Motives for Reporting Fixed Assets at Revalued Amount: Evidence from a Developing Economy

The purpose of this study is to examine firms’ motives for reporting fixed assets at revalued amount. The study analysed 30 manufacturing firms listed in Colombo Stock Exchange (CSE) for a period of two years from 2012 to 2013, employing Mann–Whitney U test and bivariate and multivariate logistic regression. It is found that manufacturing firms tend to report their property, plant and equipment (PP&E) at revalued amount, when land and building dominates their fixed assets, and firms whose PP&E is dominated by plant and machinery are inclined towards reporting fixed assets at historical cost. However, all such other factors investigated as firm size, carrying amount of PP&E ( ppe), intensity of PP&E ( ippe), returns on total assets ( roa) and return on equity ( roe) fail to explain the accounting choice between cost and revaluation models. The probability for a revaluation to occur, on the other hand, is found to be significantly and positively associated to financial leverage, indicating that highly levered manufacturing firms tend to revalue their assets, may be with the expectation of creating possibilities for additional borrowing. Further, no other variables investigated associate with the probability for a revaluation to occur, though prior researches support such association. Findings reveal that fixed assets revaluation motives may be characterized by the nature of fixed assets and their market dynamics characterized by the nature of economy in which firms operate. Findings also suggest that fair value accounting is relevant to manufacturers with high levels of land and building within their asset structure. Fixed assets revaluation motives may differ across countries which should accordingly be valued by financial analyst and investors. Future research should focus on value relevance of revaluation decision of firms in developing countries. Revaluation decisions should be analysed as first-time revaluation and frequency of subsequent revaluations. This is the first study in Sri Lanka reporting the evidence for fixed asset revaluation motives.

Download Full-text

Investigation on the Value Relevance of Integrated Reporting and Organizational Capital: Evidence From Sri Lanka

International Journal of Financial Research ◽

10.5430/ijfr.v11n6p372 ◽

2020 ◽

Vol 11 (6) ◽

pp. 372

Author(s):

Athambawa Haleem ◽

Samsudeen Thowfeek Ahamed ◽

Wewaldeniyage Shanika Lakmali Kumarasing

Keyword(s):

Positive Impact ◽

Value Relevance ◽

Stock Exchange ◽

Market Value ◽

Analysis Data ◽

Future Research ◽

Organizational Capital ◽

Integrated Reporting ◽

Return On Equity ◽

Corporate Reporting

Integrated reporting is a developing reporting aspect in order to assess problems relating to corporate reporting. It provides a comprehensive account of organizational worth. This paper aims to assess whether integrated reporting and organizational capital increase the value relevance of firms. A checklist containing 100 integrated reports of banks which are listed in Colombo stock exchange were used for the analysis. Data were collected over the period from 2010 to 2019. Statistical analysis was done using the EWIS. Finding reveals that the book value of equity, earnings before interest and taxation of the equity of the bank, leverage of the bank and Organizational capital have a direct effect on the market value of equity of the bank while return on equity and size does not have a positive impact on the market value of equity of the bank. And to the best of our knowledge, it reveals that there is a significant effect of integrated reporting on the value relevance of organizations. Future research avenues were identified and the suggestions for future research on integrated reporting were provided. The findings bring out different implications for managers, decision-makers and the research community as well. This study further expands the existing knowledge on integrated reporting and sets the foundation for future researchers.

Download Full-text

RELEVANSI NILAI REVALUASI ASET TETAP DENGAN TINGKAT UTANG SEBAGAI VARIABEL MODERASI

JURNAL AKUNTANSI DAN AUDITING ◽

10.14710/jaa.v14i1.18220 ◽

2018 ◽

Vol 14 (1) ◽

pp. 1

Author(s):

Fransisca Ayudya Aryani ◽

Agung Juliarto

Keyword(s):

Value Relevance ◽

Stock Exchange ◽

Fair Value ◽

Future Prospects ◽

Fixed Asset ◽

Debt Contracting ◽

Financial Condition ◽

A Value ◽

Fixed Assets ◽

Debt Levels

This study aims to analyze the value relevance of fixed asset revaluation and whether debt levels moderate value relevance of fixed asset revaluation. Signaling theory states that the company revalues its assets with the aim to provide credible signals about favorable future prospects; whereas debt contracting theory suggests that firms with high debt levels have opportunistic motives in doing the revaluation of fixed. This study uses 54 data of nonfinancial companies listed on the Indonesian Stock Exchange and have revalued its fixed assets in the period 2012-2015. The results shows that the revaluation of fixed asset has a value relevance, and leverage moderates this value relevance. Companies are trying to show the fair value of assets and an overview of the actual company's financial condition by revaluing their assets. However, when the company revalued its assets and has a fairly high leverage, investor respons negatively on revaluation conducted. Investors perceive that it is an opportunistic motives of managers to avoid the costs arising from the loan agreement.

Download Full-text

RELEVANSI NILAI REVALUASI ASET TETAP DENGAN TINGKAT UTANG SEBAGAI VARIABEL MODERASI

JURNAL AKUNTANSI DAN AUDITING ◽

10.14710/jaa.14.1.1-21 ◽

2018 ◽

Vol 14 (1) ◽

pp. 1

Author(s):

Fransisca Ayudya Aryani ◽

Agung Juliarto

Keyword(s):

Value Relevance ◽

Stock Exchange ◽

Fair Value ◽

Future Prospects ◽

Fixed Asset ◽

Debt Contracting ◽

Financial Condition ◽

A Value ◽

Fixed Assets ◽

Debt Levels

Download Full-text

ANALISIS KEPUTUSAN PENDANAAN TERHADAP STRUKTUR MODAL MELALUI TRADE OFF THEORY

JURNAL ILMIAH AKUNTANSI UNIVERSITAS PAMULANG ◽

10.32493/jiaup.v8i2.4779 ◽

2020 ◽

Vol 8 (2) ◽

pp. 143

Author(s):

Nana Umdiana ◽

Dyah Lupita Sari

Keyword(s):

Real Estate ◽

Stock Exchange ◽

Sample Selection ◽

Secondary Data ◽

Annual Reports ◽

Financial Reports ◽

Trade Off ◽

Return On Equity ◽

Fixed Assets ◽

Equity Ratio

This study aims to analyze funding decisions on capital structure through trade off theory in property and real estate companies listed on the Indonesia Stock Exchange for the period 2015-2018. Profitability is measured using the return on equity ratio, asset structure is measured by fixed assets ratio and funding decisions are measured by debt. to equity ratio. The population of this research is property and real estate companies listed on the Indonesia Stock Exchange for the period 2015-2018. The data analyzed is secondary data in financial reports or annual reports. The sample selection used purposive sampling method and the sample obtained in this study were 40 data from 10 companies. In this research, the analytical method used is descriptive statistics, classical assumption test, multiple regression analysis and statistical test. The results of the analysis in this study indicate that there is no effect of profitability on funding decisions, there is an effect of asset structure on funding decisions. This shows that the asset structure influences the company's decision making in funding.

Download Full-text

Free cash flow, investment inefficiency, and earnings management: evidence from manufacturing firms listed on the Indonesia Stock Exchange

Investment Management and Financial Innovations ◽

10.21511/imfi.15(1).2018.25 ◽

2018 ◽

Vol 15 (1) ◽

pp. 299-310 ◽

Cited By ~ 1

Author(s):

Zaki Fakhroni ◽

Imam Ghozali ◽

Puji Harto ◽

Etna Nur Afri Yuyetta

Keyword(s):

Earnings Management ◽

Cash Flow ◽

Structural Equation ◽

Stock Exchange ◽

Manufacturing Firms ◽

Free Cash Flow ◽

Path Model ◽

Equation Modeling ◽

Fixed Assets ◽

The Relationship

The study aims to test investment inefficiency of fixed assets in mediating the relationship between free cash flow and earnings management and to test the controlling shareholders in moderating the relationship between free cash flow and fixed assets investment inefficiency. The research problem proposed in this study is whether the use of free cash flow for the investment inefficiency of fixed assets is able to ultimately improve the managerial performance. This research investigates new empirical evidence related to management earnings practices caused by free cash flow fixed assets investment inefficiency. The study was conducted on all the manufacturing firms listed on the Indonesia stock exchange from 2010 to 2015. The data used are secondary data in the form of the firms’ financial statements. Using purposive sampling, 314 units were analyzed from 69 manufacturing firms. The estimation of the path model was completed using Structural Equation Modeling (SEM) by WarpPLS program version 5.0. The results showed that free cash flow is positively related to earnings management. Fixed assets investment inefficiency is able to mediate the relationship between free cash flow and earnings management.

Download Full-text

Value Relevance of DuPont Identity

International Journal of Accounting and Financial Reporting ◽

10.5296/ijafr.v7i2.11980 ◽

2017 ◽

Vol 7 (2) ◽

pp. 48

Author(s):

Pradeep Kumar Gupta

Keyword(s):

Stock Returns ◽

Value Relevance ◽

Stock Exchange ◽

Accounting Information ◽

Empirical Support ◽

Operating Efficiency ◽

Valuation Theory ◽

Financial Leverage ◽

Return On Equity ◽

Use Efficiency

This study provides an empirical support to the relevance of very prevalent and well-established almost a century ago the DuPont Identity in the context of India, one of big 10 emerging markets (Garten, 1997). The DuPont Identity, a familiar form of financial statement analysis (Soliman, 2008) for use in equity valuation (Nissim and Penman, 2001), decomposes the return on equity (ROE) into three multiplicative components: net profit margin (operating efficiency), assets turnover ratio (asset use efficiency) and equity multiplier (financial leverage). The present study is based on the valuation theory which considers the viewpoint of equity investors to empirical investigate the value relevance of accounting information (Beisland, 2009). In this study, value relevance of three measures of accounting information used in the DuPont Identity is investigated for 228 manufacturing firms listed in National Stock Exchange (NSE) of India over a period of ten years from 2006-07 to 2015-2016. The findings indicate that the firms should focus on asset use efficiency and financial leverage components of DuPont Identity since a statistically significant impact of these two components on the stock returns is found. The strategic use of asset efficiency and financial leverage inevitably ensures the operating efficiency of the firms. This empirical investigation is an addition to the value relevance literature with an important insight to the firms and the participants of stock market about the usefulness of DuPont Identity in the context of India.

Download Full-text

Relative value relevance of historical cost vs. fair value: Evidence from bank holding companies

Journal of Accounting and Public Policy ◽

10.1016/s0278-4254(02)00084-4 ◽

2003 ◽

Vol 22 (1) ◽

pp. 19-42 ◽

Cited By ~ 65

Author(s):

Inder K Khurana ◽

Myung-Sun Kim

Keyword(s):

Value Relevance ◽

Fair Value ◽

Bank Holding Companies ◽

Holding Companies ◽

Historical Cost ◽

Relative Value

Download Full-text

Pengaruh Return on Equity, Debt to Equity Ratio, Fixed Asset Turnover, Price to Book Value dan Interest Rate terhadap Price Earning Ratio pada Perusahaan Property & Real Estate di Bursa Efek Indonesia

Jurnal Riset Akuntansi & Perpajakan (JRAP) ◽

10.35838/jrap.v1i02.78 ◽

2014 ◽

Vol 1 (02) ◽

pp. 200-210

Author(s):

Agung Setiyawan ◽

Oman Rusmana

Keyword(s):

Interest Rate ◽

Real Estate ◽

Significant Influence ◽

Stock Exchange ◽

Jel Classification ◽

Return On Equity ◽

Book Value ◽

Fixed Assets ◽

Asset Turnover ◽

Equity Ratio

ABSTRACT This study is aimed to examine the influence return on equity (ROE), debt to equity ratio (DER), fixed assets turnover (FATO), price to book value (PBV) and interest rate (IR) towards price earning ratio (per). Population of this study are Property & Real Estate companies which had go public in Indonesia Stock Exchange (IDX) during the period of 2008-2012.This research take 11 samples of 52 Property & Real Estate companies listed in IDX during the period of 2008-2012. This research concluded that the price to book value (PBV) and interest rate (IR) have significant influence towards the price earning ratio (PER). Meanwhile, other variables partially have no significant influence towards the price earning ratio (PER). ABSTRAK Penelitian ini dilakukan untuk menguji pengaruh return on equity (ROE), debt to equity ratio (DER), fixed assets turnover (FATO), price to book value (PBV) dan interest rate (IR) terhadap Price Earning Ratio (PER). Populasi penelitian adalah perusahaan-perusahaan Property & Real Estate yang terdaftar di Bursa Efek Indonesia (BEI) selama periode 2008-2012. Penelitian ini mengambil jumlah sampel sebanyak 14 perusahaan dari 52 perusahaan Property & Real Estate yang terdaftar di BEI selama periode 2008-2012. Hasil penelitian menunjukkan bahwa variabel Price to Book Value (PBV) dan Interest Rate (IR) secara parsial berpengaruh signifikan terhadap Price Earning Ratio (PER). Sedangkan Return on Equity (ROE), Debt to Equity Ratio (DER) dan Fixed Assets Turnover (FATO) tidak berpengaruh signifikan terhadap Price Earning Ratio (PER). JEL Classification: G14, G30

Download Full-text

THE EFFECT OF FAIR VALUE IMPLEMENTATION ON CASH FLOW FORECASTING (CASE STUDY: BANKING COMPANY LISTED IN INDONESIAN STOCK EXCHANGE YEAR 2014-2015)

AKUNTABILITAS ◽

10.29259/ja.v11i1.8929 ◽

2019 ◽

Vol 11 (1) ◽

pp. 59-70

Author(s):

Riesa Morita Yuliasari ◽

Mukhtaruddin Mukhtaruddin ◽

Tertiarto Wahyudi

Keyword(s):

Cash Flow ◽

Quantitative Research ◽

Stock Exchange ◽

Secondary Data ◽

Sampling Technique ◽

Fair Value ◽

Financial Statement ◽

Historical Cost ◽

Cash Flow Forecasting

This study has one main objectives; to investigate about the significant effect of fair value implementation in forecasting cash flow on Banking Company in Indonesia. The methodology used in this research is quantitative research, so the data are collected from secondary data by using purposive sampling technique of Banking Company’s Financial Statement uploaded in Indonesian Stock Exchange which related to this research. The number of sample in this research are 36 financial statement of Banking Company in Indonesia for year 2014 and 2015 consist of 18 financial statement that implement fair value and 18 financial statement that still implement historical cost. The results of this study show that the implementation of fair value does significantly influence cash flow forecasting of Banking Company in Indonesia.

Download Full-text

An Analysis Of Factors Impacting The Value-Relevance Of SFAS No. 107 Fair Value Disclosures

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v1i4.2995 ◽

2011 ◽

Vol 1 (4) ◽

Author(s):

Daniel R. Brickner

Keyword(s):

Value Relevance ◽

Fair Value ◽

Relative Magnitude ◽

Financial Statement ◽

Font Size ◽

Historical Cost ◽

Financial Condition ◽

The Difference

This study examines the impact of hypothesized factors on the value-relevance of SFAS No. 107 fair value disclosures.  These factors include firm size, the relative magnitude of the difference between the fair value and the historical cost measurements for each financial instrument, firm financial condition, and the quality of a firm’s financial statement audit.  A pooled valuation model is employed on the sample of 867 firm years for banks and bank holding companies during the period of 1996 and 1997.   The results indicate that the SFAS No. 107 fair value disclosures for investment securities, net loans, and long-term debt are value-relevant in explaining the market value of common equity for the sample banks.  With respect to the hypothesized factors, firm size was found to have a statistically significant impact on the value-relevance of the disclosures for net loans and long-term debt.  Additionally, the relative magnitude of the difference between the fair value and historical cost had a statistically significant effect on the value-relevance of the disclosure for investment securities and long-term debt.  Finally, firm financial condition and the quality of a firm’s audit were found to have a statistically significant impact on the fair value disclosure for net loans.  The results of this study are descriptive of the behavior of financial statement users with respect to these fair value disclosures.  The implications of this study’s findings are useful for both accounting standard-setters and preparers of financial statements.  Taken together, these findings suggest that the market does not respond to the SFAS No. 107 fair value disclosures at their face value alone or without considering their context.  Specifically, it appears to look to other factors that may impact the relevance and/or reliability of these disclosures.

Download Full-text