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Title:Fair value reclassifications of financial assets during the financial crisis PDF Logo
Authors:Bischof, Jannis
Brüggemann, Ulf
Daske, Holger
Issue Date:2012
Series/Report no.:SFB 649 discussion paper 2012-010
Abstract:At the peak of the financial crisis in October 2008, the IASB amended IAS 39 to grant companies the option of abandoning fair value recognition for selected financial assets. Using a comprehensive global sample of publicly listed IFRS banks, we find that banks use the reclassification option to forgo the recognition of fair value losses and ultimately the regulatory costs of supervisory intervention. Analyses of stock market reactions suggest that a small subset of the most troubled banks benefit from such reclassifications. However, analyses of related footnote disclosures reveal that two-thirds of reclassifying banks do not fully comply with the accompanying IFRS 7 requirements. These banks experience a significant increase in bid-ask spreads in the long run.
Subjects:bank regulation
fair value accounting
financial crisis
IAS 39
IFRS 7
JEL:G14
G21
G28
M41
M48
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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