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Institution-specific value

Author

Listed:
  • Ken Peasnell

    (Lancaster University - Department of Accounting, Finance)

Abstract

The introduction of a new accounting standard for financial instruments, has raised a number of issues related to the application of fair value principles. This paper discusses some of these issues which are generally related to the fact that "fair values" are not always easily defined or readily available. It concludes that the application of fair value for financial liabilities might present fewer complications if it is matched by similar valuation principles for financial assets. The issue of measurement error is more complicated as it can be related to whether valuations refer to exit value, as postulated by the IASB, or deprival value, which is more closely related to firm-specific valuation. Measurement error is magnified in the income statement and so will be any biases from the application of historical accounting for derivatives. Despite any measurement issues, the problem of institution-specific dimensions of value that looms so large in the case of non-financial enterprises and makes the systematic application of fair value accounting fraud with difficulty there, would seem to be much more manageable for financial institutions because of their familiarity with risk measurement and management techniques for financial instruments.

Suggested Citation

  • Ken Peasnell, 2006. "Institution-specific value," BIS Working Papers 210, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:210
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    References listed on IDEAS

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    1. Gunther Gebhardt & Rolf Reichardt & Carsten Wittenbrink, 2004. "Accounting for financial instruments in the banking industry: conclusions from a simulation model," European Accounting Review, Taylor & Francis Journals, vol. 13(2), pages 341-371.
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    Cited by:

    1. Stephen H. Penman, 2009. "Accounting for Intangible Assets: There is Also an Income Statement," Abacus, Accounting Foundation, University of Sydney, vol. 45(3), pages 358-371, September.

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    More about this item

    Keywords

    financial statements; institution-specific value; fair value; financial reporting;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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