Relevant literature
| Authors | Year | Title | Focus | Main results and contribution |
|---|---|---|---|---|
| Quagli, A. and Avallone, F. | 2010 | Fair value or cost model? Drivers of choice for IAS 40 in the real estate industry | The authors analyze if the choice between cost or fair value for investment property under IAS 40 aims at (1) reducing agency costs (contractual efficiency reasons), (2) mitigating information asymmetries, (3) allowing managerial opportunism, typical motives defined by accounting choice theory. Real estate European companies | The authors find that all the rationales described by accounting choice theory (information asymmetry, contractual efficiency and managerial opportunism) drive the decision to adopt fair value |
| Christensen, H.B. and Nikolaev, V.V. | 2013 | Does fair value accounting for non-financial assets pass the market test? | The authors study valuation choices for non-financial asset groups: property, plant and equipment (PPE), investment property, and intangibles. UK and German companies, all industries | Regarding investment property the authors find that UK companies are more likely to switch to fair value whereas German companies are more likely to choose historical cost. In addition, German real estate firms are more likely to switch to fair value than German firms in other industries, while UK real estate firms are less likely to switch to historical cost than UK firms in other industries. Finally, companies relying on debt financing more heavily are more likely to commit to fair value accounting for investment property |
| Israeli, D. | 2015 | Recognition versus disclosure: evidence from fair value of investment property | The author examines firms' choices to recognize versus disclose fair values of investment properties, tests whether recognized and disclosed amounts are valued equally by investors, and determines whether these amounts exhibit equivalent associations with future financial outcomes. Real estate firms from four large EU economies; France, Germany, Italy, and Spain | The author finds that contractual and asset-pricing incentives help to explain the recognition versus disclosure choice, investors place smaller valuation weights on disclosed amounts, and recognized and disclosed amounts exhibit statistically equivalent associations with future financial outcomes |
| Isidro H., Nanda, D., Wysocki, P. | 2016 | Financial Reporting Differences Around the World: What Matters? | The international financial reporting literature identifies a multitude of country attributes (e.g. geographic features, legal institutions, religious affiliation, cultural development and economic outcomes) that each appear to explain financial reporting differences around the world. The authors aim at taking comprehensive look at the existing country-level attributes proposed in prior empirical studies in order to identify what truly determines or influences the quality of reported financial numbers across countries | The results show that the 4 latent factors identified in the study which capture the joint explanatory power of several specific country attributes for reporting outcomes around the world, collectively explain a substantial amount of the observed cross-country variation in financial reporting outcomes |
| Olante, M.E., Lassini, U. | 2022 | Investment property: Fair value or cost model? Recent evidence from the application of IAS 40 in Europe | The authors analyze if the choice between cost or fair value for investment property under IAS 40 is determined by several classes of reasons identified by accounting choice theory (i.e. contractual efficiency motives, information asymmetries, country factors and industry factors). European companies, all industries | The authors find that all the proposed classes of reasons identified by accounting choice theory help to explain the choice between fair value and cost |
| Authors | Year | Title | Focus | Main results and contribution |
|---|---|---|---|---|
| Quagli, A. and Avallone, F. | Fair value or cost model? Drivers of choice for IAS 40 in the real estate industry | The authors analyze if the choice between cost or fair value for investment property under IAS 40 aims at (1) reducing agency costs (contractual efficiency reasons), (2) mitigating information asymmetries, (3) allowing managerial opportunism, typical motives defined by accounting choice theory. Real estate European companies | The authors find that all the rationales described by accounting choice theory (information asymmetry, contractual efficiency and managerial opportunism) drive the decision to adopt fair value | |
| Christensen, H.B. and Nikolaev, V.V. | Does fair value accounting for non-financial assets pass the market test? | The authors study valuation choices for non-financial asset groups: property, plant and equipment (PPE), investment property, and intangibles. UK and German companies, all industries | Regarding investment property the authors find that UK companies are more likely to switch to fair value whereas German companies are more likely to choose historical cost. In addition, German real estate firms are more likely to switch to fair value than German firms in other industries, while UK real estate firms are less likely to switch to historical cost than UK firms in other industries. Finally, companies relying on debt financing more heavily are more likely to commit to fair value accounting for investment property | |
| Israeli, D. | Recognition versus disclosure: evidence from fair value of investment property | The author examines firms' choices to recognize versus disclose fair values of investment properties, tests whether recognized and disclosed amounts are valued equally by investors, and determines whether these amounts exhibit equivalent associations with future financial outcomes. Real estate firms from four large EU economies; France, Germany, Italy, and Spain | The author finds that contractual and asset-pricing incentives help to explain the recognition versus disclosure choice, investors place smaller valuation weights on disclosed amounts, and recognized and disclosed amounts exhibit statistically equivalent associations with future financial outcomes | |
| Isidro H., Nanda, D., Wysocki, P. | Financial Reporting Differences Around the World: What Matters? | The international financial reporting literature identifies a multitude of country attributes (e.g. geographic features, legal institutions, religious affiliation, cultural development and economic outcomes) that each appear to explain financial reporting differences around the world. The authors aim at taking comprehensive look at the existing country-level attributes proposed in prior empirical studies in order to identify what truly determines or influences the quality of reported financial numbers across countries | The results show that the 4 latent factors identified in the study which capture the joint explanatory power of several specific country attributes for reporting outcomes around the world, collectively explain a substantial amount of the observed cross-country variation in financial reporting outcomes | |
| Olante, M.E., Lassini, U. | Investment property: Fair value or cost model? Recent evidence from the application of IAS 40 in Europe | The authors analyze if the choice between cost or fair value for investment property under IAS 40 is determined by several classes of reasons identified by accounting choice theory (i.e. contractual efficiency motives, information asymmetries, country factors and industry factors). European companies, all industries | The authors find that all the proposed classes of reasons identified by accounting choice theory help to explain the choice between fair value and cost |