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Fair value accounting in banking - issues in convergence to IFRS

Author

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  • Vighneswara Swamy
  • Vijayalakshmi

Abstract

This paper intends to analyse and elucidate the impact of fair value accounting on the banking industry in general and Indian banking in particular in the light of the move towards convergence to international financial reporting standards across the globe. In the light of criticism against fair value accounting for amplifying the subprime crisis and for causing a financial meltdown, the article has analysed the nature and impact of fair value accounting in view of the recent announcement of the Indian version of IFRS i.e., Ind AS by the regulators in India and its impact in relation to the contentious issues like; systemic risk, contagion and its impact on investors. Further, the article highlights the areas in which Indian banking industry is required to focus before and after the implementation of fair value accounting and their consequences on the financial statements of the bank.

Suggested Citation

  • Vighneswara Swamy & Vijayalakshmi, 2012. "Fair value accounting in banking - issues in convergence to IFRS," African Journal of Accounting, Auditing and Finance, Inderscience Enterprises Ltd, vol. 1(3), pages 270-280.
    • Handle: RePEc:ids:ajaafi:v:1:y:2012:i:3:p:270-280
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    References listed on IDEAS

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    1. Wayne Landsman, 2006. "Fair value accounting for financial instruments: some implications for bank regulation," BIS Working Papers 209, Bank for International Settlements.
    2. Benston, George J., 2008. "The shortcomings of fair-value accounting described in SFAS 157," Journal of Accounting and Public Policy, Elsevier, vol. 27(2), pages 101-114.
    3. 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.
    4. Stephen Penman, 2007. "Financial reporting quality: is fair value a plus or a minus?," Accounting and Business Research, Taylor & Francis Journals, vol. 37(S1), pages 33-44.
    5. Rodrigo Cifuentes & Hyun Song Shin & Gianluigi Ferrucci, 2005. "Liquidity Risk and Contagion," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 556-566, 04/05.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    IFRS; fair value accounting; banking; IFRS convergence; financial reporting; auditing; investment; capital; India; International Financial Reporting Standards; systemic risk; contagion; financial statements.;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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