Abstract:
The objective of this paper is to determine if fair value measurement for inventories is value-relevant. Inventories are measured at historical cost and investors will have to estimate the fair value for themselves. For a sample of firms listed in the UK and reporting from 2009 to 2018, multivariate regression results show that the historical cost component of inventories on the balance sheet is value-relevant, but that the fair value component is not. By contrast, both historical cost earnings and changes in the fair value of inventories are value-relevant. Results therefore imply that investors need both historical cost earnings and fair value movements to make decisions. By extension, fair value measurements complement, rather than replace, historical cost information.
Description:
DATA AVAILABILTY STATEMENT : The data that support the findings of this study are available from Refinitiv. Restrictions apply to the availability of these data, which were used under licence for this study. The existence of the data that support the findings of this study can be verified at https://doi.org/10.25403/UPresearchdata.19845619. However, the underlying data are only available from the authors with the permission of Refinitiv.
