The Relationship between Fair Value Accounting and Presence of Manipulation in Financial Statements
The application of fair value has started early in Jordan, which was a bone of contention among supporters and opponents. This study came to provide empirical evidence on the relationship between fair value and financial manipulation. The study extracted data from 45 companies’ annual reports during a ten-year period (1997- 2006) five years before and after the application of fair value to examine the relationship among the application of fair value accounting and the presence of manipulation in financial statements. The result indicates that the number of firms that manipulated information in the financial statements had increased after applying fair value accounting. The results have policy implications, one of which is that the Jordanian government should either enact new regulations or modify the current regulations in the face of an increasing number of manipulations by firms after the application of fair value accounting. These regulations are needed to increase both the managements’ and accountants’ responsibility towards the firms and to enhance the business ethics of the organization.
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