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He, Colly

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  • Paper Title: Opportunistic Use of Fair Value Accounting and Corporate Governance 
  • Department Affiliation: Accounting and Corporate Governance
  • Supervisor's Names:
    • Doctor Sue Wright
    • Doctor Elaine Evans


The study examines whether managers use the discretion and flexibility available under FVA provided in AASB 141 to report higher profits. Is executive pay sensitive to FVA gains?

What is the role of corporate governance in monitoring the size of reported FVA gains or executive pay-sensitivity to the gains?

Key literature/theoretical perspective:

Research suggests that firms are rewarded for reporting positive earnings while managers provide earnings comparisons which emphasize improvement. Further, managers exercise the discretion in accounting standards when their compensation is linked to the reported number. Firm size, board independence, executive tenure and ownership concentration and other corporate governance mechanisms are found in the literature to have an impact on executive compensation and earnings management behaviour.


Regression analyses are undertaken to examine data for 255 company/years which applied AASB 141 for the period 2001-2010.


Management reports higher FVA gains from biological assets when non-FVA earnings is (1) below target earnings; (2) lower than the prior year.  Analyses for compensation incentives and corporate governance are under development.

Research and practical implications:

The findings may inform future legislation and regulation of reporting and corporate governance in Australia, in terms of how much flexibility should be provided in accounting standards requiring the use of FVA.


Fair value, Earnings smoothing, Executive compensation, Corporate governance.