Fair value in financial reporting: Problems and pitfalls in practice
A case study analysis of the use of fair valuation at Enron
David Gwilliam ∗, Richard H.G. Jackson
School of Business and Economics, University of Exeter, Streatham Court, Rennes Drive, Exeter EX4 4PU, UK
Abstract
This paper contributes to the debate on the use of mark to market accounting in financial reporting by means of a case study-based
examination of the use of mark to market accounting by Enron Corp. in the years immediately preceding its collapse. Set in the
context of historical developments in and theoretical discussion upon asset valuation and income measurement, the case study
highlights: (i) the ease with which Enron was able to ‘monetize’ physical assets so as to bring them within the remit of mark
to market accounting; (ii) the unreliability of valuation estimates provided by independent third parties; and (iii) the asymmetry
between management desire to recognise mark to market gains through the income statement in contrast to their desire to avoid
recognising mark to market losses.
Notwithstanding the particular features of the Enron case, it is argued in the paper that these issues are generic and should be
taken into account by standard setters as they move toward encouraging more widespread use of mark to market accounting under
IAS 39, SFAS 157 and previous statements, and by other regulators with an interest in the provision of financial information to the
capital markets, such as the SEC in the US, the FSA/FRC in the UK, and the ASIC/FRC in Australia.
© 2008 Elsevier Ltd. All rights reserved.
Keywords: Mark to market; Fair value; Income measurement; Enron
<-PollName->
خبرنامه وب سایت:
آمار
وب سایت:
تبادل
لینک هوشمند
