To Fair Value or Not to Fair Value: A Broader Perspective

28 Pages Posted: 8 May 2008

See all articles by Joshua Ronen

Joshua Ronen

New York University (NYU) - Department of Accounting


Fair value is considered here with respect to the two primary objectives of financial statements proposed in the joint conceptual framework that is under development by the FASB and the IASB, namely (a) informativeness to assist providers of capital in predicting, evaluating, and comparing the amounts, timing and uncertainty of future cash flows, and (b) stewardship - to assist in evaluating how efficient and effective managers have been in enhancing shareholders value. More specifically, a comprehensive set of accounting measures and a set of corporate governance reforms intended to align corporate insiders and auditors behaviour and decisions with the interests of investors is outlined. Suggested reforms show how to present a mix of effectively historical quantifications, exit values, and the discounted values of future cash flows expected from the particularized use of combinations of assets within the firm. Additionally, the article describes how markets can be reformed in order to align the interests of the officers who prepare such accounts, and the auditors who certify them, with those of investors. These market-based reforms would require auditors to insure misrepresentations, and managers to take equity to induce truthful reporting. Also included is a radical extension to earlier proposals by the author, requiring an officer of the company to make the market in shares in a way that would place limits upon the value of the insider's private information.

JEL Classification: M41, M43, M44, M47, G34, G12

Suggested Citation

Ronen, Joshua, To Fair Value or Not to Fair Value: A Broader Perspective. Abacus, Vol. 44, No. 2, pp. 181-208, June 2008. Available at SSRN: or

Joshua Ronen (Contact Author)

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
Suite 10-180
New York, NY 10012-1118
United States
212-998-4144 (Phone)
212-995-4599 (Fax)


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