A critical analysis of “fair value” as a valuation method in the Italian financial statement

In this paper study, we delve into the intricate landscape of Italian
financial reporting, focusing our lens on the inclusion of derivative
financial instruments for fiscal years commencing on or after 1
January 2016. Specifically, the study aims to understand the extent
to which these instruments are integrated into company financials
and evaluate the impact of recognizing derivatives at fair value on
the Return on Investment (ROI) Index. Focusing on the analysis, it is
used a substantial dataset that comprises more than 750 firms over
three years. It examines whether the possession of derivative
financial instruments is a distinguishing factor in Italian financial
reporting and if the shift to fair value recognition has a statistically
significant influence on the ROI Index. Additionally, the study
explores potential variations when the dataset is segmented by
geography and company size, as well as by employee count.
Moreover, the findings challenge conventional expectations,
revealing that the presence of derivative financial instruments fails
to wield significant influence on financial statements or induce some
shifts in ROI values. Even when the dataset is stratified based on
geographic regions or company workforce size, no statistically
significant effects were observed. Finally, this research contributes
original insights into the treatment of derivative financial
instruments in Italian financial reporting following the
implementation of fair value recognition rules. The study's useof a
large dataset and its exploration of various segmentation factors
provide valuable perspectives on the impact of these accounting
changes on financial performance metrics.