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Paper eres2009_205:
Need for Disclosure Regarding Property Valuations in Financial Reports According to IFRS

id eres2009_205
authors Nordlund, Bo
year 2009
title Need for Disclosure Regarding Property Valuations in Financial Reports According to IFRS
source 16th Annual European Real Estate Society Conference in Stockholm, Sweden
summary Applying a historical cost accounting (HCA) concept in property companies led on many occasions to a situation where everyone knew that the figures in balance sheets and income statements were wrong from a market perspective, but the analysts knew how the figures had arisen. Applying a fair value accounting (FVA) concept has led to a situation, on many occasions, where almost everyone believes that the figures in balance sheets and income statements accurately and fairly reflect reality, whereas few have sufficient knowledge how these figures have arisen. Appraisal of property is a complex issue. An important conclusion from the research reported in this paper is that disclosure regarding applied methods, significant assumptions in property valuations and statements about the connections between appraised values and market evidence needs refinement in financial reports, according to International Financial Reporting Standards (IFRS). As the uncertainty in property valuations cannot be removed, it has to be managed. Providing explicit disclosure about valuations is one important way to manage this issue by reducing the gap of information asymmetry between those who perform valuations and those who are users of financial statements. Providing high quality disclosure on these issues would make analysis and the application of individual judgement by users of financial reports far easier. Findings reported in this paper implies that many companies have not so far found the right balance between cost and benefits regarding what amount of disclosure would be appropriate on this issue in financial reports.
keywords Disclosure, IAS 40, Fair value model, Property valuation
series ERES:conference
email bo.nordlund@abe.kth.se
content file.ppt (416,256 bytes)
discussion No discussions. Post discussion ...
ratings
session Valuation
last changed 2009/09/16 16:22
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