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http://ssrn.com/abstract=1467954
 
 

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Do Voluntary Disclosures that Disavow the Reliability of Mandated Fair Value Information Reflect Legitimate Concerns About Reliability?


Walter G. Blacconiere


Indiana University - Kelley School of Business - Department of Accounting

James R. Frederickson


Melbourne Business School

Marilyn F. Johnson


Michigan State University - Department of Accounting & Information Systems

Melissa Fay Lewis-Western


University of Utah

October 1, 2010

AAA 2010 Financial Accounting and Reporting Section (FARS) Paper

Abstract:     
One consequence of the shift to fair value measurement is the emergence of voluntary disclosures in audited financial statements that question the reliability of mandated fair value information. We refer to these disclosures as reliability disavowals and address three questions: Are fair value estimates less reliable for firms that disavow? Do managers of disavowal firms have reason to believe that they cannot reliably estimate the disavowed fair values? Are factors indicative of reliability problems associated with the decision to disavow? We address these questions in the context of managers’ stock option compensation estimates disclosed under SFAS 123. Our results suggest reliability disavowals reflect legitimate reliability concerns, consistent with managers believing that supplemental disclosures about fair value estimates provide useful information about the limitations of the estimates, which is the FASB’s position in SFAS 157.

Number of Pages in PDF File: 57

Keywords: Fair value, disclosure, reliability, stock options

JEL Classification: M41, M45, G12

working papers series





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Date posted: September 6, 2009 ; Last revised: May 11, 2014

Suggested Citation

Blacconiere, Walter G. and Frederickson, James R. and Johnson, Marilyn F. and Lewis-Western, Melissa Fay, Do Voluntary Disclosures that Disavow the Reliability of Mandated Fair Value Information Reflect Legitimate Concerns About Reliability? (October 1, 2010). AAA 2010 Financial Accounting and Reporting Section (FARS) Paper. Available at SSRN: http://ssrn.com/abstract=1467954 or http://dx.doi.org/10.2139/ssrn.1467954

Contact Information

Walter G. Blacconiere
Indiana University - Kelley School of Business - Department of Accounting ( email )
1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2653 (Phone)
812-855-4985 (Fax)

James R. Frederickson
Melbourne Business School ( email )
200 Leicester Street
Carlton, Victoria 3053
Australia
Marilyn F. Johnson
Michigan State University - Department of Accounting & Information Systems ( email )
270 North Business Complex
East Lansing, MI 48824-1034
United States
517-432-0152 (Phone)
517-432-1101 (Fax)
Melissa Fay Lewis-Western (Contact Author)
University of Utah ( email )
1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
801 585-5380 (Phone)
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