Pregunta 1
Pregunta
Which following statement is related to Accounting as Economics of the artikel?
Respuesta
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Introduction of the idea of Fair Value;
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IFRS 13: emphasis on current market price as a guide to economic decision –making;
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Implication: market ontology=> no distinction between different types of fair value;
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However, IFRS 13 explicitly acknowledges three levels of FV;
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Level 3: IFRS 13 requires hypothetical market and simulations as if market exists.
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Beliefs about fair value are shared by everyone (collective intentionality & acceptance), because it
said to be so (status function declarations)
Pregunta 2
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Faithful representation = representing the market ontology
Pregunta 3
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Tranformation of concept of “Reliability” are include the following:
1. Faithful representation = representing the market price
2. This Transformation makes assumptions about ontology & reality
Pregunta 4
Pregunta
Searle’s account of Institutional Reality: Select the correct one?
Respuesta
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Beliefs about fair value are shared by everyone (collective intentionality & acceptance), because it
said to be so (status function declarations)
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This creates institutions (=ontologically subjective);
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Creates institutional facts (=epistemologically objective) => entity-specific instead of market-specific?
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Creates institutional facts (=ontologically objective) => entity-specific instead of market-specific?
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This creates institutions (=epistologically subjective);
Pregunta 5
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This paper questions the main premise of IFRS 13, that Fair Value for non-financial assets always faithfully represents the economic ‘reality’.
Pregunta 6
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What is Shift in Accounting as a metaphor?
Respuesta
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Accounting as History:
Information that is reliable
Historical Cost Accounting
[Record keeping]
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Accounting as Economics:
Information faithfully represents market signals and expected cash flows
Fair Value Accounting
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accounting is the translation of economic “reality” into the balance sheet
Pregunta 7
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Accounting is the translation of subjectief “reality” into the balance sheet
Pregunta 8
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Cost Model is the preferred measurement model of the IASB; the theory and practice of fair value measurement is set out in IFRS 13
Pregunta 9
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IFRS 13 is centered on the concept of ‘the market price’ as a guide to economic decision-making.
Pregunta 10
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What is the objective of IFRS 13?
Respuesta
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To estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions’
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Among their many functions, markets are systems that transmit information in the form of prices.
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markets are systems that transmit information
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Marketplace participants attribute prices to assets and, in doing so, distinguish the risks and rewards of one asset from those of another
Pregunta 11
Pregunta
Why use the market price as guiding principle?
Respuesta
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Markets are systems that transmit information
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Marketplace participants attribute prices to assets and, in doing so, distinguish the risks and rewards of one asset from those of another
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Consensus view about an asset or liability
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there is a single, unifying ‘market price
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Market price is an unique outcome of the market, no other value exists
Pregunta 12
Pregunta
What is Market Ontology?
Respuesta
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Market price is an unique outcome of the market, no other value exists it does not depend on any metaphor, it just exists
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Data are observable inputs other than Level 1 data,
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There should be distinction in IFRS 13 between different ‘types’ of fair value
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Data are quoted prices in active markets, while
Pregunta 13
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What if there are no market prices readily available?
Respuesta
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The solution of IFRS 13 is epistemological diversity
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Level 1’ data are quoted prices in active markets, while (Onaangepaste genoteerde prijzen in actieve markten voor identieke activa en verplichtingen . Voorbeeld: Slotkoers op Euronext)
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Level 2’ data are observable inputs other than Level 1 data (Genoteerde prijzen voor soortgelijke activa en verplichtingen in actieve markten of inputfactoren die gebaseerd zijn op of ondersteund worden door waarneembare marktgegevens. Voorbeeld: Prijzen per vierkante meter afgeleid van prijzen in transacties van soortgelijke gebouwen in hetzelfde geografische gebied.)
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Level 3’ data are unobservable, meaning that they are the preparer’s own assumptions about ‘the assumptions that market participants would use when pricing the asset’ (IFRS 13, para 87). (iet-waarneembare inputfactoren voor het bepalen van de reële waarde van een actief of verplichting.
Voorbeeld: Netto-contantewaardeberekening op basis van aannames van marktpartijen.)
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there is a single, unifying ‘market price’
Pregunta 14
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How do we know Level 3 fair value is an faithful representation of price?
Respuesta
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considered from the perspective of a market participant
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not identify specific market participants
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obtain information about market participant assumptions
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clear distinction between the reporting entity and the market participant
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an entity uses assumptions that market participants would use when pricing the asset
Pregunta 15
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Searle (1995; 2010), use theory of the nature of institutional reality. Benoem four elements?
Respuesta
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Intentionality (“what are you trying to do?”)
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Collective Intentionality (“what are we all trying to do
together?”)
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Status function declarations (“ have we made it clear
to everyone what we try to do as a fact”?)
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ontological and epistemological status of institutional facts
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Institutions are rules of society to create assets and liabilities
Pregunta 16
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What is Searle’s theory on the nature of institutional reality?
Respuesta
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Institutions are rules of society to create assets and liabilities
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IFRS standards are rules of accounting to create assets
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fair value of assets & liabilities
Pregunta 17
Pregunta
What reality is IFRS 13 “representing”?
Respuesta
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Collective Intentionality = a market is a setting where agents try to determine the “right” price
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Status function declarations = the price quoted on the market is “in fact” the right price, i.e. the fair value.
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ontological status: Ontology: [“ontos=being, that which is” – “logos= the study of-” ; “logia= logical discourse]” >>> Does it’s really exist?
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it is a network where market transactions and environmental context coexist
Pregunta 18
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Does “the market” exist by itself?
Respuesta
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No, it is a network where market transactions and environmental context coexist.
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Yes, it is a network where market transactions and environmental context coexist.
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No, IFRS 13 is subjective for both Level 1 & 3, because it depends on what someone consider to be the
market.
Pregunta 19
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Epistemological status: Objective: we know that there is a market where all market participants come together to agree on a price, and we can find this price (so we don’t need a financial statement in which this is copy-pasted (redundancy because it is a pre-existing institutional fact). Which level is this?
Pregunta 20
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epistemological status: subjective: depends on whether we agree with the calculations of the entity (hypothetical fair value) >> faithful representation is meaningless. Which level is this?
Pregunta 21
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Interviews with preparers of the financial reports explore how they responded to this dilemma for Level 3?
Respuesta
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Transferring the problem elsewhere
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Finding an expedient solution
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Narrowing the problem to make it more tractable
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Speculative thinking
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Different practices emerged (no acceptance of one status function declaration)
Pregunta 22
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What are the main results?
Respuesta
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Very Limited use of Level 1: core-assets are very specific, CGU can not be separated & very difficult
to determine the correct market discount rate
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One way to deal with this is to let another party determine the fair value: for instance the auditor
(this makes it entity-specific)
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Different practices emerged (no acceptance of one status function declaration)
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Speculative thinking
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profit is change in (market) value. There is flexibility in to what you can consider market value
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in practice, accounting was more conservative, with focus on historical cost
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fair values are introduced in a select group of standards
Pregunta 23
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What explained Baker and Schulte?
Respuesta
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This paper questions the main premise of IFRS 13, that Fair Value for non-financial assets always faithfully represents the economic ‘reality’.
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Faithful representation (previously called relevance) stands opposite to reliability, so a focus
on faithful representation marks a metaphorical shift in what the IASB emphasizes in their standards. Is this shift consistent with Searle’s notion of ‘reality’?
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Does Fair Value represents an objective reality or a subjective reality?
Pregunta 24
Pregunta
Why explained banker and Schulte the economic reality?
Respuesta
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This paper questions the main premise of IFRS 13, that Fair Value for non-financial assets always faithfully represents the economic ‘reality’.
-
Faithful representation (previously called relevance) stands opposite to reliability, so a focus on faithful representation marks a metaphorical shift in what the IASB emphasizes in their standards. Is this shift consistent with Searle’s notion of ‘reality’?
-
Critical Question of this paper: does Fair Value represents an objective reality or a subjective
reality?
Pregunta 25
Pregunta
How explained banker and Schulte the economic reality?
Respuesta
-
This paper questions the main premise of IFRS 13, that Fair Value for non-financial assets always faithfully represents the economic ‘reality’.
-
Faithful representation (previously called relevance) stands opposite to reliability, so a focus on faithful representation marks a metaphorical shift in what the IASB emphasizes in their standards. Is this shift consistent with Searle’s notion of ‘reality’?
-
Critical Question of this paper: does Fair Value represents an objective reality or a subjective
reality?
Pregunta 26
Pregunta
Which problem is identified within this artikel?
Respuesta
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Fair Values are (1) either reported as preexisting institutional fact (Level 1), or (2) ‘made-up’ representations (level 2 & 3). However, firms that report under IFRS are required to apply IFRS 13.
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Transferring the problem elsewhere
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Narrowing the problem to make it more tractable
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Finding an expedient solution