Fair value accounting perspectives, adoption and implementation patterns for preparers and users in one southern African economy

Abstract

This study examines the definition and understanding of 'fair value accounting', and identifies how it is measured in Zimbabwe at the back of the most recent financial crisis which prompted strong debates about the pros and cons of fair-value accounting (FVA). The debate presents a major challenge for FVA going forward as standard setters' push to extend FVA into other areas of accounting valuations. The study also explores benefits and limitations of the concept, examining its impact on financial reporting roles, determines appropriate alternatives to this method and forecasts its prominence and endurance in Zimbabwe. The paper concludes that users and preparers of financial reports have similar understanding of fair value accounting. Some benefits identified were better disclosure and information that is more relevant. Limitations of the method in terms of costs of valuation, training and hiring of professionals, and the application of subjective judgment were identified. The proxies predicted prominence of fair value accounting in the long run. Thus, we recommended certain fair-value accounting and disclosures be considered.