Fair value accounting from a distributed cognition perspective

•This paper focuses on the actual practice of fair value accounting.•Fair value accounting is discussed from a distributed cognition perspective.•Internal/external resources are mobilized to calculate a company's financial instruments value.•Unusual market conditions may necessitate more interactions among human actors in the process of fair value accounting.

This study offers a unique interdisciplinary perspective on fair value accounting. The growing influence of esoteric financial instruments whose valuation is becoming increasingly complex makes it necessary to focus on actual valuation practices. Based on an extensive review, this paper regards fair value accounting for complex financial instruments as involving processes distributed among actors located inside and/or outside a reporting entity. It also draws attention to collaboration by organizations that apply their external and internal resources to perform complex financial valuations. Furthermore, it demonstrates that cases involving unusual market conditions underline the importance of human interactions to the valuation process.