Facing financial instruments in financial institutions: The Fair Value Hierarchy as coding practice
2013 (English)Conference paper, Abstract (Refereed)
One of the more debated consequences of the introduction of fair value accounting is the ejection of the principle of prudence, also mirrored in IASB’s updated conceptual framework. The rise of fair value accounting has been explained as largely due to the increased influence of the financial economics paradigm over the accounting standard-setting process (Power, 2010). Whereas the quantitatively inclined accounting research has debated the effects of these changes on accounting quality and the possibilities for earnings management more qualitatively inclined studies have shown these changes to be challenging for auditors (Smith-Lacroix et al., 2012) and accountants in financial institutions (Cleverton et al., 2011). Another jurisdictional change in financial institutions that have been noted is the rise of risk managers (Mikes, 2009; 2011). By studying the coding practices related to an accounting device central for the production of fair values—The Fair Value Hierarchy—we are able to visualize these issues. What our analysis show is how the previously reported marginalisation of traditional accountants and relative increase in the importance of risk management mediates IASB’s financial economics inspired fair values in a way that make them more, prudent. More particularly, we find a strong support for, risk managers preferring Level 2 in the Fair Value Hierarchy, which allows for more control of the numbers. Hence, although our findings support the claims that traditional accountants are becoming increasingly marginalised, it is also evident that accounting is not.
Place, publisher, year, edition, pages
accounting, fair values, classification, coding practice, banks, financial institutions, valuation
Business Administration Social Sciences
Research subject Business Studies
IdentifiersURN: urn:nbn:se:uu:diva-213114OAI: oai:DiVA.org:uu-213114DiVA: diva2:680588
Financial Reporting and Auditing as Social and Organizational Practice, London School of Economics and Political Science,16th – 17th December 2013.