The reliability of investment property fair value estimates

The reliability of investment property fair value estimates We investigate the reliability of mandatory annual fair value estimates for UK investment property. We find that appraisal estimates understate actual selling prices and are considerably less biased and more accurate measures of selling price than respective historical costs. Investigations of managerial discretion over fair value reporting reveal that managers select among permissible accounting methods to report higher earnings, time asset sales to smooth reported earnings changes, smooth reported net asset changes and boost fair values prior to raising new debt. Finally, we find that the reliability of appraisal estimates increases when monitored by external appraisers and Big 6 auditors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

The reliability of investment property fair value estimates

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Publisher
Elsevier
Copyright
Copyright © 2001 Elsevier Science B.V.
ISSN
0165-4101
D.O.I.
10.1016/S0165-4101(01)00002-7
Publisher site
See Article on Publisher Site

Abstract

We investigate the reliability of mandatory annual fair value estimates for UK investment property. We find that appraisal estimates understate actual selling prices and are considerably less biased and more accurate measures of selling price than respective historical costs. Investigations of managerial discretion over fair value reporting reveal that managers select among permissible accounting methods to report higher earnings, time asset sales to smooth reported earnings changes, smooth reported net asset changes and boost fair values prior to raising new debt. Finally, we find that the reliability of appraisal estimates increases when monitored by external appraisers and Big 6 auditors.

Journal

Journal of Accounting and EconomicsElsevier

Published: Oct 1, 2000

References

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