Abstract
This study investigates the association between accounting restatements and reporting different levels of fair value measurements as defined by SFAS No. 157. We find that firms with higher ratios of Level 3 fair value assets (i.e., financial assets which fair values are determined by unobservable, firm-generated inputs) to total assets are more likely to subsequently restate their financial statements. Further analysis shows that this association is driven by the restatements caused by errors and managerial manipulation. Overall, our results suggest that use of less reliable (Level 3) fair value measurements may reduce financial reporting quality.
| Original language | English |
|---|---|
| Pages (from-to) | 30-45 |
| Number of pages | 16 |
| Journal | Advances in Accounting |
| Volume | 38 |
| DOIs | |
| Publication status | Published - 2017 Sep 1 |
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All Science Journal Classification (ASJC) codes
- Accounting
- Finance
Cite this
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Fair value measurement and accounting restatements. / Lin, Yi Hung; Lin, Steve; Fornaro, James M.; Huang, Hua-Wei.
In: Advances in Accounting, Vol. 38, 01.09.2017, p. 30-45.Research output: Contribution to journal › Article
TY - JOUR
T1 - Fair value measurement and accounting restatements
AU - Lin, Yi Hung
AU - Lin, Steve
AU - Fornaro, James M.
AU - Huang, Hua-Wei
PY - 2017/9/1
Y1 - 2017/9/1
N2 - This study investigates the association between accounting restatements and reporting different levels of fair value measurements as defined by SFAS No. 157. We find that firms with higher ratios of Level 3 fair value assets (i.e., financial assets which fair values are determined by unobservable, firm-generated inputs) to total assets are more likely to subsequently restate their financial statements. Further analysis shows that this association is driven by the restatements caused by errors and managerial manipulation. Overall, our results suggest that use of less reliable (Level 3) fair value measurements may reduce financial reporting quality.
AB - This study investigates the association between accounting restatements and reporting different levels of fair value measurements as defined by SFAS No. 157. We find that firms with higher ratios of Level 3 fair value assets (i.e., financial assets which fair values are determined by unobservable, firm-generated inputs) to total assets are more likely to subsequently restate their financial statements. Further analysis shows that this association is driven by the restatements caused by errors and managerial manipulation. Overall, our results suggest that use of less reliable (Level 3) fair value measurements may reduce financial reporting quality.
UR - http://www.scopus.com/inward/record.url?scp=85025674149&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85025674149&partnerID=8YFLogxK
U2 - 10.1016/j.adiac.2017.07.003
DO - 10.1016/j.adiac.2017.07.003
M3 - Article
AN - SCOPUS:85025674149
VL - 38
SP - 30
EP - 45
JO - Advances in Accounting
JF - Advances in Accounting
SN - 0882-6110
ER -