120 The Impact of Fair Value Measurements on Income Statement: IFRS 13 "an Application Study in Insurance Companies" Dr. Nour Aldeen M. Ghafeer* Dr. Abdul Aziz A. Abdul Rahman Accounting Department, Philadelphia University, PO box 19392, Amman, Jordan * E-mail of the corresponding author: nghafeer@philadelphia.edu.jo Abstract There has been a steady shift in accounting standards over the past few years, moving away from historical cost measure towards fair value. Proponents view this as a way to deal with traditional criticisms of accounting valuation while making information more relevant to users. This paper attempts to shed some light on this issue by restating some of the financial assets of an insurance company, applying fair value instead of historical-cost-based valuations, and comparing data emerged by using historical costs principle and fair value principle. We find that the numbers on the face of the income statement change considerably and observe that the magnitude of these changes varies between the two policies. However, these findings seem to indicate that a change from historical- cost to fair-value accounting could achieve different results. Key words: Fair value, Historical cost, comprehensive income. Introduction: The point of using fair value measure is to allow accounting to provide information that is both useful and relevant (Rankin & others, 2012). Traditionally accounting has mostly used a valuation concept known as modified historical costs as the key measurement foundation. In other words, IFRS requires that companies account for and report many assets and liabilities on the basis of acquisition price (Kieso & others, 2011). IFRS has increasingly called for use of fair value measurements in the financial statements. Fair value information may be more useful than historical cost for certain types of assets and liabilities and in certain industries. (Kieso & others, 2011). The importance of the study: Fair value accounting or measures or estimates often provide more of the relevant information about the future expected cash flows associated to an asset or a liability. Using the fair value as a basis for measuring the financial assets and financial liabilities is more relevant than historical cost in these situations because it reflects the current cash equivalent value of financial instruments. The importance of this study arises by restate income statement for the company under study by using the two principles; historical cost principle and fair value principle. This will show advantages by restate income statement, which will reflect the future expected cash flows by using fair value. The objectives of the study: The researcher aims at fulfilling the following goals: 1. Determine net income and comprehensive income for the company under study by using historical cost principle and fair value principle. 2. Obtain a broad overview about the factors which effect with net income and comprehensive income. The problem of the study: From the previous points, the problem of the study can be summed up as follows: 1. Is there a difference between net incomes and incomes from operations by using the two principles; historical cost principle and fair value principle? 2. Is there a difference between comprehensive incomes by using the two principles; historical cost principle and fair value principle? The study hypotheses: The researcher tries to test if these hypotheses are correct: H1: There is a significant difference between net incomes and incomes from operations by using the two principles; historical cost principle and fair value principle. H2: There is a significant difference between comprehensive incomes by using the two principles; historical cost principle and fair value principle. The methodology of the study: The researcher has adopted the descriptive application methodology because it suits the objectives of this study. The researcher has also depended on information resources relating to the study and has analyzed it. brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by International Institute for Science, Technology and Education (IISTE): E-Journals