The value-relevance of fair value measurement for inventories
Loading...
Date
Authors
Badenhorst, Wessel M.
Von Well, Rieka
Journal Title
Journal ISSN
Volume Title
Publisher
Wiley
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.
Keywords
Fair value measurement, Inventory, Value-relevant
Sustainable Development Goals
Citation
Badenhorst, W.M. & Von Well, R. 2023, 'The value-relevance of fair value measurement for inventories', Australian Accounting Review, vol. 33, no. 2, pp. 135-159, doi : 10.1111/auar.12382.