engleski

Assessment of fair value - is it reliable and useful for investors?

Fair value represent economic reality and the values at which transaction really take a place. Information which is based on fair value have greater relevance and utility for financial statement users than the accounting information based on historical cost. The reliability of fair value measures is dependent on the quality of inputs and measurements techniques used. Assessment of fair value is easiest and most reliable when assets or liabilities are actively traded in liquid markets, and more complicated and less reliable when active liquid markets do not exists. For that reason the fair value hierarchy is set to communicate to investors and other potential users reliability of fair value measures by presenting observability of inputs and types of estimation techniques. Fair value is based on three levels (level 1, level 2, and level 3) of inputs that are used in determination of fair value. Different economic categories can be or have to be measured at fair value, but the most significant impact of fair value measures is evident for financial instruments. The aim of this paper is to analyze influence of fair value measurement and transparency in the process of making investment decisions. Based on review of previous research it is evident that better transparency and quality of financial statements leads to risk reduction for investors.

fair value measurement, reliability, investors, IFRS 13

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