Discussing the usefulness of Fair Value from the lenders’ perspective

Fair value measures in financial reporting have been at the center of recent debates, with many scholars considering the issue increasingly relevant and useful. This paper discusses the appropriateness of these measure in countries, like Italy, wherein lenders are the major source of financing and are therefore the ‘primary users of financial reporting. Specifically, we argue that fair valuation – while potentially useful in countries that boast advanced capital markets with diffused equity ownership – is not as useful, and even potentially misleading in countries like Italy. The discussion is based on a review of the literature on the prediction of creditworthiness. In the literature, the main informational inputs largely ignore fair values, whether measured as exit values or otherwise. Basically, the idea that fair values are suitable for all countries and entities, regardless of differences in ownership structure and modes of financing, may need to be re-examined. Possibly, disclosure of fair values instead of recognition is more likely to satisfy the criterion of decision usefulness when lenders are the main users of financial reporting.