This study examines whether firm managers' choice of valuation methods for long-lived assets between fair value and historical cost affects firm risk. Using a sample of 95 UK listed firms and 754 firm-year observations during the period of 2003 to 2010, we find evidence that, on average, fair value accounting for long-lived assets induces a higher level of systematic risk, relative to historical cost accounting in the pre-IFRS adoption period. In the post-IFRS adoption period, firms choosing fair value accounting have a higher level of positive changes in systematic risk than their counterparts using historical cost accounting. Overall, these findings imply that given a set of costly accounting standards, fair value accounting for non-financial assets needs further considerations.
