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Convergence in Motion: A Review of Fair Value Levels’ Relevance

Author

Listed:
  • Andrei Filip
  • Ahmad Hammami
  • Zhongwei Huang
  • Anne Jeny

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Michel Magnan
  • Rucsandra Moldovan

Abstract

The IFRS 13 post-implementation review by the IASB motivates our investigation on the value relevance of fair value (FV) measurement hierarchy (i.e. level 1, level 2, and level 3). First, using a meta-analysis, which allows us to summarize inconsistent empirical findings, we synthesize studies on the value relevance of the FV hierarchy. Overall, value relevance is lower for level 3 than for levels 1 and 2, but it increases over time. In non-U.S. studies, we note lower value relevance across all levels of FV assets. Underlying asset fundamentals, model risk, and measurement process complexity may contribute to this value relevance gap. Second, from interviews with professionals from financial institutions, we note that, in practice, there has been extensive learning about FV accounting since the 2007–9 Financial Crisis and a formalization of the valuation process that the academic literature has yet to fully recognize. We thus highlight conceptual and methodological issues and areas for research with practical implications.

Suggested Citation

  • Andrei Filip & Ahmad Hammami & Zhongwei Huang & Anne Jeny & Michel Magnan & Rucsandra Moldovan, 2021. "Convergence in Motion: A Review of Fair Value Levels’ Relevance," Post-Print hal-03601743, HAL.
    • Handle: RePEc:hal:journl:hal-03601743
    DOI: 10.1080/17449480.2021.1912370
    as

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