Voluntary fair value disclosures beyond SFAS 157’s three-level estimates

Sung Gon Chung, Beng Wee Goh, Tee Yong Ng, Kevin Ow Yong

Research output: Journal article publicationJournal articleAcademic researchpeer-review

26 Citations (Scopus)


Some firms voluntarily make disclosures about the controls and processes in place to ensure the reliability of fair value estimates. Consistent with these disclosures being driven by investors’ concerns about the reliability of their SFAS 157 estimates, we find that firms with more opaque estimates are more likely to provide such disclosures. We then examine whether these disclosures improve investors’ perception about the reliability of fair value estimates. We find that they are associated with higher market pricing and lower information risk for Level 3 estimates. Further analyses of the disclosures reveal that the following types of information are particularly important to investors: discussion of the external and independent pricing of fair value estimates and their proper classification according to the SFAS 157 hierarchy. Overall, our results suggest that the voluntary reliability disclosures that firms provide beyond SFAS 157’s three-level estimates help reduce investors’ uncertainty toward the more opaque fair value estimates.
Original languageEnglish
Pages (from-to)430-468
Number of pages39
JournalReview of Accounting Studies
Issue number1
Publication statusPublished - 1 Mar 2017


  • controls
  • Fair value accounting
  • information risk
  • SFAS 157
  • voluntary disclosure

ASJC Scopus subject areas

  • Accounting
  • General Business,Management and Accounting


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