Economic policy uncertainty exposure and the valuation of non-financial assets: an analysis of Australian listed firms

Purpose This study aims to explore how a firm’s exposure to economic policy uncertainty (EPU) affects the use of fair value (FV) measurement for non-financial assets. Design/methodology/approach The analysis focuses on the selection of FV models for different types of non-financial assets. It examines how internal factors and external policy shocks (EPU) influence the adoption of FV measurement through regression analyses. Findings The results reveal that firms with greater sensitivity to EPU are significantly less likely to adopt FV accounting for non-financial assets. This tendency is especially pronounced among firms that benefit from uncertain environments and is consistent with the conservatism principle. The effect varies by firm characteristics and industry context – being more evident among larger firms, those with high tangible assets or volatile cash flows and those operating in regulated or non-real estate sectors. Originality/value This study contributes to the literature by linking macroeconomic uncertainty to accounting policy choice, highlighting EPU as a key external determinant of FV adoption. It extends prior work focused on internal drivers by empirically documenting how firms adapt accounting practices in response to policy uncertainty.