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Acquisition and integration of fair value information on liabilities into investors' judgments

Maik Lachmann (Faculty of Business, Economics and Social Sciences, TU Dortmund University, Dortmund, Germany)
Arnt Wöhrmann (Münster School of Business and Economics, Westfälische Wilhelms‐Universität Münster, Münster, Germany)
Andreas Wömpener (University of Duisburg‐Essen, Duisburg, Germany)

Review of Accounting and Finance

ISSN: 1475-7702

Article publication date: 1 November 2011




The International Accounting Standards Board and the Financial Accounting Standards Board allow fair value measurement of liabilities. Previous findings from the literature on recognition versus disclosure indicate that recognition of fair value information better serves investors' needs, because it is more likely to facilitate the incorporation of the information into their judgment. In cases of credit risk changes for own liabilities, however, many authors doubt that fair value measurement is beneficial due to its potential counter‐intuitiveness. The purpose of this paper is to gain insight into non‐professional investors' processing of fair value information for liabilities.


A between‐subjects laboratory experiment was employed. Subjects received financial information on three different companies. The authors manipulated the accounting treatment of liabilities between the three groups. Subjects ranked three companies according to their economic performance. The authors then compared these rankings to the companies' actual performance.


The results of the experiment indicate that non‐professional investors are less likely to acquire the information of credit risk changes when liabilities are not measured at fair value. Additionally, evidence was found that fair value measurement is to some extent counter‐intuitive for non‐professional investors.

Research limitations/implications

A main limitation is that our experiment concentrates on liabilities and abstracts from interactions of both sides of the balance sheet.


This is the first study to analyze in detail non‐professional investors' information processing of liabilities measured at fair value.



Lachmann, M., Wöhrmann, A. and Wömpener, A. (2011), "Acquisition and integration of fair value information on liabilities into investors' judgments", Review of Accounting and Finance, Vol. 10 No. 4, pp. 385-410.



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Copyright © 2011, Emerald Group Publishing Limited

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