The Impact of Corporate Governance on Fair Value Accounting

Author:Sorana Mihaela MĂNOIU, Ph.D.Student; Maria Ionela DAMIAN, Ph.D.Student

JEL:M41, G30

DOI:

Keywords:corporate governance, fair value, financial assets reclassification, IAS 39, IFRS 7

Abstract:
The purpose of this paper is to present the involvement of corporate governance mechanisms to ensure the fair representation of fair value measurements in the financial statements. The literature review brought the authors to the issue of reclassifications made by some big financial European groups during the financial crisis in order to avoid recognising losses from fair value estimates write-downs due to the market illiquidity during the financial crisis. The situation arisen after the adoption of IAS 39 and IFRS 7 amendments in October 2008, when several banking groups have made massive reclassifications of financial assets, shows that the management`s decision regarding their intention to keep the assets in the portfolio in the long-term could have a material effect on financial reports. It is important for managers and board of directors to know all aspects of fair value estimates and evaluate the risks that may result in material misstatement. Therefore, they should realise the impact of their decisions on the financial statements and comply with corporate governance policies.\r\n

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