Abstract
This study examines how US companies used the Level 3 provisions of fair value accounting to value their financial assets during the 2008 global financial crisis (GFC) when relevant accounting rules regarding fair value measurements were relaxed. It contributes to the literature by providing evidence about non-financial companies’ reporting of Level 3 financial assets during the 2008 GFC. Substantially large amounts of potentially manipulable toxic assets, classified as Level 3 by US companies, are of significant importance to the US and global economy. Results of the study indicate that financially distressed companies were holding significantly larger amounts of Level 3 financial assets, which are those based on management’s own modeling of inputs. Level 3 assets are thought to be more subjectively manipulable than Level 1 or 2 inputs that are based on quoted market prices. Further, the results lend additional support to the growing belief that avoidance of toxic asset impairments has contributed centrally to the way the global financial crisis has unfolded.
Original language | English |
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Title of host publication | 2012 AFAANZ conference |
Subtitle of host publication | papers |
Place of Publication | Melbourne |
Publisher | Accounting and Finance Association of Australia and New Zealand |
Pages | 1-37 |
Number of pages | 37 |
Publication status | Published - 2012 |
Event | Accounting and Finance Association of Australia and New Zealand Conference (2012) - Melbourne Duration: 1 Jul 2012 → 4 Jul 2012 |
Conference
Conference | Accounting and Finance Association of Australia and New Zealand Conference (2012) |
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City | Melbourne |
Period | 1/07/12 → 4/07/12 |