Measurement Model or Asset Type: Evidence from an Evaluation of the Relevance of Financial Assets

31 Pages Posted: 3 Jun 2017

See all articles by Willoe Freeman

Willoe Freeman

University of Technology Sydney (UTS); Financial Research Network (FIRN)

Peter Alfred Wells

University of Technology Sydney, Accounting Discipline Group ; Financial Research Network (FIRN)

Anne Wyatt

Deakin University

Multiple version iconThere are 2 versions of this paper

Date Written: June 2017

Abstract

This study focuses on the operation of the Level 1, 2, and 3 measurement uncertainty hierarchy embedded in the SFAS 157 accounting for financial assets. Prior studies conclude the SFAS 157 fair value measurement model and prevailing financial market conditions are causal factors for the lower value relevance of the Level 3 financial assets. The contribution of our paper is to provide evidence on an additional, hitherto undocumented source of measurement uncertainty impacting the relevance of SFAS 157 financial assets to investors: the type of asset appearing in Level 3 financial assets as a result of asset securitizations and SFAS 140 securitization accounting. The paper also presents evidence that suggests the SFAS 166 amendments were unable to fully address informational transparency for financial assets arising from securitizations. The key contribution is evidentiary insights suggesting the prescribed measurement model has a relatively lower impact on measurement uncertainty and relevance of financial assets compared to the effects of the asset type.

Keywords: Asset securitization, Fair value accounting model, Measurement uncertainty, Underlying asset type

Suggested Citation

Freeman, Willoe and Wells, Peter Alfred and Wyatt, Anne, Measurement Model or Asset Type: Evidence from an Evaluation of the Relevance of Financial Assets (June 2017). Abacus, Vol. 53, Issue 2, pp. 180-210, 2017, Available at SSRN: https://ssrn.com/abstract=2979624 or http://dx.doi.org/10.1111/abac.12108

Willoe Freeman (Contact Author)

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Peter Alfred Wells

University of Technology Sydney, Accounting Discipline Group ( email )

P.O. Box 123
Broadway NSW 2007
Australia
+61 (02) 9514 3628 / 3629 (Phone)
+61 (02) 9514 5515 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Anne Wyatt

Deakin University

75 Pigdons Road
Victoria, Victoria 3216
Australia

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