The Impact Fair Value Accounting Implementation on the Quality of Financial Disclosure in Commercial Banks during Financial Crisis

Abstract

This research investigates the application of fair value accounting in the banking sector and its influence on financial disclosure, particularly during periods of financial crisis. Fair value application in commercial banks is recognized as an influential tool for enhancing the financial statements, as it improves the transparency, ability to manage risk, and enabling effective financial decision making. To achieve the objectives and results of the study, (60) questionnaires were used as a research tool in the field study, where the questionnaire was formulated through a survey of the target groups to achieve the objectives of the study. Statistical program for social sciences (SPSS) was used to analyze the questionnaire data. The results showed that adopting a financial accounting system of the fair value model for accounting measurement and financial disclosure plays an important role, according to which it affects the quality of accounting information by maximizing the qualitative characteristics of this information, represented by relevance, reliability, comparability, and understandability. However, the results revealed, during financial crisis, no variance in the financial disclosure quality while applying fair value accounting. Since applying fair value accounting has positive direct effect on financial disclosure clarity, high report quality, transparency, and provision of reliable information for decision-making, the research recommends improvement in applying fair value accounting in financial banks especially during financial crisis.