SSE/EFI Working Paper Series in Business Administration
Beate E. Juettner-Nauroth
Problems associated with the Value-Relevance of Financial Derivatives according to IAS 39
Abstract: This paper studies some fundamental issues concerning the
relation between market value of equity and the fair value of financial
derivatives determined according to International Accounting Standard No.
39, Financial Instruments: Recognition and Measurement (IAS 39) in
non-aktive markets. It is shown that the fair value of a financial
derivative is not relevant in a non-active market. It is also demonstrated
that in a setting of a non-active market, determining the fair value under
the fiction of an active market does not take all available information
into account. Additionally, it is noted that the definition of fair value
in non-active markets according to IAS 39 has two consequences:
market value of equity at the balance sheet date reflects the company's
value in a fictive market situation.
(ii) The fair value calculated by
one valuation model is in general not unique.
Keywords: Financial Instruments; IAS 39; Fair Value; Value Relevance; (follow links to similar papers)
31 pages, January 10, 2003, Revised September 26, 2004
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