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ABSTRACT
This paper aims at knowing the theoretical philosophy related to fair value. It also deals with the accusations made
against this principle especially during the financial crisis.
This research drafted and tested the relevant hypothesis in order to know the extent to which extent the
decision- makers realize the concept of fair value as well as its influence on decisions on sales and purchases.
The study concluded that the concept of fair value has a profound effect on these decisions; the researcher
recommended the continuity in dealing in such standard? together with improving the disclosure process by issuing
binding legal codes.
KEYWORDS: Fair Value, Purchase Decisions, Sales Decisions, Making Decisions, Assets
INTRODUCTION
Financial data based upon common measuring bases-such as the historical cost principles-were unable to show the
financial position and the results of operations owing to the economic events which made these data lose their importance.
It became clear that with the use of traditional accounting, the financial values in the financial statements could not meet
investor's needs to take the appropriate economic decisions based upon fair information that records the events of the past
and does not consider the present or the future.
The issue of measuring fair value emerged and was given many definitions after the deterioration of the Inron
Corporation which made it lose the consistency feature and became a gap that helped the boards of banks to manipulate
profits and magnify the assets. Thus, and after much argument, the American accounting standard no.157 Measurement of
fair value, was approved on the basis that the markets have the ability to introduce the best and more stable and fair assets.
Problem of the Study
Defining fair value in blockbuster markets, with the banks and the loan companies approving it led to the
emergence of many issues related to loans. Since fair value, according to standard 157, stipulates that assets which has no
blockbuster markets must be evaluated according to the best information available, thus the continued decrease in and the
negative anticipations for the values of property mortgages did not only affect these bad mortgages.
Accounting standards in general, and the fair value accounting standards in particular faced strong criticism from
the persons interested observers because they do not provide sufficient information to make decisions, especially in
relation to fixed assets through the following question:
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Abdulqawi A. Hezabr
The Role of Fair Value Standards in Making Decisions on Purchasing and Selling Assets in the Kingdom of Bahrain
Suitability: Meaning that the information shall suit the purpose for which it was prepared. Suitable information is
that which affects the behavior of the decision-maker and makes him take a decision that differs from one which
he may have taken in the absence of such information. As for unsuitable information, its value is almost zero, in
spite of the cost and efforts expended in order to collect and analyze it is a useless charge on the establishment.
Appropriate Timing: In order for the information to satisfy the purpose for which it is used, it should be made
available at a suitable time, meaning that the information should be offered at the time when it is needed.
Ease and Clarity: Information should be free from ambiguity. It should be clear and understood by its users.
Information may not include any words, symbols, terms or mathematical expressions or unknown formulas that
its users may not understand.
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Abdulqawi A. Hezabr
Validity and Accuracy: Valid information means that it should express facts accurately, that there should be no
mistakes when producing, collecting and determining this information. The extent of accuracy needed for
information depends on the time scope of this information. In case the information is related to future
anticipations, then its accuracy lessens if it addresses a distant future, and vice versa. Invalid and inaccurate
information gives opposite results, meaning that it will be harmful and useless even if it is suitable.
Scope: Meaning that the information submitted shall be complete information that covers all the aspects and
interests of its users. Moreover, it should be in its final form, which means that its user will not have to perform
any additional operations to get the information.
Acceptance: Meaning that the information is to be provided in the form or the method accepted by the user of this
information according to the form and content. As for its form, information can be provided in the form of a
report written in a clear and understandable style or in the form of tables, statistics or charts.
Cost: The process of inserting or processing the information has a cost that should be compared to the benefit we
will get by using this information. The information has a great value if it contributes to decreasing uncertainty,
i.e., the information shall be economic, meaning that it will not cost more than its users capacity.
The Role of Fair Value Standards in Making Decisions on Purchasing and Selling Assets in the Kingdom of Bahrain
Table (4) shows that there are no statistically significant differences at the significance level because the
significance level is more than (0.05), consequently the study hypothesis is acceptable, and it states that there is no
statistically significant relation between the standards of fair value and the decisions of purchasing or selling fixed assets.
Recommendations
Increase awareness of the concept of fair value for decision-makers by holding forums and distributing pamphlets
constantly to take the appropriate decisions.?
Fair value must be disclosed in the public budgets by obligating companies to comply with state
REFERENCES
1.
Alhajj, Oraba, Nour Eddin, Tamgadin (2008) The importance of having a system for managing crisis in the
light of information. Fourth international forum regarding crisis management in the light of knowledge
economy, - 20th August 1955university - Skikda -Algeria
2.
Hassan, Nagah (2008) The current financial crisis and its anticipated reflections Itehad newspaper, Iraq,
issue 1967.
3.
Hayan, Ahmed Salman (2008), International financial crisis and its repercussions Thawra newspaper, issue
no. 13745, Damascus.
4.
Khalfawy, Shams (2008) Role of communication in facing the crisi in the light of information Fourth
international forum regarding crisis management in the light of knowledge economy, - 20th August
1955university - Skikda Algeria
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El-rabiI, Hakem (2008) Managing the financial crisis using the information technology in the light of
knowledge economy Fourth international forum regarding crisis management in the light of knowledge
economy, - 20th August 1955 university - Skikda Algeria
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Resowan (2003) International information system. The position of the Arab world on the new map of the
world, Arab Center for Strategic Studies.
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AlRawsan, Usama (2004) Managing knowledge and e-learning, Fourth annual international scientific
conference: Managing knowledge in the Arab World, Zeitouna Jordanian University.
8.
El-Zobi, Yanen (2005): Acccounting measurement based on the fair market value. Unpublished Masters
thesis, Al El-Bayt University
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Samir, Moshi & Salah Eddin, Sawalem (2008) Information systems and its role in managing and processing
crisis Fourth international forum regarding crisis management in the light of knowledge economy, - 20th August
1955 university - Skikda Algeria
editor@tjprc.org
Abdulqawi A. Hezabr
12. Matar, Moahmmed, 2008, Arab region and the repercussions of the international financial crisis A Forum
organized by Talal Abu Ghazal for business and the Jordanian -German university meeting
APPENDICES
Table 1: The Study Population Shall be Distributed According to the Demographic Variables
Study Variables
Expertise
Job position
Variables Levels
3-1
6-4years
more than 7-10
General manager
Department chief
supervisor
No.
52
30
28
9
50
51
Percentage
%47
%27
%.25
%8
%45
46%
Cronbach Alpha
0.98
0.65
Table 3: Arithmetic Averages and Standard Deviations for the Influence of the Standards Related to the Fair Value
and the Decisions for Purchasing and Selling Assets
Scope
No.
1
Question Content
Applying the standards of fair value
has a main role in the purchase
decision
Using the fair value standard in the
accounting of the items out side the
budgt leads to selling assets
Using the fair value approach in
measuring the performance of the
financial derivatives is a reason for
taking a decision
Using the fair value in measuring
assets and real estate investments is a
reason to keep the asset`
It is believed that the fair value
standard doesnt affect the decision of
purchasing and selling
Arithmetic
Average
Standard
Deviation
Rank
Level
2.35
0.751
medium
3.10
0.981
High
1.56
0.882
High
3.20
0.552
Low
3.90
0.752
medium
Significance Level
*0.000