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dc.contributor.authorYao, DaiFei
dc.contributor.authorPercy, Majella
dc.contributor.authorHu, Fang
dc.contributor.authorStewart, Jenny
dc.contributor.editorPaul de Lange
dc.description.abstractOne of the objectives of general-purpose financial reporting is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. The current focus on potentially increased relevance of fair value accounting weighed against issues of reliability has failed to consider the potential impact on the predictive ability of accounting. Based on a sample of international (non-U.S.) banks from 24 countries during 2009-2012, we test the usefulness of fair values in improving the predictive ability of earnings. First, we find that the increasing use of fair values on balance-sheet financial instruments enhances the ability of current earnings to predict future earnings and cash flows. Second, we provide evidence that the fair value hierarchy classification choices affect the ability of earnings to predict future cash flows and future earnings. More precisely, we find that the non-discretionary fair value component (Level 1 assets) improves the predictability of current earnings whereas the discretionary fair value components (Level 2 and Level 3 assets) weaken the predictive power of earnings. Third, we find a consistent and strong association between factors reflecting country-wide institutional structures and predictive power of fair values based on discretionary measurement inputs (Level 2 and Level 3 assets and liabilities). Our study is timely and relevant. The findings have important implications for standard setters and contribute to the debate on the use of fair value accounting.
dc.relation.ispartofconferencename2015 AFAANZ
dc.relation.ispartofconferencetitleAccounting & Finance Association of Australia and New Zealand Conference 2015
dc.relation.ispartoflocationHobart, Australia
dc.subject.fieldofresearchFinancial Accounting
dc.titleThe Usefulness of Fair Values in Improving the Predictive Ability of Earnings: Evidence from International Banks
dc.typeConference output
dc.type.descriptionE2 - Conferences (Non Refereed)
dc.type.codeE - Conference Publications
gro.facultyGriffith Business School, Department of Accounting, Finance and Economics
gro.hasfulltextNo Full Text
gro.griffith.authorPercy, Majella
gro.griffith.authorStewart, Jenny D.
gro.griffith.authorYao, DaiFei
gro.griffith.authorHu, Fang

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    Contains papers delivered by Griffith authors at national and international conferences.

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