Værdiansættelse af investeringsejendomme i et illikvidt marked: Herunder fokus på investors informationsbehov

Christina Refstrup & Alex Blicher Hansen

Student thesis: Diploma thesis


Up until 2007 the real estate market, especially investment properties, where subject to excessive price adjustments. However, the world economy was hit by a recession which has had, and still have, a big influence on the valuation of investment properties. The financial crisis has had a large impact on the annual reports for property investment companies, since investment properties can be measured at fair value. The fair value is based either on market prices or models that uses market indicators for calculating the value. Effectively, valuating the favorability of investments in property investment companies is becoming increasingly difficult. The thesis of this assignment is to emphasize what requirements there is to the annual report in relation to recognition of investment properties, and to what extent these fulfill investors’ information needs. The starting point of this assignment is the definition of the true and fair view, with a description of the immense impact of the annual report on society and companies through the influence on key decision makers’ i.e. share- and stakeholders. This part is followed up by a review of the accounting policies in relation to ÅRL and IFRS. Concluding on the review, it is our assessment that there are no major differences between ÅRL and IFRS in relation to investment properties. It is under IAS 40 allowed to either use a fair value or a cost (less depreciation) method. Normal praxis for property investment companies are the usage of the fair value model, the advantage of using this method is that it makes it transparent for the investor which is then able to compare with other property investment companies. The challenge with using fair value is its reliability since it is based on estimates (future assumptions), and in a market in recession it is therefore even harder to reliably estimate the fair value. Expecting companies to increase the amount of information on the assumptions used for the valuation will therefore be expected from investors to increase the transparency. However, IAS 40 states that if the requirements are strictly applied in this accounting policy, the information needed evaluating the true and fair view for the stakeholder (investor) will be met. The assignment also covers a review of the annual report for Tower Group A/S for the period ending 30/06-2009, in relation to the methods used in evaluating the fair value, a probability calculation of the recognized value and whether the stakeholder’s information needs have been fulfilled.

EducationsGraduate Diploma in Accounting and Financial Management, (Diploma Programme) Final Thesis
Publication date2011
Number of pages93