Abstract: Part 1: Introduction 1 Introduction: The Nature of Fair Value 2 The Use of Fair Value in IFRS 3 What SFAS 157 does and does not Accomplish 4 The Case for Fair Value 5 Fair Values: Imaginary Prices and Mystical Markets Part 2: Theoretical Analysis 6 Recent History of Fair Value 7 Fair Value and Valuation Models 8 Whither Fair Value?: The Future of Fair Value 9 Between a Rock and a Hard Place 10 Fair Value and Capital Markets 11 Fair Value: The Right Measurement Basis? 12 Measurement in Accounting and Fair Value 13 CCA: An Unsuccessful Attempt to Change the Measurement Basis 14 Alternatives to Fair Value 15 The Relevance and Reliability of Fair Value Measurement 16 The Fair Value Principle and its Impact on Debt and Equity Part 3: Fair Value in Practice 17 Fair Value: A Cautionary Tale from Enron 18 The Insurance Industry and Fair Value 19 Fair Value Measurement for Corporate Entities, Insurance Companies and Retail Banks from an Investment Banker's Perspective 20 Fair Value and the Auditor 21 Fair Value Accounting in the USA 22 A Japanese Perspective on Fair Value 23 Pension Accounting and Fair Value 24 Fair Value in IFRS: Issues for Developing Countries and SMEs 25 Fair Value and Financial Instruments 26 Fair Value and IAS 36

Abstract: Under the common assumption of constant interest rates, we show that penalties for early termination of a lease are often structured in such a way that the cancellation option embedded in consumer automotive leases has little value. Furthermore, our estimates drawn from a sample of three popular car models over 1990 to 2000 indicate that the stand-alone value of the lease-end purchase option is, on average, about 16% of the market value of underlying used vehicles, or about $1,462 per contract. Finally, we examine the sensitivity of our option value estimates to model parameters and default risk. RECENT YEARS HAVE WITNESSED A DRAMATIC GROWTH in the leasing of automobiles. For instance, overall industry sales data indicate that about a third of the new vehicles and trucks sold in the United States are leased (Hendel and Lizzeri (2002), and Miller (1995)), and the Federal Reserve Board survey of family finances reports that the use of leased vehicles by individuals (nonbusiness consumers) has risen from 2.9% to 5.8% over the 1992 to 2001 period (Azicorbe, Kennickell, and Moore (2003)). Consumer automobile lease contracts for new cars often include two embedded options that are not associated with a typical debt contract. The first is a cancellation option that allows the lessee to terminate the lease early. The second is a European call option, which gives the lessee the right, but not the obligation, to purchase the leased (used) vehicle at the scheduled termination of the lease at a predetermined exercise price. Both of these options are simple examples of real options because the asset underlying these options is a used car, that is, a real asset; however, these options constitute a special case of real options since they are embedded in the lease contract, which is a financial (credit) instrument. Theoretical analyses of lease contracts show that the cancellation option is quite valuable (Schallheim and McConnell (1985)). With respect to the purchase option, Hendel and Lizzeri (2002) argue that they can play an important role in

Abstract: This paper deals with the use of the CAPM for investment decisions and evaluations. Four different measures are deductively drawn from this model: the disequilibrium Net Present Value, the equilibrium Net Present Value, the disequilibrium Net Future Value, the equilibrium Net Future Value. It is shown that all of them may be used for accept-reject decisions, but only the equilibrium Net Present Value and the disequilibrium Net Future Value may be used for valuation, given that they enjoy the additivity property. The two nonadditive indexes cannot be deducted from the CAPM assumptions if the decision problem “invest/no invest” is reframed as “invest in Z/invest in Y”. Despite their additivity, the equilibrium Net Present Value and the disequilibrium Net Future Value are unreliable for both valuation and decision, because they do not signal arbitrage opportunities whenever there is some state of nature for which they are decreasing functions with respect to the end-of-period cash flow. In this case, the equilibrium value of a project is not the price it would have if it were traded in the security market. This result is the capital-budgeting counterpart of Dybvig and Ingersoll’s (1982) result.

Abstract: The goal of the firm is to maximize shareholder value. While most firms devote their main efforts to exploit financial value drivers such as mergers and acquisitions, not enough attention is being paid to managerial value drivers like reducing time to market, increasing throughput, or improving logistics, operations and supply chain management, although these managerial drivers have a much greater potential for value creation. This paper focuses on managerial value drivers and presents Value Focused Management (VFM), which is a methodology for enhancing the organization value by identifying its value drivers, quantifying their estimated contribution, and prioritizing them according to their relative value creation potential and difficulty of implementation. VFM combines Value Based Management (VBM) with the Theory of Constraints (TOC) along with practices such as the focusing matrix, and provides managers with a structured process that includes a focused diagnosis of the organization, followed by a comprehensive implementation plan which helps them direct their efforts towards the most promising value drivers. VFM has been successfully implemented in dozens of organizations worldwide. This paper analyzes a case study of a supermarket chain which demonstrates VFM’s potential as an effective practical methodology to guide companies in their ongoing quest to increase shareholder value.

Abstract: Embedded value has been widely adopted by European and Canadian life insurance companies for supplementary performance reporting and increasingly by US insurers for management purposes. It has important implications for the international debate over the appropriate use of fair values in financial reporting. But EV has still not been accepted by standard setters (e.g. IASB) for inclusion in the main financial statements. The concept of Market Consistent Embedded Value has been developed primarily by actuaries utilizing modern financial economics. This paper analyzes how both top-down and bottom-up methodologies for estimating MCEV may lead to unrealistic allowance for risk and explores the dangers of double counting of elements in the MCEV 'economic balance sheet', of a misunderstanding of the synergistic nature of overall firm value, and of a naive belief in market efficiency. It outlines potential empirical research with wider implications for 'fair value' accounting and reporting.

Abstract: Shareholder value depends on the intrinsic value of a company which, in turn, is driven by sales growth rate, operating profit margin, incremental capital investment, income tax and cost of capital (Rappaport, 1998). Often, there is confusion among professionals as to which of the value drivers are significantly contributing to value and on which they should focus to enhance value on a sustainable basis. In this paper, we make an attempt to list the value drivers of return on equity (ROE) and classify them as internal and external value drivers. Using the financial data of 112 companies listed on the Bombay stock exchange in India, for a period of seven years from 2000 to 2006, the impact of the value drivers on the ROE is quantified. By statistical analysis, some important value drivers which are sustainable in the long term and contribute significantly to value creation have been derived.

Abstract: A premise of value when attached to a standard of value in binary combination completes the description of a transactional event. In this paper we confine ourselves to one standard of value market value and survey several of the usual premises of value which can complement it. Use of a premise of value to qualify a standard of value also serves to cut down on the proliferation of the number of separate standards of value. As a byproduct of our delving into the theoretical structure of standards and premises of value we discern possible additions to the plant & machinery valuer's toolkit.

Abstract: We value a company that targets its capital structure in book-value terms. This capital structure definition provides us with a Value of Tax Shields that lies between those of Modigliani-Miller (fixed debt) and Miles-Ezzell (fixed market-value leverage ratio). If a company targets its leverage in market value terms, has less value than if it targets the leverage in book value terms. How could some manager target leverage in market value terms? We also present empirical evidence that permits to conclude that debt is more related to the book value of the assets than to their market value.

Abstract: With the fast development of the Financial Accounting on the usefulness for decision,there is the present situation that the accounting is based on the value.What is the assets' value? This paper points out that first of all,the value is not the utility evaluation of individual corporations,but the utility evaluation of the market;second,it is meaningless to talk about the value of individual asset without linking the integral.The individual asset's value is the contributive share of corporations' whole economic interest.

Abstract: The paper proposes to compare a series of indicators used for measuring shareholders value such as: total shareholder value, economic value added, market value added, cash value added or cash flow return on investment.

Abstract: This article investigates the creation and monitoring of the fundamental value of a company, the methods of its valuation, and capital market responses to changes of the funda- mental value. The author uses the basic theory of discounted cash flows as his main theoretical model. This theory states that the investment value equals the net present value of future cash flows that is created as a result of this investment. Other theories referred to in the article are de- rived from the aforementioned model. The article contains an empirical analysis of correlation dependence between the fundamental value and the market capitalization. The figures obtained from international companies during a 5-year time period showed that the highest indices of fundamental value increase were used as output data. The article argues that the total business return has the highest correlation index with respect to a company's market value. The reasons affecting the results of the empirical research have been analyzed. The author gives some rec- ommendations on the appreciation of a company's market value.

Abstract: Even under the International Financial Reporting Standard 4 (IFRS 4), the current accounting regime for UK life insurance companies is oriented towards delaying the recognition and distribution of profit, and still remains largely rooted in traditional requirements for statutory solvency reporting. This paper tests empirically the value relevance of the alternative ‘realistic reporting regime’ of voluntary embedded value (EV) disclosures that has been generally adopted by leading UK and Continental European insurers. In recent years, EVs have also been used internally (but not disclosed) by many US life insurers. The results found here are consistent with value relevance and some implications for standard-setters are explored.

Abstract: Purpose – This paper seeks to provide an empirical view of the present state of intellectual capital (IC) in Finnish companies. It also examines the relationship between the concepts value of IC and efficiency of IC.Design/methodology/approach – Calculated Intangible Value (CIV), which measures the monetary value of IC, and Value Added Intellectual Coefficient (VAICTM), which describes how a company's IC adds value to the company, were applied to approximately 20,000 companies per year during the period 2001‐2003 and studied using correlation analysis.Findings – Value and efficiency of IC are described in 11 industries in both SMEs and large companies. The theoretically unclear relationship between the value and efficiency of IC remains vague even after the empirical analysis. Calculating the value of IC in relative terms by dividing the value of a company's IC by the value of its tangible assets was found to be illustrative in comparing different industries.Research limitations/implications – The measure...