290.E关于中小企业融资困境的制度背景分析 外文原文

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1、Fair Value Accounting and the Financial Crisis: Messenger or Contributor?Michel MagnanAbstractDid fair value accounting play a role in the current financial crisis? This appendix explores the issue. Fair value accounting implies that assets and liabilities get measured and reflected on a firms finan

2、cial statements at their market value, or close substitutes. Extensive academic research done over the past 20 years shows that financial statements that reflect the market values of assets or liabilities provide information that is relevant to investors. In other context, fair value accounting is j

3、ust a messenger carrying bad news. In contrast, there is also another research stream which is quite critical of the perceived merits of fair value accounting, and which worries about how it undermines what constitutes the core of financial reporting. More specifically, it is argued that fair value

4、accounting is difficult to verify, may be based on unreliable assumptions or hypotheses and provides management with too much discretion into the preparation of financial statements. Hence, according to this view, fair value accounting is not necessarily a neutral or unbiased messenger. Moreover, fa

5、ir value accounting creates a circular dynamic in financial reporting, with markets providing the input for the measurement of many assets, thus affecting reported earnings which are then used by analysts and investors to assess a firms market value. If markets become volatile, as has been the case

6、in recent months, reported earnings also become more volatile, thus feeding investors apprehensions. Therefore, since fair value accounting is associated with more volatile and less conservative financial statements and, it may have allowed managers to delay the day of recognition as well as distort

7、ed investors and regulators perceptions of financial performance and stability at the end of the financial bubble. However, once the economic pendulum swung back, fair value accounting may have magnified their views as to the severity of the current financial crisis, hence accelerating some negative

8、 trends.Keywords: fair-value Accounting, governance, risk management17IntroductionDespite its almost universal adoption by accounting standard setters, the merits of fair value accounting continue to generateintense and passionate debates among academics, businesspeople, regulators or investors. A s

9、urprising element underlying these debates is the apparent irreconcilable positions adopted by participants in favour or against fair value accounting. However, the current financial crisis has significantly raised the level and stakes in that discussion, with fair value accounting increasingly bein

10、g under attack. For instance, the U.S. Congress recently mandated the Securities and Exchange Commission to investigate and report on fair value accountings contribution to the financial crisis. In reaction, some standard setters such as the Canadas Accounting Standards Board, the Financial Accounti

11、ng Standard Board and the International Accounting Standard Board have recently introduced temporary provisions waiving some aspects of fair value accounting for financial institutions.The purpose of the Appendix is to provide additional insights into the role played by fair value accounting in the

12、financial crisis. Since the crisis is still ongoing, there is no direct or formal empirical evidence about such role, which may be perceived, actual or potential. However, by analyzing the conceptual and empirical foundations of fair value accounting, it may be possible to draw some inferences and t

13、o assess if and how fair value accounting underlies some of the recent turmoil in financial markets. In that regard, the Appendix aims to achieve the following objectives. First, I intend to provide a brief overview of fair value accounting, including its impact on financial statements. The overview

14、 includes a summary of the opposite viewpoints on the merits of fair value accounting. Second, I present and discuss the theoretical and empirical underpinnings of fair value accounting. Thirdly, I analyze the measurement and valuation challenges that arise from the use of fair value accounting. Fin

15、ally, on the basis of the above analyses, I sketch a tentative framework to understand fair value accountings role and potential contribution to the financial crisis. While fair value accounting can conceptually apply to all aspects of a firms financial statements, I will purposefully focus on its a

16、pplication to financial instruments and financial institutions.ContextFair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties.1 For liabilities, fair value is defined as the amount that would be paid to transfer the liab

17、ility to a new debtor. Under fair value accounting (FVA), assets and liabilities are categorized according to the level of judgment (subjectivity) associated with the inputs to measure their fair value, with three (3) levels being considered. At level 1, financial instruments are measured and report

18、ed on a firms balance sheet and income statement at their market value, which typically reflects the quoted prices for identical assets or1Financial Accounting Standards Board. 2006. Financial Accounting Standard 157 - Fair Value Measurements. Norwalk, CT.liabilities in active markets. It is assumed

19、 that the quoted price for an identical asset or liability in an active market provides the most reliable fair value measurement because it is directly observable to the market ( mark-to-market ). However, if valuation inputs are observable, either directly or indirectly, but do not qualify as Level

20、 1 inputs, the Level 2 fair value assessment of a financial instrument will reflect a) quoted prices for similar financial instruments in active markets, b) quoted prices for identical or similar financial instruments in markets that are not active, c) inputs other than quoted prices but which are o

21、bservable (e.g., yield curve) or d) correlated prices. Finally, certain financial instruments which, for example, are customized or have no market, will be valued by a reporting entity on the basis of assumptions that presumably reflect market participants views and assessments (e.g., private placem

22、ent investments, unique derivative products, etc.). Such valuation is deemed to be derived from Level 3 inputs and is commonly referred as “mark-to- model” since it is often the outcome of a mathematical modelling exercise with various assumptions about economic, market or firm-specific conditions.

23、2 In all cases, any unrealized gain (or loss) on financial instruments held by an institution translates into an increase (decrease) in its stockholders equity and, consequently, an improvement (deterioration) in its capitalization ratios. 3Detractors, among them David Dodge, the former Governor of

24、the Bank of Canada, argue vehemently that FVA has accelerated and amplified the current financial crisis.4 Their argument can be summarized as follows. Starting in 2007, the drop in the price of many types of financial instruments led financial institutions to mark down the asset values reported on

25、their balance sheets, thus weakening their capitalization ratios (lets think about the first write-offs following the start of the subprime crisis). To improve their financial profile and to enhance their safety zone with respect to regulatory capital requirements, these institutions started to sell

26、 securities or close down positions on some financial instruments in markets that were increasingly shallow as a result of the emergence of a liquidity crisis. These sales magnified the downdraft in quoted prices, thus bringing additional devaluations, etc. Along these lines, William Isaac, former C

27、hairman of the U.S. Federal Deposit Insurance Corporation, argues that “mark-to-market accounting has been extremely and needlessly destructive of bank capital in the past year and is a major cause of the current credit crisis and economic downturn”.5However, FVA can count on broad support from the

28、accounting profession, standard setters and regulators. For instance, in a recent speech, Nick Le Pan, Canadas former Superintendent of Financial Institutions, argued that FVA is only a messenger and should not be criticized2 For more details, see FAS 157 and FAS 159 - The Fair Value Option for Fina

29、ncial Assets and FinancialLiabilities.3 Currently, while all unrealized gains or losses on financial instruments do affect a firms stockholders equity, they do not necessarily directly affect its reported net earnings. Some gains or losses may flow through an intermediateperformance measure which is

30、 labelled Other comprehensive income and which is distinct from reported netearnings.4 See McFarland, J. and J. Partridge. 2008. Mark-to-market accounting rules fuel debate. The Globe and Mail Report on Business. November 20.5 Jeffrey, G. 2008. Mark market debate down as a draw. The Bottom Line, Dec

31、ember, p. 27.for merely reflecting the poor underlying economic outlook.6 Barbara Roper, from the Consumer Federation of America, argues that sound accounting principles, such as FVA, led to the exposure of underlying problem assets. In her view, FVA provides more accurate, timely and comparable inf

32、ormation to investors than any other accounting alternative.Theoretical and Empirical Foundations Underlying FVAFVAs theoretical and empirical premises are relatively solid. In fact, it is one of the few accounting standard that can be traced back directly to accounting-based scientific research. Mo

33、re specifically, there is consistent empirical evidence, accumulated over the past 20 years, that a firms stock price is more closely associated with the market value of its underlying financial or real assets than with their historical cost, i.e., their purchase price plus related expenses.7 The su

34、perior relevance of market-derived values is even more obvious in the case of financial derivatives which historical cost is often close to zero but which market value can fluctuate widely.8 In other words, fair values, or marked to market values, have been found to be more relevant indicators of fi

35、rm value than traditional historical cost-based figures.9An interesting early study on the relevance and implications from FVA was performed by Bernard, Merton and Palepu (1995). For many years, Denmarks accounting standard-setting and banking regulatory authorities have relied on mark-to-market val

36、uation for the assets of their commercial banks.10 Bernard, Merton and Palepu find that Danish banks book values, which reflect mark-to-market valuations, seem to provide more reliable information to investors than historical cost-based figures then provided by U.S. banks. Moreover, they do not find

37、 evidence hat Danish bank executives manipulate mark-to-market numbers that Danish 6 McFarland, J. and J. Partridge. Idem.7 See, among many papers, Barth, M E, W H Beaver and W R Landsman. 2001. The relevance of the value relevance literature for accounting standard setting: another view. Journal of

38、 Accounting and Economics 31, pp 77104; Landsman, W.R. 2006. Fair Value Accounting for Financial Instruments: Some Implications for BankRegulation. Bank for International Settlements Paper.8 Venkatachalam, M. 1996. Value-relevance of banks derivatives disclosures. Journal of Accounting andEconomics

39、22, pp 32755.9 While studies take many different forms, the most widely used approach closely resembles the following(simplified version of a regression):Priceit = 0 + 1Assets(at costs)it + 2Liabilitiesit + 3Unrealized Gain(Loss)itWhere i represents a specific firm, and t, a given year-end. Variable

40、s are measured in $, in $ per share, or standardized by proxies for firm size. Price equals a firms stock market price while both Assets and Liabilities are as on the balance sheet (consistent with Generally Accepted Accounting Principles). Unrealized Gains(Losses) reflect the difference between an

41、asset market value (according to FVA) and its book value (according to GAAP). FVA-measured information is deemed to be more relevant for investors if results from the regression model show that 3 is positive and statistically significant.10 Bernard, V., R. Merton, and K. Palepu (1995). Mark-to-Marke

42、t Accounting for Banks and Thrifts: Lessons from the Danish Experience. Journal of Accounting Research 33 (Spring), 1-32.that Danish bank executives manipulate mark-to-market numbers to circumvent regulatory capital ratios. However, they also point out that that the Danish and U.S. capital markets a

43、re not quite similar and that their findings may not completely hold in a U.S. setting.On the basis of these empirical findings, many accounting professors have actively lobbied standard setters such as the Financial Accounting Standards Board to 1) introduce FVA into financial statements, initially

44、 through footnote disclosure, 2) gradually reduce the relative scope of historical cost-derived assets and liabilities in financial reporting and, 3) modify the conceptual framework underlying standard setting to state more clearly that the primary goal of financial reporting is to provide informati

45、on that is relevant to investors (presumably, stock market investors) and that, as such, FVA should be emphasized over historical cost11 Academic researchs influence over the standard setting process has been greatly enhanced by the involvement of many leading accounting professors favouring FVA int

46、o the decision-making process of standard setters or regulators such as the FASB or the SEC.12 In that regard, it is important to note that there is currently a joint project between FASB and the IASB to adopt a unique conceptual framework for accounting standard-setting. The draft framework, which

47、should be adopted within the next year, clearly states that the main purpose of financial reporting is to provide information that is relevant for investors, with emphasis on market values and cash flow forecasts as the most critical drivers underlying financial reporting.13Measurement and Valuation

48、 ChallengesDespite its many tangible or perceived benefits to investors, the adoption and use of FVA undermines several critical foundations of financial reporting to which we have become accustomed. More specifically, the implementation of FVA explicitly confirms the primacy of financial markets an

49、d of investors in the determination of accounting standards. Essentially, the broader social issues and implications arising from accounting standards for stakeholders beyond investors are assumed away.11 For instance, as early as 2000, the Financial Accounting Standards Committee of the American Ac

50、counting Association stated that “.The Committee generally supports the FASB position that financial instruments be reported in the financial statements at fair value.”(Wahlen, J., J.R. Boatsman, R.H. Herz, G. J. Jonas, K.G. Palepu, S.G. Ryan, K. Schipper, C.M. Schrand, D.J. Skinner. 2000. Response

51、to the FASB Preliminary Views: Reporting Financial Instruments and Certain Related Assets and Liabilities at Fair Value. Accounting Horizons 14(4), 501-508).12 For instance, a leading proponent of FVA, Katherine Schipper, from Duke University (formerly a professor at theUniversity of Chicago) and fo

52、rmer President of the American Accounting Association, was a member of the FASB between 2001 and 2006. One of the researchers who pioneered empirical work on FVA, Mary Barth, a professor at Stanford University (formerly at Harvard University) is currently a member of the International AccountingStan

53、dards Board and was previously involved in the American Institute of Certified Public Accountants and FASB.13 Financial Accounting Standards Board. 2008. Conceptual Framework for Financial Reporting: The Objective ofFinancial Reporting and Qualitative Characteristics and Constraints of Decision-Usef

54、ul Financial ReportingInformation. Exposure-Draft.The potential danger of relying on capital markets-based findings to directly prescribe accounting standard has been highlighted more than 30 years ago by Gonedes and Dopuch (1974).14 Following a first wave of capital markets-based studies that mappe

55、d their findings directly into standard-setting issues, Gonedes and Dopuch explain that observing an empirical relation between accounting amounts and equity prices or returns does not provide sufficient evidence about the desirability or effects of a particular standard, even if markets are informa

56、tional efficient. Their conclusion rests on the fact that accounting standards are essentially a public good. Therefore, standard setters mandate and responsibility is to develop standards after making the appropriate social welfare trade-offs, which do involve more parties than just investors. Henc

57、e, deciding about a particular accounting standard requires that social preferences be specified. From a different perspective, Holthausen and Watts (2001) put forward the argument that the value-relevance literature has little to say about standard-setting issues.15 In their view, without an underl

58、ying theory that explains, predicts and links accounting, standard setting, and valuation, value-relevance studies simply report associations.Other conceptual foundations of traditional financial reporting are also set aside to effectively implement FVA. On one hand, emphasis on value relevance impl

59、ies that accounting conservatism a remnant of the past. Within a conservatism perspective, financial statements anticipate bad news, i.e., before a transaction is actually done or concluded: hence, an asset is written down if it is deemed that it has suffereda permanent impairment or if expected eco

60、nomic conditions suggest that the firm will not be able to recover its value. Moreover, such write-down is permanent, i.e., the asset will not be re-evaluated upward in the future even if economic conditions change in the meantime. Still within a conservatism perspective, financial statements will o

61、nly reflect good news if there is an arms length transaction: the impact of any appreciation in the value of an asset or of the signature of a new contract will be reflected on a firms financial statements only the asset is actually sold. In contrast, within a FVA perspective, both realized and unre

62、alized losses and gains are recognized on financial statements. Moreover, assets that have been marked down can be re-evaluated upward. As an accounting principle, conservatism traces its roots back to the financial scandals that marked the early twentieth century. Interestingly, some of the firms i

63、nvolved in these scandals were actually using variants of FVA.16 The Enron case also 14 Gonedes, N., and Dopuch, N. (1974). Capital market equilibrium, information production, and selecting accounting techniques: Theoretical framework and review of empirical work. Journal of Accounting Research, 12:

64、48129.15 Holthausen, R.W., R.L. Watts. 2001. The relevance of the value-relevance literature for financial accountingstandard setting. Journal of Accounting & Economics 31 (1-3), 3-75.illustrates the potential negative consequences from dropping conservatism and replacing it with mark-to-market accounting, with management strategically selecting bid or ask prices to value its energy contracts. Enron was a key market-maker or, sometimes, the only market-maker, in some markets, thus facilitating managerial discretion.17Reliability