A major feature of International Financial Reporting Standards (IFRS) is the use of fair value accounting for financial assets and liabilities. IFRS 7 requires reporting entities to disclose fair values based on a ‘Three-Level’ hierarchy in order to provide financial statement users with useful information about valuations, methodologies and the uncertainty associated with fair value measurements. Level 1 and Level 2 measurements include observable and indirectly observable inputs such as quoted prices of identical or comparable assets or liabilities from active markets. However, Level 3 measurements include unobservable inputs computed by using price models or discounted cash flow methodologies or other information reflecting the reporting entity’s own assumptions and judgments. Research results generally confirm that managers use the discretion provided under fair value accounting opportunistically to increase firm performance and cash flows (Chong et al., 2012; Fiechter and Meyer, 2010; Henry, 2009), to smooth earnings volatility (Barth et al., 1995; Hodder et al., 2006; Li and Sloan, 2015), to meet analysts’ forecasts (Song, 2008) and to increase management compensation (Ramanna and Watts, 2009; Dechow et al., 2010; Shalev et al., 2013; Livne et al., 2011). Barth and Taylor (2010) call for more research to investigate the role of discretion in fair value estimates. Using the language of the fair value measurement hierarchy, Level 3 inputs are discretionary in nature. However, the incentive of bankers to use Level 3 inputs remains an empirical question.