Financial Reporting for Financial Instruments

Stephen G. Ryan

83 citations0/0 files storedFoundations and Trends® in Accounting

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Risk Management in Financial Firms

Abstract

Financial Reporting for Financial Instruments provides an integrated examination of the four most active areas of empirical accounting research on financial reporting for financial instruments: (1) banks’ loan loss accruals, (2) fair value versus amortized cost accounting measurement bases, (3) balance sheet presentation of risk-concentrated financial instruments such as derivatives and retained residual securities in securitizations, and (4) risk disclosures. The author explains conceptual and practical issues regarding financial reporting for financial instruments, summarizes extant empirical research in these areas, and indicates future empirical research possibilities. He emphasizes that empirical researchers should strive to incorporate four ideas into their research topics and designs: (1) financial instruments exhibit identifiable heterogeneity in their contractual features and risks; (2) at a first approximation, financial institutions are portfolios of interrelated financial instruments; (3) the markets in which financial instruments trade and the institutional settings in which financial institutions operate affect their value and risks; and (4) accounting and disclosures required by generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) imperfectly capture the first three ideas.

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References

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2016Bank Financial Reporting Opacity and Regulatory Intervention 2016The Effect of Corporate Taxation on Bank Transparency: Evidence from Loan Loss Provisions 2015Discretion in Bank Loan Loss Allowance, Risk Taking, and Earnings Management 2018The Implications of Credit Risk Modeling for Banks’ Loan Loss Provisions and Loan-Origination Procyclicality 2014Fair Value Measurement in Financial Reporting

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