Fair Value and the IASB/FASB Conceptual Framework Project: An Alternative View

  • Geoffrey WhittingtonEmail author


This chapter analyses issues arising from the project of the IASB and FASB to develop a joint conceptual framework for financial reporting standards. It discusses, in particular, the possible use of fair value as the preferred measurement basis. Two competing world views are identified: a Fair Value View, implicit in the IASB’s public pronouncements, and an Alternative View implicit in publicly expressed criticisms of the IASB’s pronouncements. The Fair Value View assumes that markets are perfect and complete and that financial reports should meet the needs of investors and creditors by reporting fair values derived from current market prices. The Alternative View assumes that markets are imperfect and incomplete and that, in such a market setting, financial reports should also meet the monitoring requirements of current shareholders by reporting transactions and events using measurements that reflect the opportunities available to the reporting entity. The different implications of the two views are illustrated by reference to specific issues in recent accounting standards.


Corporate Governance Balance Sheet Discussion Paper Alternative View International Financial Reporting Standard 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Accounting Standards Board (1992). FRS, Reporting Financial Performance, ASB, (revised 1993 and 1999).Google Scholar
  2. Accounting Standards Board (1999). Statement of Principles for Financial Reporting, ASB.Google Scholar
  3. Andre, P., Cazavan-Jeny, A., Dick, W., Richard, C., & Walton, P. (2009). Fair value accounting and the banking crisis in 2008: Shooting the messenger. Accounting in Europe, 6, 3–24.CrossRefGoogle Scholar
  4. Barth, M. E. (2006). Including estimates of the future in today’s financial statements. Accounting Horizons. Google Scholar
  5. Beaver, W. H., & Demski J. S. (1979). The nature of income measurement. The Accounting Review. Google Scholar
  6. Black, F. (1993). Choosing Accounting Rules. Accounting Horizons. Google Scholar
  7. Bromwich, M. (2004). Aspects of the future in accounting: The use of market prices and “fair values” in financial reports. In C. Leuz, D. Pfaff and A. Hopwood (Eds.) The Economics and Politics of Accounting, Oxford University Press.Google Scholar
  8. Bullen, H. G., & Crook, K. (2005). Revisiting the Concepts. FASB and IASB.Google Scholar
  9. Bush, T. (2005). Divided by a common language: Where economics meets the lawUS versus non-US financial reporting models. Institute of Chartered Accountants in England and Wales.Google Scholar
  10. Camfferman, K., & Zeff, S. (2007). Financial reporting and global capital markets: A history of the inter-national accounting standards committee, 19732000, Oxford University Press.Google Scholar
  11. Canadian Accounting Standards Board (2005). Measurement bases for financial accounting-measurement on initial recognition, IASB. Google Scholar
  12. Cauwenberge, P. I., & De Beedle, I. (2007). On the IASB comprehensive income: An analysis of the case for dual income display. Abacus. Google Scholar
  13. Chambers, R. J. (1966). Accounting, evaluation and economic behavior. New York: Prentice-Hall.Google Scholar
  14. Chambers, R. J. (1970). Second thoughts on continuously contemporary accounting. Abacus. Google Scholar
  15. Chambers, R. J. (1974). Third thoughts. Abacus. Google Scholar
  16. Edwards, E. O., & Bell, P. W. (1961). The theory and measurement of business income, University of California Press.Google Scholar
  17. Edwards, J., Kay J., & Mayer, C. (1987) The economic analysis of accounting profitability. Clarendon Press, UK.Google Scholar
  18. Financial Accounting Standards Board (2006). SFAS 157, fair value measurements. FASB. Google Scholar
  19. Hicks, J. R. (1946) Value and Capital (2nd ed.) Clarendon Press, UK.Google Scholar
  20. Hitz, J.-M. (2007). The decision usefulness of fair value accounting—a theoretical perspective. European Accounting Review 16(2).Google Scholar

International Accounting Standards Board: Standards

  1. IAS 16 (2004). Property, Plant and Equipment, amended.Google Scholar
  2. IAS 17 (2004). Leases, revised.Google Scholar
  3. IAS 27 (2004). Consolidated and Separate Financial Statements, revised 2004.Google Scholar
  4. IAS 36 (2004). Impairment of Assets, revised 2004.Google Scholar
  5. IAS 37 (1998). Provisions, Contingent Liabilities and Contingent Assets. Google Scholar
  6. IAS 38 (2004). Intangible Assets, amended 2004.Google Scholar
  7. IAS 39 (2005). Financial Instruments: Recognition and Measurement, amended 2005.Google Scholar
  8. IAS 41 (2001). Agriculture. Google Scholar
  9. IFRS 2 (2004). Share-Based Payment.Google Scholar
  10. IFRS 3 (2004). Business Combinations.Google Scholar
  11. IFRS 4 (2004). Insurance Contracts.Google Scholar

Exposure Drafts

  1. Proposed Amendments to IFRS 3 (2005). Business Combinations. Google Scholar
  2. Proposed Amendments to IAS 27 (2005). Consolidated and Separate Financial Statements. Google Scholar
  3. Proposed Amendments to IAS 37 (2005). Provisions, Contingent Liabilities and Contingent Assets, and IAS 19, Employee Benefits. Google Scholar

Discussion Papers

  1. Preliminary Views on an Improved Conceptual Framework for Financial Reporting (2006). The objective of financial reporting and qualitative characteristics of decision-useful financial reporting information. Google Scholar
  2. Fair Value Measurements, Parts 1 and 2, November 2006. Preliminary Views on Insurance Contracts, Parts 1 and 2, May 2007.Google Scholar

Other Publications

  1. Framework for the Preparation and Presentation of Financial Statements, April 1989.Google Scholar
  2. IASB Update, monthly minutes of Board meetings.Google Scholar
  3. IASB Information for Observers, edited versions of Board papers, on the IASB web site:
  4. Johnson, L. T. (2004). The Project to Revisit the Conceptual Framework. FASB Report, 28.Google Scholar
  5. Johnson, L. T. (2005). Relevance and Reliability. FASB Report, 28.Google Scholar
  6. Keynes, J. M. (1931). Possibilities for our Grandchildren. Nation and Athenaeum, 18 October 1930. Reprinted in Essays in Persuasion, London: Macmillan.Google Scholar
  7. Lee, T., & Wolnizer, P. (eds) (1997). the quest for a science of accounting: An anthology of the research of Robert R. Sterling, New Works in Accounting History, Garland.Google Scholar
  8. Lennard, A. (2002). Liabilities, and How to Account for Them: An Explanatory Essay, Accounting Standards Board.Google Scholar
  9. Paton, W. A., & Littleton, A. C. (1940). An Introduction to Corporate Accounting Standards. American Accounting Association.Google Scholar
  10. Penman, S. (2007). Financial reporting quality: Is fair value a plus or a minus? Accounting and Business Research, Special Issue: International Accounting Policy Forum.Google Scholar
  11. Plantin, G., Sapra, H., & Shin, H. S. (2008). Marking to market: Panacea or Pandora’s box? Journal of Accounting Research, 46, 435–460.CrossRefGoogle Scholar
  12. Reinstein, A., Alvin, G., & Vangermeesch, R. (2008). George R. Husband: Contributions to the development of accounting thought. Abacus. Google Scholar
  13. Rosenfield, P. (2008). Prospects: A missing piece of current selling price reporting. Abacus. Google Scholar
  14. Sprouse, R. T. (1978). The importance of earnings in the conceptual framework. Journal of Accountancy. Google Scholar
  15. Sterling, R. R. (1970). Theory of the Measurement of Enterprise Income, University Press of Kansas.Google Scholar
  16. Storey, R. K., & Storey, S. (1998) Special report: The framework of financial accounting concepts and standards. Financial Accounting Standards Board.Google Scholar
  17. Tweedie, D. P., & Whittington, G. (1984). The debate on inflation accounting. Cambridge University Press.Google Scholar
  18. Tweedie, D. P., & Whittington, G. (1997). The end of the current cost revolution. In C. W. Nobes and T. Cooke (Eds.), The Development of Accounting in an International Context, Routledge.Google Scholar
  19. Van Zijl, A., & Whittington, G. (2006). Deprival value and fair value: A reconciliation. Accounting and Business Research. Google Scholar
  20. Verrecchia, R. E. (2004). Policy implications from the theory-based literature on disclosure. In C. Leuz D. Pfaff and A. Hopwood (Eds.), The economics and politics of accounting. Oxford: Oxford University Press.Google Scholar
  21. Wagenhofer, A. (2004) Accounting and economics: What we learn from analytical models in financial accounting and reporting. In C. Leuz, D. Pfaff and A. Hopwood (Eds.), The Economics and Politics of Accounting. Oxford: Oxford University Press.Google Scholar
  22. Walker, R. G. (2007). Reporting entity concept: A case-study of the failure of principles-based regulation. Abacus. Google Scholar
  23. Walton, P. (2006). Fair value and executory contracts: moving the boundaries in international financial reporting. Accounting and Business Research. Google Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Centre for Financial Analysis and PolicyUniversity of CambridgeCambridgeUK

Personalised recommendations