FAT Week 5 - FAT Week 5 Market Anomalies Trend to FV Trend...

This preview shows page 1 - 3 out of 5 pages.

FAT Week 5 – Market Anomalies & Trend to FV Trend to incorporate FV into f.s. in recent years F.s. = mixture of HC & FV Reporting FV = Measurement perspective Measurement Perspective = Greater use of FV in f.s. proper Accountants have more responsibility to measure firm value Where and how info is disclosed - also matters (Info perspective = only disclosure matters) FV = amount asset could be exchanged betw knowledgeable, willing parties in arm’s length trans Difference betw Info & Measurement Perspectives Info perspective = Accountants need only provide HC earnings & other info, ‘efficient market’ do the rest Measurement perspective = Accoutants take much larger role in valuation of key BS items FV decision useful? More relevant for decision making purposes, but sacrifice some degree of reliability Whether decision useful & efficient depends on extent reliability is sacrificed Efficient Securities Market important? Info perspective assumes ESM Necessary to ensure security prices correct conditional on all current info If not efficient, stock prices are biased, can potentially overreact/ underreact to info - No price protection Why accountants moving towards MP? 1. Securities market X efficient 2. Ohlson’s RI Model 3. Declining value-relevance of f.s. info 4. Auditor liability
Image of page 1

Subscribe to view the full document.

1. Are securities market efficient? Possible to make abnormal profits using publicly available info e.g. buy stocks performed well in prior 12 months, continue to perform well (Price momentum) Usefulness of f.s info rely on efficient market Less efficient, acc info less useful, hence more important (IP less useful) 2 conditions necessary for inefficient market: 1. Individuals X perfectly rational
Image of page 2
Image of page 3
  • Fall '15

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern