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Motivation of investment real estate listed companies metering mode select

Author: TanJiangHui From: www.yourpaper.net Posted: 2010-03-21 14:17:23 Read:
[Abstract] "Accounting Standards for Business Enterprises No. 3 - investment property standards require subsequent measurement of investment property using the cost model can also be measured using the fair value model. In this paper, based on the analysis of the implementation of the subsequent measurement of investment real estate listed companies, through the analysis of listed companies on the choice of measurement model of investment real estate, the influencing factors of listed companies in the choice of accounting policies.
[Keywords] investment property measurement model of fair value accounting policy choices
In February 2006, China's Ministry of Finance released a new corporate accounting standards, investment property is separated from the fixed asset criteria. According to the provisions of the guidelines of the Accounting Standards for Business Enterprises No. 3 - investment real estate, investment real estate is to earn rentals or for capital appreciation or both hold real estate. Investment real estate in the subsequent measurement of the cost model and fair value model to choose.

First, investment real estate with the relevant provisions of the follow-up measurement mode

China "Accounting Standards for Business Enterprises No. 3 - Investment Property Code provides that enterprises should at the balance sheet date subsequent measurement of investment property using the cost model or the fair value model.
Cost model, the balance sheet date provision for depreciation (or amortization) of investment real estate, if impaired, the impairment provision.
In the fair value measurement model, not investment property is depreciated (or amortized), do not need to provision for impairment. However, in the case of real estate price changes should be based on the balance sheet date, the fair value of the investment property to adjust the carrying value. The difference between the original book value of the fair value of investment property are included in profit or loss, in order to adjust the current year profit. But must ensure that there is conclusive evidence that the fair value of the investment property can be continuously and reliably, and at the same time meet the following conditions: enterprise from the real estate market on the same or similar investment property location, there is an active real estate market; The real estate market prices and other relevant information, so as to make a reasonable estimate of the fair value of the investment property.
Under two different pricing model, the value of the real estate investment reflect distinct. In comparison, the fair value measurement model used closer to the market price, the value of the investment property, and therefore it is more fair and objectively reflect the market value of the point in time of the investment property statements, and more conducive to the statements read to understand the business assets owned status, and enhance the decision usefulness of accounting information. However, in the case of real estate price movements, taken to the fair value measurement related corporate profits will increase volatility. In our current market conditions, investment real property reflected continued to appreciate, no longer depreciated under the fair value model at the same time, these two factors will lead to the implementation of fair value measurement model in the coming years obtain a positive return, which showed aggressive accounting policies.
Second, the application of analysis of the the subsequent measurement mode of investment real estate listed companies

"Accounting Standards for Business Enterprises No. 3 - investment property guidelines clearly cost model and fair value model of investment property in the subsequent measurement of two alternative modes. Just introduced new standards and is widely predicted that many companies will tend to use the fair value model, but in the listed companies in the 2007 mid-term report shows, many hold property real estate company and a hot commercial real estate resources company with fair value for subsequent measurement of very few, most companies still decide to use the cost model.
Starting from January 22, 2008 in Shanghai and Shenzhen listed company announced its first Annual Report 2007, as of April 30, 2008, in addition to? Yan ST Weida (000603) and nine rounds of shares (600,180) two companies, Shanghai and Shenzhen total 1,570 listed companies (861 in the Shanghai stock market, Shenzhen 709) published the 2007 Annual Report, 1543 non-financial listed companies, 27 financial listed companies, 53 A H share listed companies . Investment real estate in 1570 listed companies, there are 630 listed companies, accounting for 40.13% in 1570. The vast majority of these companies on the investment property using the cost model, only 18 listed companies (2.86%) of the number of such business occupies the subsequent measurement of the fair value of investment property. The fair value of investment real estate, changes in the fair value of the net income of 2.279 billion yuan, net profit of 2.61% of the possession of such business 18 companies, accounting for 0.23% of the net profit of 1,570 listed companies.
According to the annual report of the 18 companies to disclose the fair value of investment property real estate appraisal price (10 listed companies), third-party investigation report (two listed companies), the proposed purchaser preliminary negotiations agreed price lower limit (a listed company) and with reference to the market price of the real estate of the same kind and condition (2 listed company). Three other listed companies did not disclose the specific method for determining the fair value of investment property.

Third, investment real estate listed companies subsequent measurement mode selection Motivation

1, China for investment property using the fair value policy restrictions
"Investment property" guidelines allow listed companies to the subsequent measurement of the fair value model for investment property using the cost model can also be used. But the guide also advocated using the cost model. Guidelines on the cost model without any conditions or restrictions, every investment real estate enterprises can use the method. And criteria guide clearly states: "Enterprises should generally use the cost model for subsequent measurement of investment property. Measured using the fair value model proposed qualification must ensure that there is conclusive evidence that the fair value of investment property can be continuously and reliably, and at the same time meet the following conditions: the location of the investment property with an active real estate market; companies can obtain the same or similar to the real estate market prices and other relevant information from the real estate market. In addition, provisions have adopted the fair value of investment property shall not change in accounting policy reversal cost model. The above provisions is based on China's national conditions, a listed company in deciding whether to adopt the fair value of investment property measured very cautious, unless there is sufficient market environment and technical support, otherwise they would not rush to adopt the fair value model, in order to avoid The fair value of the use of real estate enterprises have investment potential adverse consequences. 2, the management of the listed company earnings management motivation
If a listed company with a fair value measurement conditions, using the cost model or the use of fair value measurement are two options for the company's management will face. Starting from the point of view of earnings management, management will tend to choose using the cost model. Consider cost model, when the investment property is sold, the income can once and for all into the current profits; the same time, investment real estate is depreciated, sold all previously accrued depreciation transformed for the sale of the current profit can achieve the adjustment of profits in different periods.
3, the tax effects of motivation
In deciding whether to adopt the fair value measurement, the company must consider the impact of the corporate tax. If the fair value measurement of investment real estate will be no provision for depreciation or amortization, tax no clear whether this part of the depreciation tax deduction of investment real estate, you may lose the "tax shield effect. In addition, the Income Tax Ordinance is not clear whether the payment of income tax on fair value gains. If the fair value of the listed companies net income subject to income tax, tax expenditures will increase, reducing net profit. 18 listed companies of investment property fair value movements in net income of 2.279 billion yuan in 2007, calculated to be paid one hundred million yuan 5.6975 income tax rate of 25%, an average of 0.3165 billion in tax revenue each listed company is required to pay. This is undoubtedly no small amount of spending, a lack of cash flow and changes in fair value increase of income support. If listed companies in the fair value of the net income subject to income tax, the tax expenditures will increase, reducing net profit, and a lack of cash flow and changes in fair value increase of income support. If you do not pay the same tax burden on listed companies, but it seems that the suspect walking a fine line. Pay and do not pay the dilemma, the listed company may take a prudent financial policy to maintain the original cost model, to be related to tax policy clearly before making decisions.
4, the conditions of fair value
Using the fair value model should meet two conditions: First investment property location, active in the real estate market; enterprises obtain the same or similar to the real estate market price information from an active real estate market, which make a reasonable estimate of the fair value of the investment property. The above conditions are very strict, because to explain what is an active market, similar to the environment, use, recency real estate transactions. To obtain this information not only difficult and costly, which limits listed companies to adopt the fair value model in practice. In contrast, the traditional cost model, direct access to information, convenience, low cost. In comparison, the listed companies of course, more willing to adopt the cost model. In addition, even if the fair value method, the determination of the amount will become the problem of the listed companies. Whether it is a method for determining the fair value of the provisions, the FASB Financial Accounting Standards No. 157 - Fair Value Measurements "build" fair value hierarchy ", in essence is the same. That is, the fair value of the acquisition, the preferred active open market offer, open market quote is not easy to obtain in the current market conditions, the determination of fair value is often through professional assessment of those valuation. From the 15 of the fair value of the Company as disclosed method for determining the fair value of term, 10 of them with the price of real estate appraisal, accounting for 66.67% of the sample. Shows that, in the determination of fair value, practitioners or tend to the help of an independent third party assessment of the real estate price. But the problem is that China has real estate assessment qualified property appraisers, real estate appraisers and land appraisers, they were part of the Ministry of Finance, the Ministry of Construction and the Ministry of Land and Resources Management. Sometimes the basis of their assessment rules during the real estate valuation, the fair value of investment real estate is difficult to guarantee. Practice from the Western point of view, due to the emergence and development of the "fair value accounting" the asset evaluation with the company's accounting, Certified Public Accountant cooperation continue to strengthen. Asset assessment only able to solve the problem, the market is not fully the case, how fair value is recognized also provide strong technical support to the fair value measurement objective real. But, our assessment community to improve the transparency and quality of work, construction, and improve the high standards of practice guidelines needs to be done a lot of work, does not have the conditions to support the comprehensive application of fair value.
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