The History of the Fair Value Term and its Measurements
Sponsored by: Department of Accountancy
Speaker(s): MARTIN E. PERSSON, Ivey Business School, University of Western Ontario
Date & Time: Monday, March 27 from 2:10 p.m. to 3:10 p.m.
This paper explores the lack of a unified theory of valuation in regards to the accounting standards related to fair value accounting, and in particular the International Accounting Standards Board’s Fair Value Measurement (IFRS 13), which was published in 2011. It does so in two parts. The first part traces the history of the term fair value, whereas the second part traces the historical antecedents of the measurements currently used in fair value accounting. In so doing, the first part demonstrate how the term emerged in legal precedents on public utilities in the late 1800s, drifted into the accounting literature in the early 1900s, and then subsequent drifted into financial accounting standards in the 1980s. The second part then demonstrates how the measurements employed under the term fair value have also drifted into financial accounting standard setting from other domains. We attribute level one and two fair value to ideas that emerged during the golden age of a priori accounting research in the 1960s, and level three fair value to a group of German foresters in the 1800s. In carefully tracing both the term and measurement of fair value, this paper aims to contribute to the contemporary debate about its (intended) usage in financial reporting.
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