Investment property: Fair value or cost model? Recent evidence from the application of IAS 40 in Europe

2021 ◽  
pp. 100568
Author(s):  
Maria Elena Olante ◽  
Ugo Lassini
Keyword(s):  
Cost Model ◽  
Fair Value

scholarly journals Fair Value Information, Audit fees and Audit Committee in Taiwan

2017 ◽  
Vol 8 (2) ◽  
pp. 124
Author(s):  
Shu-Hsing Wu ◽  
Tsung-Che Wu ◽  
Kun-Lin Yang
Keyword(s):  
Audit Committee ◽  
Cost Model ◽  
Audit Fees ◽  
Fair Value ◽  
Regulatory Requirements ◽  
Audit Risk ◽  
Level 3 ◽  
Voluntary Choice ◽  
Value Model

Regulatory requirements to adopt IFRS and to disclose audit fees make it possible to examine association between audit fees and proportion of fair-valued assets among firms in Taiwan. A voluntary choice of adding audit committee in the firm for monitoring purpose also helps to examine the association further. Empirical results indicate that lower audit fees is related to higher proportion of (Level 2) fair-valued assets, a finding consistent to Goncharov et al.’s (2014) suggestion that firms pay lower audit fees with fair-value model than with cost model. Insignificant association is found for proportion of Level 3 fair-valued assets, which is similar to Glover et al.’s (2014) suggestion that firm’s reluctant attitude in adopting Level 3 assets. Last of all, when audit committee is added, firm’s audit fees is negatively associated with Level 1 and 2 fair-valued assets, implying audit committee’s role of monitoring and further reducing audit risk and audit fees among Taiwanese firms.

Financial Reporting and Financial Crises: The Case for Measuring Financial Instruments at Fair Value in the Financial Statements

2011 ◽  
Vol 25 (2) ◽  
pp. 409-417 ◽  
Author(s):  
Thomas J Linsmeier
Keyword(s):  
Financial Reporting ◽  
Financial Crises ◽  
Cost Model ◽  
Financial Statements ◽  
Fair Value ◽  
The United States ◽  
Lessons Learned ◽  
Bank Failures ◽  
Financial Instruments ◽  
Financial Condition

SYNOPSIS The Financial Accounting Standards Board (FASB) (2010) proposes that all financial instruments be measured at fair value in the financial statements. This commentary provides one Board member's reasoning for supporting this proposal, which is based on (1) evidence that the amortized cost model failed to provide timely information about the deteriorating financial condition of failed banks in the current financial crisis, (2) lessons learned from prior financial crises affecting financial institutions in the United States and Japan, and (3) research evidence indicating that fair value measures are most highly correlated with banks' exposures to interest rate and credit risk—two key risk exposures that have led to bank failures in the three most recent financial crises.

scholarly journals Comparability of Accounting Choices in Future Valuation of Investment Properties: An Analysis of Brazilian and Portuguese Listed Companies

2015 ◽  
Vol 26 (68) ◽  
pp. 154-166 ◽  
Author(s):  
Flaida Êmine Alves de Souza ◽  
Reiner Alves Botinha ◽  
Pablo Rogers Silva ◽  
Sirlei Lemes
Keyword(s):  
Financial Reporting ◽  
Cost Model ◽  
Fair Value ◽  
Listed Companies ◽  
Financial Reporting Standards ◽  
Accounting Choices ◽  
Explanatory Factors ◽  
Model Versus ◽  
The Cost ◽  
Value Model

<p>One of the main purposes for adopting the International Financial Reporting Standards (IFRS) is the quest for comparability between financial statements within the same country, over time, and between different countries. IFRS have the feature of allowing accounting choices in most of their standards. However, the existence of such flexibility in the process for recognizing, measuring, and disclosing as sets and liabilities may impact on comparability. IFRS have been criticized both due to their accounting choices and the adoption of the fair value paradigm. This article examines these two issues, investigating the choice of the cost model versus the choice of the fair value model for investment properties (IPs), an option guaranteed under the terms of the International Accounting Standard (IAS) 40. This research aimed to identify the comparability degree and the factors that determine the accounting choices made by managers of IPs, in Brazilian and Portuguese listed companies, within the periods from 2010 to 2012. Comparability, within and between countries, was identified by the T-index and the search for the determining factors of accounting choices made by managers was performed by means of a logistic re gression analysis. As a result, it was found that, despite the accounting choices allowed by IAS 40, there was a mean comparability between the accounting practices of firms in these countries, but showing a decrease in the index over the years. The explanatory factors identified were auditing by one of the big four (PricewaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG, or Ernst & Young), companies' indeb tedness, relative importance of IPs' balance, net profit, and less experience of Brazil in using the fair value method to appraise IPs.</p>

scholarly journals Investment Property, Cost Model, Fair Value Model and Value Relevance: Evidence From Malaysia

2020 ◽  
Vol 11 (3) ◽  
pp. 115
Author(s):  
Mohd Halim Kadri ◽  
Juyati Mohd Amin ◽  
Zarina Abu Bakar
Keyword(s):  
Value Relevance ◽  
Cost Model ◽  
Simple Random Sampling ◽  
Fair Value ◽  
Listed Firms ◽  
Final Sample ◽  
Equal Chance ◽  
Property Companies ◽  
Value Model ◽  
Selection Of

The purpose of the study is to investigate the value relevance of investment property of Malaysian listed firms based on cost model and fair value model for measuring their investment properties. Some studies suggested fair value model is more value relevant and some other studies suggested cost model is more value relevant. The sample was selected using a simple random sampling so that all listed firms have equal chance to be selected. A final sample of 108 firm-year from various industries was selected for a period from 2018 to 2019. Equity valuation models developed by Landsman (1986) and Ohlson (1995) were used to test the value relevance of investment property employed by listed firms in Malaysia. The models were used to test the value relevant of pooled sample, fair value sample and cost sample. The results show that firms’ investment properties are value relevant regardless whether cost model or fair value model was selected. It was also found that depreciation included in cost model and fair value gain or loss included in fair value model net profits are value relevant. The study implicates that cost model is more value relevant in measuring investment property. The result provides useful insight to standard setter about the effect of selection of fair value model and cost model towards share market value. Standard setters, researchers and academics would benefit from this as prior research in Malaysia suggests that investment properties (in general) are not value relevant even though investment properties of property companies are value relevant.

scholarly journals The use of historical cost and fair value for property and plant and equipment measurement: Evidence from the Republic of Serbia

2020 ◽  
Vol 65 (227) ◽  
pp. 95-118
Author(s):  
Nemanja Karapavlovic ◽  
Vladimir Obradovic ◽  
Jasmina Bogicevic
Keyword(s):  
Financial Reporting ◽  
Cost Model ◽  
Fair Value ◽  
Legal Form ◽  
Historical Cost ◽  
Model Based ◽  
Valuation Model ◽  
Subsequent Measurement ◽  
The Republic ◽  
Willingness To Use

The aim of the paper is to reveal how financial statement preparers in the developing and transition country of the Republic of Serbia, behave in situations where they can choose between the valuation model based on historical cost and the valuation model based on fair value. In that regard, we have analysed the subsequent measurement of property and plant and equipment in Serbia. We find that companies are more likely to choose the historical cost model than the revaluation model (the model based on fair value) for owner-occupied properties and plant and equipment, and the fair value model rather than the historical cost model for investment properties. The willingness to use the revaluation model for subsequent measurement of owner-occupied properties and plant and equipment varies across different categories of companies, and we find a statistically significant relationship between that willingness and the legal form of the company. We also find that in the notes to their financial statements, a significant number of companies in Serbia do not disclose adequate information on the model used for subsequent measurement of property and plant and equipment, although such information is required by the applicable financial reporting standards.

scholarly journals Revaluation as a Model of Subsequent Measurement of Property, Plant, and Equipment – Case of Croatia

2021 ◽  
Vol 23 (1) ◽  
pp. 63-95
Author(s):  
Mirjana Hladika ◽  
◽  
Damir Gulin ◽  
Ivana Bernat ◽  
◽  
...  
Keyword(s):  
Cost Model ◽  
Pearson Correlation ◽  
Accounting Standards ◽  
Financial Statements ◽  
Fair Value ◽  
Descriptive Statistics ◽  
International Accounting Standards ◽  
Disclosure Requirements ◽  
Subsequent Measurement ◽  
The Cost

Accounting standards allow the application of two models for subsequent measurement of property, plant, and equipment, and those are the cost model and the revaluation model. The application of a certain model depends on the manager’s choice of accounting policy. The main goal of this paper is to investigate the application of the revaluation model for subsequent measurement of property, plant, and equipment in Croatian companies. Further goals are to examine how the fair value for revalued assets is determined, and what the level is of disclosed information about the determined fair value and the revaluation. The theoretical part of the paper analyzes different models for measurement of property, plant, and equipment, the issue of determining fair value, and disclosure requirements according to national and international accounting standards. The empirical part of the paper is conducted on 500 large and medium-sized Croatian companies from the service (utilities), production, and tourism sectors. Particular attention is placed on the notes to the financial statements of these companies. The research covers the period from 2014 to 2018. Collected data are analyzed by using descriptive statistics methods, point-biserial correlation, and Pearson correlation coefficient.

scholarly journals Problems of accounting and reporting of intangible assets through accounting methods

2020 ◽  
pp. 171-186
Author(s):  
Valentyna Yasyshena
Keyword(s):  
Intangible Assets ◽  
Cost Model ◽  
Balance Sheet ◽  
Simulation Method ◽  
Fair Value ◽  
Accounting Disclosure ◽  
Normative Documents ◽  
Current Accounting ◽  
The Cost ◽  
The Impact

Introduction. Constant changes in the economy require the development of a system of accounting, which requires constant improvement of its methodology. Nowadays, the companies’ value growth is due to the increase in the share of intangible assets. Therefore, it is relevant to conduct research that will highlight the problems of accounting and reporting of such assets of the enterprise through the accounting methods and outline ways to solve them. Objective. The paper aims at studying the methods of accounting, disclosure of their nature, determining the impact on accounting and the formation of reporting indicators in the IAs and goodwill in accordance with the requirements of the applicable law. Methods. The research methodology is based on the study of the state of the statutory regulation of accounting of intangible assets through a critical analysis of the content of normative documents. The identification of problematic issues was determined through a quick survey and questionnaire of the chief accountants of the companies’chief accountants. Methods of comparison and grouping were used at all stages of the study, and the results were summarized at the final stage. Results. It is stated that the it is necessary to consider all methods that contribute to the accounting development but not only the specific ones. A simulation method will allow to build accounting models to represent and use elements of the method of accounting in current accounting, educational and scientific processes, as well as well as to fulfil plans and set accounting estimates. The necessity of development of new methodological recommendations for documentary provision of primary accounting of intangible assets of all types with generalization and improvement of existing forms of primary documents is substantiated. It is substantiated that the inventory should take into account the characteristics and nature of certain types of intangible assets to determine the approach to verification. The necessity of choosing a prudent approach to the revaluation of intangible assets at fair value and the appropriateness of the cost model in many cases is disclosed. The necessity of elaboration of Methodological recommendations for the formation of the cost of intangible assets in the context of calculation items for enterprises of different types of economic activity, or more detailed disclosure of this issue in PAS 8, is revealed. Prospects. It is necessary to carry out research in the field of improvement of accounting methodology, including intangible assets through the prism of such elements of the method of accounting as accounts, double-entry, and balance sheet.

scholarly journals Dylematy wyceny inwestycji niefinansowych

2014 ◽  
pp. 5-19
Author(s):  
Anna Kuzior
Keyword(s):  
Cost Model ◽  
Balance Sheet ◽  
Fair Value ◽  
Price Model ◽  
Initial Value ◽  
Historical Cost ◽  
Income Statement ◽  
Financial Investments ◽  
Value Model ◽  
Gains And Losses

The article presents problems concerning non – financial investments, their range, classification and measurement based on Polish accounting law. Possibilities of initial value calculations of different groups of investments were presented. The rules of measurement after initial recognition as well as the depreciation of investment property were described here. The valuation models used at the balance sheet date were depictured – historical cost model, fair value model and lower price model. External and internal indications of impairment as well as the procedure of tests for impairment were described in the article. Problems of operational and investment assets reclassification were mentioned. Treatment and allocation of results of valuation and selling non – financial investments were presented. The rules of gains and losses presentation in an income statement were criticized.

scholarly journals El valor razonable en la contabilidad de los instrumentos financieros. Análisis desde una perspectiva histórica

2017 ◽  
Vol 14 (26) ◽  
pp. 90 ◽  
Author(s):  
José Morales Díaz
Keyword(s):  
Financial Crisis ◽  
Mixed Model ◽  
Cost Model ◽  
Fair Value ◽  
Point Of View ◽  
Financial Instruments ◽  
Accounting Model ◽  
Siglo Xix ◽  
Value Model ◽  
New Evidence

El objetivo del presente artículo se centra en analizar si, desde finales del siglo XIX hasta el presente, ha existido algún momento en el tiempo en el que haya habido un modelo contable de instrumentos financieros (Modelo de Coste, Modelo Mixto o Modelo de Valor Razonable Total) que haya alcanzado plena "legitimidad" en alguna de las dimensiones establecidas siguiendo los principios enunciados por Suchman (1995).La principal contribución que queremos lograr es obtener nuevas evidencias sobre la conveniencia de aplicar el Modelo de Valor Razonable completo a la contabilidad de los instrumentos financieros.  Hemos descubierto que, incluso en el período de los años 40 a los 70, en el que el Modelo de Coste prevaleció de manera clara en las prácticas contables, muchos investigadores e instituciones continuaron defendiendo el uso del valor razonable. En ese período podría incluso hablarse de legitimidad del Modelo de Coste, pero simplemente desde un punto de vista pragmático, considerando su origen y continuidad. Se observan igualmente aspectos morales relacionados con la prevención de otra crisis financiera. Hoy en día, podemos decir que el Modelo Mixto está plenamente establecido en las prácticas contables, pero carece de una legitimidad total, conclusión avalada por las críticas de los propios organismos reguladores, el IASB y el FASB. The aim of this article is to analyze whether, from the end of the nineteenth century until the present, there has been any moment in time in which there has been an accounting model for financial instruments (Cost Model, Mixed Model or Full Fair Value Model) that has reached full "legitimacy" in some of the established dimensions following the principles stated by Suchman (1995).The main contribution we want to achieve is to provide new evidence about the convenience of applying the Full Fair Value Model for financial instruments. We have found that, even in the period from the 40s to the 70s in which Cost Model prevailed in a clear way in accounting practices, many researchers and institutions continued to defend the use of fair value. In this period, we could perhaps talk about legitimacy of Cost Model but simply from a pragmatic point of view, considering its origin and continuity. We can even observe moral aspects in order to prevent another financial crisis. Nowadays we can say that the Mixed Model is fully established in accounting practices but it does not have a full legitimacy, a conclusion supported by the criticisms of the regulators, the IASB and the FASB.

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