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How Does Fair Value Measurement under IAS 39 Affect Disclosure Choices of European Banks?

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  • Bischof, Jannis

    (Sonderforschungsbereich 504)

  • Wüstemann, Jens

    (Lehrstuhl für ABWL und Wirtschaftsprüfung/Sonderforschungsbereich 504)

Abstract

There is a considerable degree of heterogeneity in the way how European banks present their financial instruments in IFRS financial statements. We identify three major presentation formats that are currently applied: a presentation by measurement category, by product, and by purpose. We find the use of the measurement categories, which were originally designed by IAS 39 for measurement purposes, as line items to be the prevalent choice across countries. We analyze the factors that could explain this disclosure choice. We find that a corresponding regulatory recommendation has a strong effect on the choice. We further find that the disclosure of measurement categories is negatively associated with the relative book value of financial assets measured at fair value. This finding suggests discretionary disclosure management by banks. We conclude, based on behavioral theory, that banks expect investors to have a negative bias in the risk perception of assets measured at fair value.

Suggested Citation

  • Bischof, Jannis & Wüstemann, Jens, 2007. "How Does Fair Value Measurement under IAS 39 Affect Disclosure Choices of European Banks?," Sonderforschungsbereich 504 Publications 07-75, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    • Handle: RePEc:xrs:sfbmaa:07-75
    Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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    File URL: http://www.sfb504.uni-mannheim.de/publications/dp07-75.pdf
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    1. Nikolaos Eriotis & Theodoros Kounadeas & Dimitrios Vasiliou, 2019. "From IAS 39 To IFRS 9: Literature Review of Studies on the Implementation of IFRS in the European Banking Sector," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 9(3-4), pages 29-51.

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