Abstract
The study is intended to investigate the impact of applying fair value, as represented in two dimensions: the relevance of fair value accounting, and the obstacles confronting fair value accounting on investment decision making, for which the hypotheses of the study has been confirmed. The problem focusses on the impact of ambiguous standards, accounting disclosures, and the lack of credibility and reliability of investment decision making. The study is also intended to determine the positive effects of applying the fair value in terms of achieving quality in profits and enabling investment decision making to take correct decisions. The study attempts to investigate the role of fair value in determining the actual value of the entity depending on the market value of bank assets so as to improve future expectations and compare with other banks that depend on fair value. A questionnaire has been distributed to a sample of 70 individuals working at commercial banks in Karbala, Iraq. of accounts and auditors and investment decision-makers. we used multiple regression and the backward method in our statistical analysis. The study asserts the necessity to have legislation related to fair value and that consolidates the concepts of fair value and the ways in which this can be measured in banks through additional training courses.
Highlights
This paper starts by presenting some of the concepts that advocate or oppose the use of fair value in accounting practices, and its usefulness in providing information needed for investment decision making because the estimate of assets value depends on the market value, so future expectations are improved, as are the associated management decisions
When reviewing a number of studies that explain the associated theoretical aspect in detail, we noticed that the decision maker is typically influenced by a number of concepts related to fair value, and could face ambiguity regarding international standards and the related disclosures or incredibility by estimated fair value
Our study focusses on determining the factors influencing the decision-making pattern and how to use them to increase the effectiveness of the decision maker, and to increase their efficiency, in addition to knowing the extent to which fair value financial reporting can provide users with useful information for good economic decision making, and knowing the reasons for using fair value
Summary
This paper starts by presenting some of the concepts that advocate or oppose the use of fair value in accounting practices, and its usefulness in providing information needed for investment decision making because the estimate of assets value depends on the market value, so future expectations are improved, as are the associated management decisions. The fear of taking risks to increase returns is related to certain internal fears, as the fear of loss is considered a behavioural obstacle to decision making that makes persons stick to previous decisions; this may lead to crisis because the of organization’s inability to meet environmental changes Limited rationality is another obstacle, which is a behavioural state that renders people unable to develop their skills or benefit from available information and opportunities because them of their apparent inability to recognize them. Nchensh, (2019) indicated that the accounting information, especially related to fair value, is the main pillar in the decision-making process It is considered one of the important and reliable information, it is through the fair value that future prices can be predicted and at the same time it is highly reliable for the investment decision-maker. There are a number of steps taken to take an investment decision: 1- Determine the main objective of the investment. 2- Gathering appropriate information for decision-making. 3- Determine the appropriate factors through which the basic factors controlling the decision are determined. 4- Evaluating the expected returns for the available investment alternatives. 5- Choose the appropriate investment alternative for the goals
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