THE EFFECT OF FAIR VALUE ACCOUNTING ON EARNINGS QUALITY IN JORDANIAN BANKING AND REAL ESTATE SECTORS: CONCEPTUAL PERSPECTIVE

Ahmed Mohammad Mubaideen; Nur Hidayah Laili; Nurul Nazlia Jamil; Khairil Faizal Khairi

doi:10.33102/wn242j72

Authors

Ahmed Mohammad Mubaideen Universiti Sains Islam Malaysia, Faculty of Economics and Muamalat, Nilai, Negeri Sembilan, Malaysia Author
Nur Hidayah Laili Universiti Sains Islam Malaysia, Faculty of Economics and Muamalat, Nilai, Negeri Sembilan, Malaysia Author
Nurul Nazlia Jamil Universiti Sains Islam Malaysia, Faculty of Economics and Muamalat, Nilai, Negeri Sembilan, Malaysia Author
Khairil Faizal Khairi Universiti Sains Islam Malaysia, Faculty of Economics and Muamalat, Nilai, Negeri Sembilan, Malaysia Author

DOI:

https://doi.org/10.33102/wn242j72

Keywords:

Banks, Earnings Quality, EQ reports, Fair Value Accounting, IFRS

Abstract

This study aims to explore the concept of Fair Value Accounting (FVA) and its effects on Earnings Quality (EQ) measures within the banking and real estate sectors listed on the Amman Stock Exchange (ASE). The significance of the study is derived from the importance of FVA, as the quality of accounting earnings is a crucial component in measuring the quality of financial reports based on FVA. EQ represents the ability to predict future earnings and the stability of bank earnings through EQ measurements. The introduction of International Financial Reporting Standards (IFRS) has mandated compliance for all listed companies in the banking and real estate sectors in Jordan, presenting a significant challenge for accountants. This challenge arises because the standards emphasize the importance of fair value (FV) on listings at the Amman Stock Exchange, aiming to enhance the genuine and fair representation of financial reports. IFRS has introduced FVA to these companies to evaluate their earnings from assets and liabilities in Jordan, following IFRS recommendations. EQ measures are based on four attributes: persistence, predictability, volatility of earnings, and closeness to cash, as reflected in the companies' income statements. This study anticipates that strict compliance with IFRS standards will significantly improve EQ through enhancements in these measures. Based on the available literature, this conceptual study posits that FVA impacts EQ measures such as persistence, predictability, volatility of earnings, and closeness to cash in the Jordanian banking and real estate sectors. It concludes that poor implementation of FVA adversely affects EQ measurements in these sectors in Jordan.

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