Does fair value accounting affect narrative disclosure obfuscation? Evidence from the United Kingdom consumer discretionary industry

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Efretuei, E orcid iconORCID: 0000-0002-4671-9841 and Zhang, F (2026) Does fair value accounting affect narrative disclosure obfuscation? Evidence from the United Kingdom consumer discretionary industry. International Journal of Disclosure and Governance. ISSN 1741-3591

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Abstract

Our understanding of the consequences of fair value representations in financial narratives is still limited. This study investigates the effect of fair value accounting on narrative disclosure obfuscation in the context of the United Kingdom (UK) consumer discretionary Industry. Narrative disclosure obfuscation is defined as the association between complex words disclosed in the company annual report and financial markets volatility. First the results show a positive association between the disclosure of complex words and market volatility, which confirms the existence of narrative obfuscation. Second, the effects of fair value accounting on obfuscation are identifiable in the post regulation period following the application of IFRS 13—Fair Value Measurement, and in the context of consumer discretionary firms in the UK. Our findings confirm the hypothesis that when fair value measurement is applied in practice to non-financial assets, for discretionary assets where fair value is unknowable, representations of fair value can be unstable leading to a contradiction and financial disclosure obfuscation.

Item Type: Article
Uncontrolled Keywords: 1801 Law; 3501 Accounting, auditing and accountability
Subjects: H Social Sciences > HF Commerce > HF5001 Business
H Social Sciences > HF Commerce
H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Liverpool Business School
Publisher: Springer
Date of acceptance: 28 April 2026
Date of first compliant Open Access: 15 May 2026
Date Deposited: 15 May 2026 13:52
Last Modified: 15 May 2026 13:52
DOI or ID number: 10.1057/s41310-026-00382-y
URI: https://researchonline.ljmu.ac.uk/id/eprint/28582
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