Disclosure Requirements related to Investment Property
Abstract: Background and problem: The IFRS/IAS standards resulted in changes of requiredinformation from quoted companies. The standard IAS 40 implicated a possibility ofvaluing investment property at fair value, which has contributed to new disclosurerequirements connected to the fair value model. We found it interesting to examine thereal estate companies’ fulfilment of the new disclosure requirements and the resourcesneeded to fulfil the requirements. The users’ opinion about disclosed information wasconsidered interesting to examine and whether the information emanating from the newdisclosure requirements ameliorated the users’ possibility to valuate investment property.Purpose: The thesis should describe and analyze the disclosed information regardinginvestment property provided by the real estate industry. To be able to fulfil the mainpurpose the study will examine the fulfilment of the disclosure requirements, describeresources demanded to meet the increased demand of information and examine if thedisclosed information by the real estate companies corresponds to the users’ needs.Method: The study has a combined quantitative and qualitative approach. Secondary datasources consisted of the annual reports from the 15 real estate companies quoted on OMXNordic Exchange Stockholm holding investment property. Primary data consisted of sixinterviews representing real estate companies, banks and analysts.Results and conclusions: The fulfilment of the disclosure requirements varies. Thebalancing of carrying amounts is an area where the companies are proficient in disclosingessential information. The examination has also found four areas where shortages couldbe distinguished: (1) the criteria to separate investment property, (2) specification ofdirect costs contributed or not to rentals, (3) variables used in the valuation model and (4)disclosing essential risks and uncertainties. The resources needed to meet the increaseddemand for information have increased and the study has found the solutions beingreallocation, rationalization and consulting external experts. The users are mainlysatisfied with the disclosed information but would like more information related to thevaluation of investment property and project property. Sensitivity analysis is a toolenabling a quick overview of the company’s influencing factors but a standardisation ofthe parameters would be preferable.Recommendations for future research: Three areas where demands for future researchhave been distinguished are: What expenditures related to investment property should becapitalized? How should an appropriate formation of tax on investment property beformulated? Should sensitivity analyses be required and is a standardisation feasible?
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