Open AccessThe Value and Risk Relevance of Fair Value: The Case of French Firms
Author(s) -
Mondher Kouki,
Mosbeh Hsini,
Farah Tabassi
Publication year - 2016
Publication title -
international journal of accounting and financial reporting
Language(s) - English
Resource type - Journals
ISSN - 2162-3082
DOI - 10.5296/ijafr.v6i2.9692
Subject(s) - fair value , net income , comprehensive income , economics , relevance (law) , value (mathematics) , historical cost , accounting , actuarial science , public economics , gross income , statistics , mathematics , political science , tax reform , law , state income tax
We study the performance of fair value accounting standards of financial instruments starting from the analysis of quality relevance of accounting information. In particular, we are interested in the value relevance and risk relevance of income that contains financial instruments measured or not at fair value. To do so, we compare three income levels known as accounting standard’s history. The three major levels are Full-Fair-Value income measurement (all-fair-value changes recognized in income), piecemeal-fair-value income measurement or comprehensive income (some fair-value changes recognized in income), and historical-cost income measurement or net income (no fair-value measurement existing). The empirical tests of value relevance showed that net income is not a relevant value, and Full Fair Value Income is more significant than the Comprehensive Income. The study shows also that risk relevance is more, measured by the volatility of Full Fair Value Income.