Perception of Investors about Fair Value Accounting in Vietnam

- Perception of Investors about Fair Value Accounting in Vietnam.
- This study aims to evaluate the investors’ perception about fair value and their perspective of challenges in applying fair value into Vietnam context.
- It is revealed that different investors understand fair value in different ways thanks to their years of investment.
- The research also indicates that although information released by financial statement based on fair value is useful for investors’ decision making, it is not the only source of helpful information.
- Also, it is stated that information accuracy and financial market typical features are the two major difficulties in the application of fair value accounting into Vietnam context.
- Fair value.
- The utilization of fair value to measure items of financial statement is the tendency of international accounting.
- Acknowledging the importance of fair value accounting, Vietnam has gradually been updating and changing its policy based on this approach.
- Under the strong integration in today’s world, it is required to carry out studies on the use of fair value in Vietnam’s accounting system.
- The general objective of this study is evaluating level of fair value accounting information users that identify the usefulness of fair value measurement.
- Evaluating understanding of accounting information users about fair value..
- Evaluating the interest of information users in accounting information measured by fair value..
- Identifying challenges and difficulties in the application of fair value from the perspective of accounting information users..
- How do accounting information users of enterprises understand the fair value?.
- From the point of view of the users of accounting information, how useful is the use of fair value information on the Financial Statements of investors?.
- From the perspective of accounting information users, what are challenges and difficulties in the application of fair value?.
- According to Herz (Young, 2008), fair value is the reasonable price for transaction between those having all information about it..
- (2007) demonstrated that fair value includes market price but it does not limit the circumstance at that available price.
- The tendency of using fair value accounting is more and more appreciated by scientists than historical cost.
- White (2008) compared accounting based on fair value and that of historical cost in order to demonstrate benefits of using fair value accounting..
- Yanez (Young, 2008) supposed that fair value accounting is an advancement in financial reporting, which aims at providing users with timely and useful accounting information.
- (2012) indicated that fair value accounting is the most appropriate approach with decision making of information users.
- (2014) believed that fair value information is more beneficial for assessing operation results, evaluating financial status and measuring investment effectiveness..
- Although fair value accounting is advantageous for users, its application is not simple.
- Wang (2009) carried out a research on applying fair value accounting in listed joint stock companies in China.
- Their survey results showed difficulties in the above application, which include (1) a shortage of complete theoretical system and instructive laws on the application of fair value accounting.
- Regarding fair value awareness of accounting information users, in 2010, Ristea and Jianu conducted a research on the awareness of fair value of accountants in Romania.
- The results showed that these accountants do not have accurate and complete understanding of fair value.
- value, other 84% considered fair value as current cost (25%) and present value (59.
- These accountants also demonstrated that they acknowledged the benefits of fair value accounting information, 87% indicated that they trusted fair value accounting more than historical cost..
- stated that they would have difficulty in recording items based on fair value.
- In conclusion, this research clarified that accountants in Romania were not ready for the application of fair value accounting.
- Another study that should be mentioned is the one by Kluever (2012) on opinions of accounting information users about benefits of fair value.
- However, this research also clarified that in addition to fair value accounting information, analysts also utilized other sources of information.
- Observation showed that accounting information at level 1 (information of present market) was reliable for the application of fair value..
- This study also concentrates on the evaluation of investors about challenges and difficulties in applying fair value accounting in Vietnam with updated data in 2017.
- This helped to gather data about their awareness of fair value.
- Some of them served the purpose of evaluating awareness and perspective of investors about fair value measured by Likert 5 scale.
- The rest questions aiming at colleting general information were built up based on the author’s selection and knowledge of financial statement and fair value..
- Research question 1: How do accounting information users of listed joint stock companies understand fair value?.
- The second survey question 2 was about investors’ knowledge of fair value concept.
- Research question 2: From the perspective of accounting information users, how useful is the application of information in fair value financial statement for the investors?.
- The usefulness of applying fair value was confirmed by questions 3 and 4 to demonstrate participants’.
- expectations of applying historical cost or fair value and to give their opinions of using these two approaches (Ristea &.
- Research question 3: From the perspective of accounting information users, what are challenges and difficulties for the application of fair value to measure items of financial statement?.
- Wang (2009) on the application of fair value accounting as well as its difficulties in China’s firms which shared the same typical features as Vietnam’s.
- Table 1: Questionnaire on fair value for investors.
- In your opinion, fair value is - Current cost.
- Historical price - Fair value - Both.
- Indicate your opinion about the following difficulties in applying financial statement based on fair value (Level: 1- Totally disagree ->.
- Knowledge of fair value.
- financial statement based on fair value.
- Evaluation on investors’ awareness of fair value.
- Table 4 reveals that 52% of investors chose three approaches, only 10.8% related fair value to selling price.
- The rest 32% respondents regarded fair value as present value and 3%.
- awareness of fair value by Ristea &.
- Jianu (2010), in which the number of participants choosing fair value as present value and selling price was higher than that of current cost.
- These groups based on specialization also regarded fair value as present value of cash flow, which was proved with relatively high numbers (Banking &.
- Table 4: Investors’ awareness of fair value concept.
- Fair value is General answer.
- It can be seen that all definitions of fair value introduced by IASB, FASB and other organizations regarded fair value as exit value.
- Therefore, the author supposes that it was more accurate when investors chose “Selling price” or “All of the above” for question 2 concerning definition of fair value.
- Analysis into groups of investors demonstrated that those with limited experience understood the concept of fair value better than those with more experience.
- This is reasonable because in fact, the concept of fair value is new in accounting area.
- In the world, fair value appeared at the end of 1990s.
- However, in Vietnam, the official document mentioning fair value was the amended accounting law in 2015.
- Then, young investors, despite their limited experience, are more updated with knowledge of fair value than the experienced ones regardless of their specialization.
- Another option of fair value concept with answer of quite high percentage was Present value.
- This is correct because in different cases, the determination of fair value is calculated based on cash flow discount..
- Evaluation on the usefulness of applying financial statement information based on fair value from the perspective of investors.
- Most participants stated that the way of reporting financial statement items based on fair value would make difference on the positive basis in compared with that of historical cost (86.3.
- Jianu (2010) shared the same results when concluding that users trusted in fair value accounting more than historical cost.
- The followed group was investors with less than 5 year experience, of which the percentage of using two types was 55.6% and that of fair value was 35.2%.
- The group with more than 10 year experience wanting to use both types was 26.3% and that of fair value was 57.9%.
- finance” held the highest percentage of utilizing fair value for financial statement (42.9.
- Most participants of specialization based groups stated that the application of fair value would make differences in providing information compared with that of historical cost, and that would be more helpful for information users.
- Table 7: Investors’ perspective of applying accounting information based on historical cost and fair value.
- Fair value .
- Table 8: Investors’ perspective of impacts of using information of fair value financial statement in place of historical cost.
- The use of fair value in place of historical cost for.
- Most investors want to use both of historical cost and fair value for information of financial statement.
- Concerning limited quality of accounting information provided by historical cost, survey participants supposed that the application of fair value would supply them with more helpful information for decision making.
- In fact, there are numerous cases of investors wishing to use fair value.
- Nonetheless, due to poor information for fair value determination, these investors still have to apply historical cost.
- Investors’ opinion of difficulties and challenges if applying fair value.
- Diagram 1: Agreeing level of difficulties in identifying accuracy of accounting information based on fair value.
- Diagram 2: Agreeing level of difficulties of financial market and asset transaction in the application of fair value accounting.
- This results from the fact that in an underdeveloped market with insufficient information like Vietnam, the determination of fair value is based on different hypothesizes and estimations of firms’.
- Vietnam’s financial market and asset transaction is not greatly developed because the best information of fair value is the transaction price in the market with high liquidity.
- This would make it infeasible to determine transaction price of assets or impossible to reflect precise fair value of financial instrument..
- This helps to provide historical cost and fair value information in financial statement system.
- The fair value record will be presented in detail in financial statement to supply appropriate information with users..
- Marsh, T (2014), 'User Perceptions of Fair Value Reporting of Investments in Fund Financial Statements of Governments', Journal of Accounting and Finance .
- Kluever, I (2012),'The usefulness of fair value: The users' views within the context of the conceptual framework for financial reporting', doctoral dissertation, university of Greenwich, London, UK..
- Jianu, I (2010), 'Fair value - From the Romanian reality perspective', Accounting and Management Information Systems .
- White, M (2008), 'Fair Value Accounting', Journal of the Zimbabwe Institute of Accountants .
- Rankin, M, Stanton, P, McGowan, S, Ferlauto, K &Tilling, M (2012), 'Measurement and Fair value accounting', Contemporary issues in accounting, John Wiley &.
- Young, M (2008), 'Fair Value Roundtable', Journal of Accountancy, 60-70..
- Teufel, A (2007), 'FASB Statement on Fair Value Measurements', Journal of Investment Compliance .
- Wang, L (2009), 'Analysis of the Implementation of fair value in China', International Business Research

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