How have US banks adopted the Financial Accounting Standards Board's Level 3 fair value disclosure rules?

Walied Keshk, Hung‐Yuan (Richard) Lu and Vivek Mande

Accounting and Finance, 2020, vol. 60, issue S1, 693-727

Abstract: We examine how banks have complied with the Financial Accounting Standards Board's disclosure rules on Level 3 recurring fair value measurements. We document widespread noncompliance with the basic disclosure requirements. We also find that the noncompliant banks are smaller in size and are associated with lower audit quality, lower institutional ownership and less effective internal controls. Our results should be of use to regulators, auditors and audit committees in the United States, Australia and other countries for assessing the likelihood of noncompliance with fair value disclosure rules and improving the quality of fair value disclosures provided to investors.

Date: 2020
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