How GAAP and accounting treatments influence property management

Abstract

PurposeThe purpose of this study is to identify how different Generally Accepted Accounting Principles (GAAP) influence property management. The study is based on two basic accounting principles for the valuation of assets: fair value and historical cost. The study focuses on land and buildings as a main part of the total fixed assets of a company. It uses the framework of the Greek real estate market as an experimental setting where the principles of historic cost and fair value accounting can be compared.Design/methodology/approachThe topic is approached using an integration of fixed assets into four main portfolio categories: own used; investments; held for sale assets; and inventories. According to this framework the study examines the accounting treatments under International Financial Reporting Standards (IFRS), US GAAP and Greek GAAP for each portfolio transaction and analyses the impact of accounting entries to equity and profit and loss account.FindingsThe study results to a comparative analysis of the different studied GAAP and tries to establish a purchase price allocation method for property acquisition.Originality/valueThe contribution of this article is that it surveys principles, literature and practice about the above issues from a critical perspective, and presents a way to managing and monitoring real estate investments, using logical decision trees, from an accounting point of view.