Revaluation Model Research Articles

Analysis of the Impact of PP&E Two Subsequent Measurement Models on Enterprise Financial Reporting and Financial Performance

Abstract: Measurement based on PP&E has been controversial in accounting in recent years. This paper analyzes the contributions and risks of two subsequent measurement models of PP&E to the financial reporting and performance of enterprises. It also explores the relationship between the two models. This study aims to provide a reference for companies in the selection of subsequent measurement model of PP&E. According to previous research, the cost model provides more timely and understandable information for financial reporting and reduces the cost of preparing reports. It also improves the objectivity and verifiability of financial performance. However, the cost model may not show the true value of a company's PP&E. The revaluation model provides more relevant information for financial reporting and reduces information asymmetry. It also positively affects the company's future financial performance. However, revaluation models are highly subjective, susceptible to bias manipulation, and can lead to misleading information due to value reversal. The relationship between the two models can be explained as a slow evolution from the cost model to the revaluation model, but not a complete replacement.

ACCOUNTING IN UZBEKISTAN BASED ON INTERNATIONAL FINANCIAL REPORTING STANDARDS (as exemplified by intangible assets)

The article is devoted to the consideration of the problems arising in the process of globalization and experienced in adjusting the National Accounting Standards (NAS) in Uzbekistan, including the standard related to intangible assets, in compliance with the International Financial Reporting Standards (IFRS), as well as the solutions proposed thereof. Herewith the author proposes the recommendations worked out for recognition of intangible assets, assessment of book value, the method of calculating amortization, revaluation model, the order of disclosure of information on intangible assets in the financial statements in accordance with international standards (IFRS 38). Moreover, there some considerations on the revaluation model of intangible assets to assess their impact on initial value, amortization, long-term and total assets.

Property, Plant and Equipment Measurement and Financial Reporting Quality of Manufacturing Firms in Nigeria

The quality of financial information in Nigeria regarding property, plant and equipment, particularly in the manufacturing sector, remains a significant concern. In view of this, this present study examined the relationship between property, plant and equipment measurement and financial reporting quality of manufacturing firms in Nigeria. The specific objectives were to ascertain the effect of PPE measurement using cost model on faithful representation of financial information of manufacturing firms in Nigeria and to assess the effect of PPE measurement using revaluation model on faithful representation of financial information of manufacturing firms in Nigeria. This study adopted a survey research design with data collected through the administration of a five-point Likert Scale questionnaire to a sample of 360accounting staff across selected manufacturing firms in Nigeria. The data collected were analyzed using descriptive statistics tools and Pearson product moment correlation analysis via SPSS 25.0 statistical package. The study findings revealed that PPE measurement using cost model has an insignificant positive relationship (r= 0.039{p=0.468>0.05}) with faithful representation of financial information of manufacturing firms in Nigeria while PPE measurement using revaluation model has a significant positive relationship (r= 0.733{p=0.000<0.05}) with faithful representation of financial information of manufacturing firms in Nigeria. It was thus concluded that the use of the revaluation model for PPE measurement leads to more accurate and reliable financial information, which enhances the credibility of financial statements and increase stakeholder trust. The study recommended, amongst others, that regulatory bodies in Nigeria should consider mandating the use of the revaluation model for PPE measurement in financial reporting to enhance the credibility of financial information at all times.

Evaluation of fixed assets of electric power enterprises-operators of the distribution system under the conditions of the post-war reconstruction of Ukraine

The article is devoted to the assessment of the fixed assets of electric power companies-operators of the distribution system under the conditions of the post-war reconstruction of Ukraine. Attention is focused on areas of criticism of the concept of historical costs. Considerable attention has been paid to the advantages and disadvantages of the approaches of researchers to fair value asset valuations and cost asset valuations. The advantages and disadvantages of using fair value when making management decisions are highlighted. The sectoral features of the assessment were considered for the purpose of forming investment projects in the renewal of fixed assets of electric power enterprises-operators of the distribution system and the development of the distribution system. The majority of electric power enterprises-operators of the distribution system choose a revaluation model for classes of fixed assets and carry out revaluations of fixed assets. The algorithm for determining the asset valuation base with the aim of transitioning to stimulating regulation (RAB-regulation) was studied. It was found that the basis of asset valuation can be the market value or the residual value of replacement (reproduction). The expediency of applying the concept of asset impairment assessment in electric power enterprises-operators of the distribution system has been established. A method of testing for the reduction of utility of fixed assets of electric power companies-operators of the distribution system is proposed, with the help of which internal users will make decisions regarding their further safe operation and the need to find sources of investment in the restoration of distribution networks.

Penerapan Psak No.16 Atas Aset Tetap Dan Hubungan Dengan Perhitungan Laba Pada Pt Garuda Indonesia.Tbk

In service industries, trading companies and manufacturing industries, fixed assets are used in business activities. Every decision regarding the use of fixed assets affects the survival and development of a company. This not only considers the profits generated by a company, but also the important role of fixed assets in achieving company goals. Therefore, PSAK No.16 must be applied. Based on the data described above, the aim of this research is to confirm the application of PSAK no. 16 which is used to calculate the profits of the company PT. Garuda Indonesia Airlines. As a research method, we use descriptive analysis methods to understand existing facts and compare them with existing theories. To obtain the necessary data, the author uses data collection techniques such as documentation. The type of data used by the author is secondary data. From the research analysis, the author can conclude that the company has implemented fixed assets in accordance with PSAK No.16 (revised 2007). Companies use two methods to value fixed assets: the historical cost method and the revaluation model. The use of these two methods can affect the growth of fixed assets.

Determining the Appropriate Accounting Treatment of Cryptocurrencies Based on Accounting Theory

The International Financial Reporting Standards (IFRS) do not make explicit provisions, in terms of a specifically dedicated standard, for the accounting treatment of cryptocurrencies. This creates uncertainty, and guidance is therefore required in terms of accounting for such investments. Accounting theory has the potential to provide the foundation for this guidance. This study aimed to determine the most appropriate accounting treatment for cryptocurrencies based on the International Accounting Standards Board’s (IASB) Conceptual Framework for Financial Reporting (as a form of accounting theory) that results in decision-useful information. The research further investigated the proposed accounting treatment in terms of IFRS and sought to determine whether this treatment was aligned with the IASB’s conceptual framework. This qualitative study conducted a non-empirical interpretative analysis of the literature (focusing specifically on accounting theory) to address the research aim. The conceptual framework indicated that the most appropriate way to account for cryptocurrencies was to recognise an asset at fair value. This accounting treatment aligns with accounting for assets under International Accounting Standard (IAS) 2 commodities held by broker-traders and the IAS 38 revaluation model. Addressing the problem of accounting for cryptocurrencies with reference to accounting theory makes this study novel. The guidance provided could reduce uncertainty among entities holding investments in cryptocurrencies and could increase the decision-usefulness of financial information.

PERAN KOMITE AUDIT DALAM HUBUNGAN ANTARA METODE NILAI WAJAR DENGAN BIAYA AUDIT: STUDI KASUS DI ASEAN

This research discusses the impact of the fair value method on fixed assets, audit fees, and audit committees in ASEAN. The samples of the research are 277 manufacturing companies listed in the Indonesia Stock Exchange, Malaysia Stock Exchange, Singapore Stock Exchange, Philippine Stock Exchange, and Thailand Stock Exchange from 2014 to 2016. The results of the study found that companies that use the fair value method through a revaluation model to measure their fixed assets have higher audit fees than those that use the historical cost method. In addition, there is a moderation effect of audit committee competencies on the relation of fair value method to audit fee. The findings prove that the accounting and financial competencies of the audit committees reduce audit fees imposed on companies using the fair value method for fixed assets.

Conservatism and its determinants for Portuguese small and medium entities

In this study, we aim at analyzing whether Portuguese small and medium entities (SMEs) are accounting conservatively and what the determinants for conservatism are. While conservatism remains on accounting for a long time, both within the local accounting standards and IFRS firms may opt for a revaluation model to subsequently measure fixed assets. As the number of assets may be carried to higher values than firm becomes less conservative. Therefore, we propose that revaluations are a negative proxy for conservatism. We find that revaluations are not used in an often manner and they are higher for listed than for unlisted firms. Furthermore, our results suggest that debt and firm size are both positively associated with conservatism. Both associations are more significant for listed than non-listed firms. In addition, return on equity tends to increase conservatism, but only for the most indebted unlisted firms. These pieces of evidence are consistent with conservatism being a mechanism to regulate managers’ activity and to capture the confidence of stakeholders.

Accounting of fixed assets of enterprises and analysis of their value in the conditions of armed aggression

Introduction. The armed aggression of the russian federation lead to deterioration of the external environment in Ukraine. In particular, this was manifested in the form of interruptions and stoppages in business activities, damage and destruction of business assets, closure of transport routes and ports, disruptions in supply chains, reduced market demand and high inflation. The mentioned factors mainly had a negative impact on the financial condition and financial results of the enterprises, and, accordingly, on the value of the business and its assets. In the structure of assets, fixed assets were significantly affected: some were destroyed or damaged, some remained in temporarily occupied territories, and for the rest, expectations regarding generating economic benefits from the use of such objects worsened. New challenges caused by armed aggression actualize the revision of approaches and procedures to the accounting of fixed assets, as well as the appraisal and analysis of their value. The purpose of the study is to explore approaches to accounting for fixed assets and analysis of their value in the environment of armed aggression. In particular, the procedures for accounting for fixed assets in case of damage or destruction, property being in a temporarily occupied territory were analyzed, the accounting assessment of fixed assets was considered according to the cost model and the revaluation model, and the change in the value of fixed assets in the event of an impairment and revaluation of assets was also analyzed. Method (methodology). The theoretical and methodological basis of the study was made up of scientific research by Ukrainian and foreign scientists, methodology standards, practical comments, and recommendations of experts. A literature review indicates that the topic of the impact of armed aggression on the approach to the accounting of fixed assets of enterprises in Ukraine is not new, but not sufficiently studied. In the article, the methods of systematization and generalization were used when studying practical recommendations of experts, induction and deduction when studying the peculiarities of the accounting of fixed assets for various consequences of armed aggression (damage, destruction, location in the occupied territory), analysis and synthesis when studying the accounting models of fixed assets and analysis the value of objects according to these models in the environment of armed aggression. Results. According to the study, the authors came to the conclusion that the issue of identification and accounting of fixed assets located in the temporarily occupied territories is not fully resolved and is contrary to international accounting and financial reporting standards. In particular, the authors proposed possible solutions to this issue, such as assigning fixed assets in temporary occupation to separate groups of accounts or off-balance sheet accounts and ceasing deprecation of such assets. An important accounting consequence of armed aggression is the need to determine depreciation or revaluation of fixed assets, depending on the chosen accounting model. In the conditions of armed aggression, the implementation of such procedures is complicated by the need to update business plans, develop scenarios of cash flow forecast, incorporate additional risks of war in the discount rate.

EVIDENCE FROM SOUTH AFRICAN CONSTRUCTION AND INDUSTRIAL TRANSPORTATION BUSINESSES ON ASSET REVALUATION

This study examines the relationship between asset revaluation and accounting and economic factors among firms listed on the Johannesburg Stock Exchange (JSE). It employs a quantitative model using seven explanatory variables, namely, leverage, operating cash flow, firm size, return on equity, return on assets, Tobin’s q, and common share ownership. The study covers South African companies listed on the Johannesburg Stock Exchange (JSE) that applied asset revaluation at least once during the period 2006 to 2017. The findings of the study reveal that: (1) leverage does not have a significant impact on the revaluation decisions of the sampled firms, (2) macro-economic policy environment could significantly influence revaluation decisions, (3) the size of firms is one of the most important factors that have a significant effect on firm performance, (4) leverage has a significant impact on firm performance, while the other variables show a negative or inverse relationship with the revalued asset. The results of this study will fill a gap in understanding the variables identified by this research study which has justified with most relevant literature that motivates management of South African firms to choose the revaluation model to measure fixed assets. This study contributes to the current body of knowledge and further offers insight into the effect of the revaluation of fixed assets on firm performance, the characteristics of firms that revalue their fixed assets, and whether or not fixed asset revaluation decisions are influenced by the firm’s leverage. This study has also provided a very robust plan for future researchers.

PENGARUH LEVERAGE, UKURAN PERUSAHAAN, FIX ASSETS INTENSITY DAN INVESTMENT OPPORTUNITY TERHADAP NILAI PERUSAHAAN DENGAN REVALUASI ASET SEBAGAI VARIABLE MODERATING

The purposes of this research is to analyze the influence of leverage, fix asset intensity, investment opportunity and revaluation of fixed asset in Manufacturing Company Consumer Goods Sector in simultaneous and partial. Methods of analysis using moderated regression analysis. Population used is the Manufacturing Company Consumer Goods Sector 2012-2015. Purposive sampling is the technique that is used as a sampling technique with predetermined criteria the number of observations of 112 sampel. The results of this study is only partially the four variables are found to significantly affect the firm value, they are leverage, size, fix asset intensity and investment opportunity. As for revaluation of fixed assets proved to be not significantly affected. Simultaneously the results showed the fifth variable fit or match the data. Revaluation of fixed assets variable as a significant moderating effect was not proven. The findings of this study was that Revaluation of fixed assets variable as a significant moderating effect was not proven to leverage, size, fix asset intensity and investment opportunity. IAS 16 provides options for companies to apply cost or revaluation model.

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

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.

Leverage, Arus Kas Operasi, Ukuran Perusahaan, Intensitas Aset Tetap dan Revaluasi Aset Tetap

Since Indonesian accounting standards allow companies to choose between cost model and revaluation model on their fixed asset, there are still few companies that revalued their assets. This study examines what factors make banking companies choose to revaluate fixed asset, that are contracting factors (leverage, operating cash flow), political factors (firm size) and asymmetry information (intensity of fixed assets). By using logistic regression, the result of this study showed that firm size and fixed asset intensity had a positive effect on the company choice to revaluate fixed assets, while leverage had a negative effect on fixed asset revaluation. This study support early research with regard to contracting, political cost and asymmetry information. This study failed to find the effect of operating cash flow on fixed asset revaluation. Based on the results of this study, banks should consider leverage, company size and the intensity of fixed assets more than cash flow when choosing to revaluate fixed assets. Keywords: Leverage; Operating Cash Flow; Size Firm; Fixed Asset Intensity; Fixed Asset Revaluation

Revaluasi Aset Tetap pada Perusahaan Sektor Industri Manufaktur Di Indonesia

IFRS was formed which is expected to improve the quality of financial reporting and enchance comparability of financial information for decision making. Indonesia is one of the countries that adopted IFRS. One of the IFRS standard adopted by Indonesia is the fixed assets accounting standard as outlined in PSAK 16. PSAK 16 explains that the measurement of fixed assets can be done by choosing between cost models or revaluation models. This study is intended to provide development of fixed asset measurement models that tend to be used by the manufacturing companies in Indonesia along with the reasons underlying to apply the related fixed asset measurement model. This research is an analytical descriptive study conducted on manufacturing companies listed on the Indonesia Stock Exchange from 2015 until 2017. The result shows that most of the manufacturing companies in Indonesia still use the cost model in the measurement of fixed assets for financial reporting. Nonetheless, there are already several manufacturing companies that implement fixed asset revaluation models and the number has increased from year to year. With this in mind, the revaluation model for fixed assets is growing and the role of asset valuation services is felt to be increasingly needed.
 Keywords: Cost Model, Fixed Asset, IFRS, PSAK 16, and Revaluation Model

TIMING, RECURRENCE, AND EFFECTS OF FIXED ASSET REVALUATION: EVIDENCE FROM BANGLADESH

This study intended to explore when and how often fixed asset revaluation (FAR) is practiced in Bangladesh and explain the impacts of FAR on net asset value (NAV), stock prices, and debts of companies. Based on 175 listed companies on the Dhaka Stock Exchange, this study found increasing use of the revaluation model where the textile industry witnessed the highest number of revaluations. Most of the listed companies were irregular revaluer, and they performed FAR during the bull market in 2010. Most newly listed companies did it just before their initial public offerings (IPO). The results of the Wilcoxon signed-rank test imply that the changes in NAV, stock prices, and total debts after revaluation were statistically significant. This study found evidence of enhancing debt capacity and stock prices of several companies through improved NAV. The findings will assist regulators to recognize the consequence of revaluation and enable them to take an appropriate stance for controlling abusive and creative reporting. The study will also make investors cautious about companies with revaluation induced assets. This study suggests that companies practicing the revaluation model should perform FAR on regular intervals to reduce information asymmetry about assets’ value and thus help improve investors’ confidence. Keywords: Fair value accounting, IAS 16, PP&E, Bull-bear market, Information asymmetry, NAV JEL Classifications : G1, G11, M41, M48 DOI: https://doi.org/10.32479/ijefi.10828

On the revaluation of property, plant and equipment (ppe): motivations, value relevance, and effects on audit fees

This paper examines three important aspects of asset revaluations under International Financial Reporting Standards (IFRS). First, it seeks to identify characteristics of firms that choose to employ the revaluation model instead of the cost model while accounting for PP&E. Hypothesizing both opportunistic and efficiency motives, the paper finds that firms with high leverage are more likely to choose the revaluation model, thus confirming contracting cost reasons, analogous to opportunistic motivation. However, the political cost reason of opportunistic motivation does not appear to be significant. On the other hand, our findings support that efficiency motive is highly significant behind asset revaluations, proving that firms with financial slack or those having higher percentage of investment in PPE are highly likely to choose the revaluation model, while those with growth opportunities are not. Second, given the managers' motivations for choosing the revaluation model, we find, using Ohlson (1995) model, that investors do not consider asset revaluation to be value relevant, proving that investors might already be aware of managers' motivation behind the choice. Finally, the paper empirically tests the effects of the use of the revaluation model on audit fees and finds that the choice of the revaluation model leads to a significant increase in audit fees. This finding supports the hypothesis that the use of the revaluation model involves additional audit effort that merits higher audit fees.

Does the Company's Scale, Fixed Asset Intensity and Operating Cash Flow Affect Asset Revaluation?

Fixed assets that are measured using cost may have lost their relevance because they do not reflect the real situation. This study aims to analyze the factors that influence the company to revaluate its fixed assets. The sample of this study consisted of 426 manufacturing companies listed on the Indonesia Stock Exchange in the 2015-2018 time frame. The research sample was selected by purposive sampling. Technical analysis of the study used logistic regression. The results of this study found that only fixed asset intensity and operating cash flow affect the revaluation of fixed assets and the scale of the company does not affect the decision of the revaluation of fixed assets. The implication of the results of the study shows that large-scale companies do not always revaluate fixed assets because they can cause taxes on revaluations that must be borne by the company. In addition, the practical implications also show that the Indonesian government must increase the number of licensed appraisers to compensate for the increasing number of companies adopting revaluation models.

La comparabilidad de la información financiera en Colombia tras su convergencia con los IFRS. El caso de las propiedades, planta y equipo de las empresas cotizantes

El presente estudio tiene por objeto examinar el efecto de la implementación de los Estándares Internacionales de Información Financiera (IFRS, por sus siglas en inglés), en términos de la comparabilidad de la información financiera de las empresas que cotizan en la Bolsa de Valores de Colombia, entre el periodo previo (2011 y 2013) y el de aplicación de los estándares (2015 y 2017). Por lo tanto, se parte de una metodología en la que se analizan los estados financieros anuales de 65 de estas corporaciones, en lo referente a las políticas, los tratamientos contables y las revelaciones del rubro de propiedades, planta y equipo; de igual modo, se establecen índices de Herfindahl para calcular el grado de armonización material de estas prácticas. En la investigación se encuentra que, en el corto plazo, se ha generado un aumento relevante en la divulgación de la información financiera bajo IFRS; no obstante, aún se tiene bastante potencial de mejora en aspectos como la presentación de la medición posterior por el modelo de la revaluación, los métodos de depreciación y el deterioro de estos activos.

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

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.

Value Relevance of Asset Revaluation Disclosure

: Research aims : The paper aims to examine the value relevance of asset revaluation disclosure after seven years of implementation of international accounting standards (IAS). This paper highlights the implementation of SFAS 16 which is converged to IAS 16 regarding fixed assets. The SFAS 16 requires companies to disclose the value of fixed assets according to market values if the book value is significantly different from the market value. Design/Methodology/Approach : We analyze 46 non-financial companies that employ the revaluation model during 2012-2018. As benchmarks, we randomly collect 46 non-financial companies that d0 not revaluate their assets during the period. To investigate the value relevance of upward asset revaluation disclosure, we approximate the relationship between and the effect of upward asset revaluation disclosure and stock price by employing Ohlson modified model (1995). Research findings : We suggest that disclosure of upward asset revaluation is value-relevant. The SFAS 16 states that an upward asset revaluation increases the value of equity and assets. Furthermore, we suggest that the information of the book value of equity, net income, and earnings of asset revaluation firms is value-relevant. The results show that the information of the book value of equity and earnings are more value-relevant than upward asset revaluation disclosure and net income. Theoretical contribution/Originality : Our study contributes to filling the gap of previous results related to the value relevance of fair value disclosure of fixed assets. Practitioner/Policy implication : This research gives an input for financial accounting standards development in Indonesia, particularly regarding the issue of asset revaluation. Research limitation/Implication : Only 46 non-financial companies that employ the revaluation model during 2012-2018. Thus, our study has a small sample size