Abstract
In financial reporting, US and international accounting standard-setters have issued several disclosure and measurement and recognition standards for financial instruments. The purpose of this paper is to review the extant capital market literature that examines the usefulness of fair value accounting information to investors. In conducting my review, I highlight findings that are of interest not just to academic researchers, but also to practitioners and standard setters as they assess how current fair value standards require modification, and issues future standards need to address. Taken together, evidence from the research suggests that disclosed and recognised fair values are informative to investors, but that the level of informativeness is affected by the amount of measurement error and source of the estimates - management or external appraisers. I also provide a discussion of implementation issues of determining asset and liability fair values.