The Relevance of Fair Value Concept Compared to Historical Costs in Indonesia

  • Nugroho Wisnu Murti Institute of Economic Science “Adi Unggul Bhirawa”
  • Suyanto Suyanto Faculty of economics and business, Gadjah Mada University


The aims of this study were to examine the usefulness of fair value concept compared to historical cost. The population of this study was financial statements of all companies which were listed on the Indonesia Stock Exchange in 2014 or earlier. The sample selection method was not probability sampling with purposive sampling technique. There was 734 observation of panel data for 367 financial statements in 2014 and 2015. We analyzed the data using multiple regression in panel data. Our results found the relevance of fair value was significantly higher than the historical cost of Economic Value Added (EVA) (p < 0.05). The relevance of fair value was also proven in stock return, while historical cost had a negative correlation with stock return. Another finding of this research was that the size of the public accountant firm had in significantly negative with to the accuracy of fair value disclosure. This finding provided a signal that public accountant who verifies fair value disclosure was not acting in their capacity. Base on this result, Indonesian Institute of Accountants should reconsider the strategic role of the appraiser for fair value disclosure like a public accountant in audit services. In addition, financial statement need verification from appraiser was needed for all Levels of fair value measurement (Level 1, 2 and 3). These had not been regulated in Indonesia Financial Statement Standard (PSAK 68), which appraiser verification is needed in fair value measurement in Level 2 and 3. The role of the appraiser in fair value measurement at Level 2 and 3, indicated that the role of appraiser had not become a priority for fair value disclosure. Evaluation of this standard could balance the roles of the appraiser and public accountant. Particularly, because currently, all companies which listed on the Indonesia Stock Exchange have an obligation to use independent professionals such as a public accountant to audit their financial statements.

How to Cite
MURTI, Nugroho Wisnu; SUYANTO, Suyanto. The Relevance of Fair Value Concept Compared to Historical Costs in Indonesia. Proceedings of Indonesia Focus, [S.l.], v. 1, n. 1, oct. 2017. ISSN 2475-4005. Available at: <>. Date accessed: 05 aug. 2020.