subjects: Financial instruments , Fair value , Banks and banking
  • Type: Mini-Dissertation
  • Identifier: uj:8785 , http://hdl.handle.net/10210/5143
  • Description: M.Comm. , The debate around the usefulness of fair value as a basis for measuring financial instruments has become increasingly topical and, in recent times, has attracted the attention of various market participants as a result of the global credit crisis which developed during 2007. The qualitative characteristics of relevance and reliability are central to any analysis regarding the usefulness of fair value as a financial instrument measurement basis. This study therefore investigates the relevance and reliability of the fair value measurements disclosed by the four largest South African banks in their 2008 annual financial statements in order to determine whether fair value is the most useful basis for measuring the majority of the financial instruments of South African banks. The financial instrument categories and fair value hierarchy defined in International Financial Reporting Standards (IFRS) are used to perform a content analysis on the 2008 annual financial statements of the banks included in the study, in order to conclude on the relevance and reliability, respectively, of the financial instrument fair values provided. Collectively, an analysis of the financial instrument categories applied and an investigation of the differences between the fair values and carrying values of financial instruments not measured at fair value suggest that fair value is not the most relevant basis for measuring the majority of the financial assets of all of the banks included in the study, and is also not the most relevant basis for measuring the majority of the financial liabilities of three of the four banks included in the study. Based on their fair value hierarchy classification, the fair values of the majority of both the financial assets and financial liabilities of the banks included in the study were not found to be reliable. Fair value was therefore not found to be the most useful basis for measuring the majority of the financial instruments of three of the four banks surveyed, while the findings for the fourth bank were inconclusive in this respect. Keywords: Fair value, financial instruments, usefulness, relevance, reliability
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Archival research of the underlying conceptual paradigm of fair value

  • Authors: Rouse, Marybeth
  • Date: 2012-10-03
  • Subjects: Fair value , Financial statements
  • Type: Mini-Dissertation
  • Identifier: http://ujcontent.uj.ac.za8080/10210/384697 , uj:10389 , http://hdl.handle.net/10210/7829
  • Description: M.Comm. , The application of measurement models in accountancy is the subject of debate, due to the financial crisis. In particular, it has brought renewed focus on the current use of the fair value measurement model in accounting standards, raising debates concerning whether the use of fair value worsened the effects of the financial crisis. Previously, there was a strong move towards fair value accounting especially in respect of financial instruments. As a result of the financial crisis, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), hereafter referred to as the Boards, responded to the criticism aimed at fair value accounting. The objective of this research study is to establish whether the leading standard setters, namely the FASB and its predecessor the APB, and the IASB, and its predecessor the IASC, have established a conceptual paradigm for fair value accounting. The literature confirms that a paradigm is established when consensus has been reached regarding the related aspect. This study therefore assesses whether the Boards have reached consensus on all aspects of fair value accounting in financial reporting. The concepts found in the Frameworks and principles found in the financial reporting standards are assessed. A qualitative research design in a critical framework is adopted for this research. The research is a critical assessment of the work of the Boards to determine whether a conceptual paradigm for fair value accounting has been established. This critical assessment is structured into various chapters that are dedicated to a specific decade. Each chapter examines the role that the Boards played in the development of the conceptual paradigm of fair value accounting for each decade. This study found that the Boards made significant progress on the development of the fair value paradigm over the period of this study. The most significant progress on the fair value paradigm was made at a financial reporting standards level. The Boards reached consensus on the fair value definition and exit price concept. Consensus was also reached on the initial measurement of fair value and on the measurement guidance for fair value. This measurement guidance was consistent and can be applied in all financial reporting standards that require fair value. The ii subsequent measurement principles established in IFRS 9 required an assessment of the business model and contractual cash flows, to determine whether fair value should be applied or not. It remains to be seen whether this principle will be accepted by the FASB and furthermore, whether this principle can be applied to other financial reporting standards that refer to fair value. The Boards reached consensus on the disclosure of fair value measurements with the publication of the standards on fair value measurement, SFAS No. 157 Fair Value Measurements and IFRS 13 Fair Value Measurements. However, limited progress was made on the development of the fair value paradigm at a conceptual Framework level. The Boards have not developed a clear measurement objective or provided conceptual guidance for the fair value paradigm. They have recognised the conceptual shortcomings of the measurement guidance provided in the Framework, and it is hoped that they will address these shortcomings of the fair value paradigm in the measurement phase of the conceptual Framework project.Key words: fair value accounting, financial reporting, Framework, paradigm, standard setters
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The underlying concepts of the definition of a liability in financial reporting : a doctrinal research perspective

  • Authors: Coetsee, Daniël
  • Date: 2020
  • Subjects: Conceptual framework , Executory contracts , Fair value
  • Language: English
  • Type: Article
  • Identifier: http://hdl.handle.net/10210/461430 , uj:41099 , Citation: Coetsee, D. 2020. The underlying concepts of the definition of a liability in financial reporting: a doctrinal research perspective. , DOI: https://doi.org/10.1080/10291954.2020.1742458
  • Description: Abstract: Accounting literature has identified fundamental conceptual issues and uncertainties regarding the financial reporting treatment of liabilities. This paper assesses whether the underlying concepts for the definition of a liability are robust and sufficiently developed in the 2018 Conceptual Framework of the International Accounting Standards Board (IASB) to create a conceptual foundation to identify, recognise, measure and derecognise liabilities. Doctrinal research is applied to evaluate the proposed concepts by using authoritative interpretation. The outcome of the authoritative interpretation is the contribution to the accounting literature. The paper finds that the 2018 Conceptual Framework significantly improves the conceptual foundation of the identification, recognition, measurement and derecognition of liabilities. The 2018 Conceptual Framework clarifies the obligation and past event criteria of the definition of a liability and, as a result, has paved the way for removing the reference to future outflow or sacrifices in both the definition and the recognition criteria of a liability. The 2018 Conceptual Framework also implies that when meeting the definition of a liability, in principle, it appropriately triggers recognition. It also clearly defines the different measurement bases and clarifies the measurement decision process regarding liabilities, which are sufficiently based on the nature and benefits of different measurement bases and the factors of useful information. The uncertainty about the existence of a liability for incorporation in financial statements is, however, still problematic and could create uncertainty in developing related International Financial Reporting Standards (IFRSs) and in practical applications.
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Minority shareholders’ appraisal rights and the determination of fair value by the courts

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