IDEAS home Printed from https://ideas.repec.org/a/eee/aosoci/v56y2017icp55-67.html
   My bibliography  Save this article

Representing the market perspective: Fair value measurement for non-financial assets

Author

Listed:
  • Barker, Richard
  • Schulte, Sebastian

Abstract

Fair value measurement (FVM) in IFRS calls for a market-oriented representation of economic ‘reality’, whereby the values attributed to rights (assets) and obligations (liabilities) are in principle determined from the perspective of the ‘market participant’ rather than that of the reporting entity. We argue, however, based upon Searle’s analysis of institutional reality, that such rights and obligations exist and are knowable only under certain conditions, that when those conditions hold FVM is not distinctive, and that when they do not hold the requirements of FVM are wishful and incoherent. Based upon this analysis, and using case study data, we explore how FVM is applied in practice to non-financial assets. We find, for a predominance of core operating assets, that fair value is unknowable, because of the absence of the institutional reality on which the FVM idea implicitly depends. In these cases, actors’ representations of fair value were found to be expedient, unstable and ultimately in direct contradiction of the market participant’s perspective that is ‘wished-for’ in IFRS.

Suggested Citation

  • Barker, Richard & Schulte, Sebastian, 2017. "Representing the market perspective: Fair value measurement for non-financial assets," Accounting, Organizations and Society, Elsevier, vol. 56(C), pages 55-67.
    • Handle: RePEc:eee:aosoci:v:56:y:2017:i:c:p:55-67
    DOI: 10.1016/j.aos.2014.12.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0361368214001056
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.aos.2014.12.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. McKernan, John Francis, 2007. "Objectivity in accounting," Accounting, Organizations and Society, Elsevier, vol. 32(1-2), pages 155-180.
    2. Robson, Keith, 1994. "Inflation accounting and action at a distance: The sandilands episode," Accounting, Organizations and Society, Elsevier, vol. 19(1), pages 45-82, January.
    3. Basu, Sudipta & Kirk, Marcus & Waymire, Greg, 2009. "Memory, transaction records, and The Wealth of Nations," Accounting, Organizations and Society, Elsevier, vol. 34(8), pages 895-917, November.
    4. Whitley, Richard, 1986. "The transformation of business finance into financial economics: The roles of academic expansion and changes in U.S. capital markets," Accounting, Organizations and Society, Elsevier, vol. 11(2), pages 171-192, March.
    5. Roberts, John & Jones, Megan, 2009. "Accounting for self interest in the credit crisis," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 856-867, August.
    6. Ijiri, Yuji, 1983. "On the accountability-based conceptual framework of accounting," Journal of Accounting and Public Policy, Elsevier, vol. 2(2), pages 75-81.
    7. Cooper, David J. & Robson, Keith, 2006. "Accounting, professions and regulation: Locating the sites of professionalization," Accounting, Organizations and Society, Elsevier, vol. 31(4-5), pages 415-444.
    8. Chambers, Rj, 1965. "Measurement In Accounting," Journal of Accounting Research, Wiley Blackwell, vol. 3(1), pages 32-62.
    9. Bayou, Mohamed E. & Reinstein, Alan & Williams, Paul F., 2011. "To tell the truth: A discussion of issues concerning truth and ethics in accounting," Accounting, Organizations and Society, Elsevier, vol. 36(2), pages 109-124, February.
    10. Young, Joni J., 1994. "Outlining regulatory space: Agenda issues and the FASB," Accounting, Organizations and Society, Elsevier, vol. 19(1), pages 83-109, January.
    11. Young, Joni J., 2006. "Making up users," Accounting, Organizations and Society, Elsevier, vol. 31(6), pages 579-600, August.
    12. Ravenscroft, Sue & Williams, Paul F., 2009. "Making imaginary worlds real: The case of expensing employee stock options," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 770-786, August.
    13. Botzem, Sebastian & Quack, Sigrid, 2009. "(No) Limits to Anglo-American accounting? Reconstructing the history of the International Accounting Standards Committee: A review article," Accounting, Organizations and Society, Elsevier, vol. 34(8), pages 988-998, November.
    14. Shapiro, Brian P., 1997. "Objectivity, relativism, and truth in external financial reporting: What's really at stake in the disputes?," Accounting, Organizations and Society, Elsevier, vol. 22(2), pages 165-185, February.
    15. Gaynor, Lisa Milici & McDaniel, Linda & Yohn, Teri Lombardi, 2011. "Fair value accounting for liabilities: The role of disclosures in unraveling the counterintuitive income statement effect from credit risk changes," Accounting, Organizations and Society, Elsevier, vol. 36(3), pages 125-134, April.
    16. Laux, Christian & Leuz, Christian, 2009. "The crisis of fair-value accounting: Making sense of the recent debate," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 826-834, August.
    17. Peter Miller, 1998. "The margins of accounting," European Accounting Review, Taylor & Francis Journals, vol. 7(4), pages 605-621.
    18. Hines, Ruth D., 1988. "Financial accounting: In communicating reality, we construct reality," Accounting, Organizations and Society, Elsevier, vol. 13(3), pages 251-261, April.
    19. Barrett, Michael & Cooper, David J. & Jamal, Karim, 2005. "Globalization and the coordinating of work in multinational audits," Accounting, Organizations and Society, Elsevier, vol. 30(1), pages 1-24, January.
    20. Arjo Klamer & Donald McCloskey, 1992. "Accounting as the master metaphor of economics," European Accounting Review, Taylor & Francis Journals, vol. 1(1), pages 145-160.
    21. Hines, Ruth D., 1991. "The FASB's conceptual framework, financial accounting and the maintenance of the social world," Accounting, Organizations and Society, Elsevier, vol. 16(4), pages 313-331.
    22. Young, Joni J. & Williams, Paul F., 2010. "Sorting and comparing: Standard-setting and “ethical” categories," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 21(6), pages 509-521.
    23. Macintosh, Norman B. & Shearer, Teri & Thornton, Daniel B. & Welker, Michael, 2000. "Accounting as simulacrum and hyperreality: perspectives on income and capital," Accounting, Organizations and Society, Elsevier, vol. 25(1), pages 13-50, January.
    24. Vollmer, Hendrik & Mennicken, Andrea & Preda, Alex, 2009. "Tracking the numbers: Across accounting and finance, organizations and markets," Accounting, Organizations and Society, Elsevier, vol. 34(5), pages 619-637, July.
    25. Carruthers, Bruce G., 1995. "Accounting, ambiguity, and the new institutionalism," Accounting, Organizations and Society, Elsevier, vol. 20(4), pages 313-328, May.
    26. Burchell, Stuart & Clubb, Colin & Hopwood, Anthony & Hughes, John & Nahapiet, Janine, 1980. "The roles of accounting in organizations and society," Accounting, Organizations and Society, Elsevier, vol. 5(1), pages 5-27, January.
    27. Power, Michael, 1997. "Expertise and the construction of relevance: Accountants and environmental audit," Accounting, Organizations and Society, Elsevier, vol. 22(2), pages 123-146, February.
    28. Murphy, Tim & O’Connell, Vincent & Ó hÓgartaigh, Ciarán, 2013. "Discourses surrounding the evolution of the IASB/FASB Conceptual Framework: What they reveal about the “living law” of accounting," Accounting, Organizations and Society, Elsevier, vol. 38(1), pages 72-91.
    29. Benston, George J., 2006. "Fair-value accounting: A cautionary tale from Enron," Journal of Accounting and Public Policy, Elsevier, vol. 25(4), pages 465-484.
    30. Hopwood, Anthony G., 1987. "The archeology of accounting systems," Accounting, Organizations and Society, Elsevier, vol. 12(3), pages 207-234, April.
    31. Robson, Keith, 1991. "On the arenas of accounting change: The process of translation," Accounting, Organizations and Society, Elsevier, vol. 16(5-6), pages 547-570.
    32. Mouck, Tom, 2004. "Institutional reality, financial reporting and the rules of the game," Accounting, Organizations and Society, Elsevier, vol. 29(5-6), pages 525-541.
    33. Power, Michael K., 2003. "Auditing and the production of legitimacy," Accounting, Organizations and Society, Elsevier, vol. 28(4), pages 379-394, May.
    34. Morgan, Gareth, 1988. "Accounting as reality construction: Towards a new epistemology for accounting practice," Accounting, Organizations and Society, Elsevier, vol. 13(5), pages 477-485, August.
    35. Burchell, Stuart & Clubb, Colin & Hopwood, Anthony G., 1985. "Accounting in its social context: Towards a history of value added in the United Kingdom," Accounting, Organizations and Society, Elsevier, vol. 10(4), pages 381-413, October.
    36. Davis, Stanley W. & Menon, Krishnagopal & Morgan, Gareth, 1982. "The images that have shaped accounting theory," Accounting, Organizations and Society, Elsevier, vol. 7(4), pages 307-318, October.
    37. Vollmer, Hendrik & Mennicken, Andrea & Preda, Alex, 2009. "Tracking the numbers: across accounting and finance, organizations and markets," LSE Research Online Documents on Economics 27073, London School of Economics and Political Science, LSE Library.
    38. Searle, John R., 2005. "What is an institution?," Journal of Institutional Economics, Cambridge University Press, vol. 1(1), pages 1-22, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Goulding, Richard & Haslam, Colin & Leaver, Adam & Silver, Jonathan, 2024. "A ‘Distributional Apparatus’ for real estate: Fair value accounting and the assetization of UK property," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 99(C).
    2. Tatiana Garanina & Henri Hussinki & Johannes Dumay, 2021. "Accounting for intangibles and intellectual capital: a literature review from 2000 to 2020," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5111-5140, December.
    3. Manuela Lucchese & Ferdinando Di Carlo, 2021. "Inventories Accounting under US-GAAP and IFRS Standards: The Differences That Hinder the Full Convergence," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(7), pages 180-180, July.
    4. Lantto, Anna-Maija, 2022. "Obtaining entity-specific information and dealing with uncertainty: Financial accountants' response to their changing work of financial reporting and the role of boundary objects," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 85(C).
    5. Durocher, Sylvain & Georgiou, Omiros, 2022. "Framing accounting for goodwill: Intractable controversies between users and standard setters," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 89(C).
    6. Pucci, Richard & Skærbæk, Peter, 2020. "The co-performation of financial economics in accounting standard-setting: A study of the translation of the expected credit loss model in IFRS 9," Accounting, Organizations and Society, Elsevier, vol. 81(C).
    7. Lin Liao & Helen Kang & Richard D. Morris, 2021. "The value relevance of fair value and historical cost measurements during the financial crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2069-2107, April.
    8. Emett, Scott A. & Libby, Robert & Nelson, Mark W., 2018. "PCAOB guidance and audits of fair values for Level 2 investments," Accounting, Organizations and Society, Elsevier, vol. 71(C), pages 57-72.
    9. Ahblom, Per & Sjögren, Ebba, 2019. "Delivering performance: the capital market framing of financial numbers from a preparer perspective," LSE Research Online Documents on Economics 102819, London School of Economics and Political Science, LSE Library.
    10. Yasmine Chahed, 2021. "Words and Numbers: Financialization and Accounting Standard‐Setting in the United Kingdom," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 302-337, March.
    11. Warren Maroun & Wayne van Zijl & Rottok Chesaina & Robert Garnett, 2022. "The Beautiful Game: Fair Value, Accountability and Accounting for Player Registrations," Australian Accounting Review, CPA Australia, vol. 32(3), pages 334-351, September.
    12. Hayoun, Shaul, 2019. "How fair value is both market-based and entity-specific: The irreducibility of value constellations to market prices," Accounting, Organizations and Society, Elsevier, vol. 73(C), pages 68-82.
    13. Nemanja Karapavlović & Vladimir Obradović & Jasmina Bogićević, 2020. "The Use Of Historical Cost And Fair Value For Property And Plant And Equipment Measurement – Evidence From The Republic Of Serbia," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(227), pages 95-118, October –.
    14. Thomas Ryttersgaard, 2021. "Bridge over troubled water: Is it possible to define other comprehensive income?," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2021(1), pages 61-87.
    15. Ballantine, Joan & Kelly, Martin & Larres, Patricia, 2020. "Banking for the common good: A Lonerganian perspective," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 67.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huikku, Jari & Mouritsen, Jan & Silvola, Hanna, 2017. "Relative reliability and the recognisable firm: Calculating goodwill impairment value," Accounting, Organizations and Society, Elsevier, vol. 56(C), pages 68-83.
    2. Pucci, Richard & Skærbæk, Peter, 2020. "The co-performation of financial economics in accounting standard-setting: A study of the translation of the expected credit loss model in IFRS 9," Accounting, Organizations and Society, Elsevier, vol. 81(C).
    3. Erb, Carsten & Pelger, Christoph, 2015. "“Twisting words”? A study of the construction and reconstruction of reliability in financial reporting standard-setting," Accounting, Organizations and Society, Elsevier, vol. 40(C), pages 13-40.
    4. Vollmer, Hendrik, 2019. "Accounting for tacit coordination: The passing of accounts and the broader case for accounting theory," Accounting, Organizations and Society, Elsevier, vol. 73(C), pages 15-34.
    5. Murphy, Tim & O’Connell, Vincent & Ó hÓgartaigh, Ciarán, 2013. "Discourses surrounding the evolution of the IASB/FASB Conceptual Framework: What they reveal about the “living law” of accounting," Accounting, Organizations and Society, Elsevier, vol. 38(1), pages 72-91.
    6. Murphy, Tim & O’Connell, Vincent, 2017. "Challenging the dominance of formalism in accounting education: An analysis of the potential of stewardship in light of the evolution of legal education," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 44(C), pages 1-29.
    7. Yasmine Chahed, 2021. "Words and Numbers: Financialization and Accounting Standard‐Setting in the United Kingdom," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 302-337, March.
    8. Napier, Christopher J., 2006. "Accounts of change: 30 years of historical accounting research," Accounting, Organizations and Society, Elsevier, vol. 31(4-5), pages 445-507.
    9. Shapiro, B. P., 1998. "Toward a normative model of rational argumentation for critical accounting discussions," Accounting, Organizations and Society, Elsevier, vol. 23(7), pages 641-663, October.
    10. Stenka, Renata & Jaworska, Sylvia, 2019. "The use of made-up users," Accounting, Organizations and Society, Elsevier, vol. 78(C).
    11. Kornberger Martin & Pflueger Dane & Mouritsen Jan, 2017. "Evaluative infrastructures : Accounting for platform organization," Post-Print hal-02276737, HAL.
    12. Robson, Keith & Young, Joni & Power, Michael, 2017. "Themed section on financial accounting as social and organizational practice: exploring the work of financial reporting," LSE Research Online Documents on Economics 69822, London School of Economics and Political Science, LSE Library.
    13. Hayoun, Shaul, 2019. "How fair value is both market-based and entity-specific: The irreducibility of value constellations to market prices," Accounting, Organizations and Society, Elsevier, vol. 73(C), pages 68-82.
    14. Roberts, John & Wang, Timothy, 2019. "Faithful representation as an ‘objective mirage’: A Saussurean analysis of accounting and its participation in the financial crisis," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 65(C).
    15. Michael Power, 2010. "Fair value accounting, financial economics and the transformation of reliability," Accounting and Business Research, Taylor & Francis Journals, vol. 40(3), pages 197-210.
    16. Kornberger, Martin & Pflueger, Dane & Mouritsen, Jan, 2017. "Evaluative infrastructures: Accounting for platform organization," Accounting, Organizations and Society, Elsevier, vol. 60(C), pages 79-95.
    17. Robson, Keith & Bottausci, Chiara, 2018. "The sociology of translation and accounting inscriptions: Reflections on Latour and Accounting Research," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 54(C), pages 60-75.
    18. McKernan, John Francis, 2007. "Objectivity in accounting," Accounting, Organizations and Society, Elsevier, vol. 32(1-2), pages 155-180.
    19. Smith-Lacroix, Jean-Hubert & Durocher, Sylvain & Gendron, Yves, 2012. "The erosion of jurisdiction: Auditing in a market value accounting regime," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 23(1), pages 36-53.
    20. Baudot, Lisa & Cooper, David J., 2022. "Regulatory mandates and responses to uncomfortable knowledge: The case of country-by-country reporting in the extractive sector," Accounting, Organizations and Society, Elsevier, vol. 99(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:aosoci:v:56:y:2017:i:c:p:55-67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/aos .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.