Does fair value accounting provide a better representation of a company?

Abstract

This article looks at the usefulness of measuring a company's wealth and net income using the fair value method. In this regard, the key question - is fair value relevant ? - can be analysed as follows : do fair value « accounting numbers » provide a better estimate of the value of a company and the risk relating to its activity ? How informative are they for users ? How useful is fair value information for decision-making ? In order to answer these questions, the author examines first the basis and limitations of the traditional accounting model. He analyses then the determining factors in the emergence of the fair value method, with particular regard to the role attributed to financial statements and the needs of their users. Lastly, he presents a summary of the empirical studies carried out to assess the usefulness of fair value accounting information. JEL classifications : G14, M41