Investment Properties at Fair Value: Information Value in the Financial Statements From a Users Perspective

Jesper Brøndahl

Student thesis: Master thesis


This thesis is written with the objective of an analysis of the usefulness of information regarding investment properties measured at fair value viewed from an accounting user´s perspective. The analysis is based statistics prepared on basis of a representative population of companies annual reports. The fact that annual reports are considered to be the most important source of information for investors and lenders raises questions to some of the changes made in the danish act to the annual accounts after the implementing the EU Accounting Directive, which aimed to reduce the administrative burden for certain companies. Critics argue that its correct there has to be a right balance between the administrative burden for companies under the proces of producing the annual report. But these critics also argue that in order to maintain the accounting users reliabilty to the annual report, there has to be more exact requirements regarding measurements at fair value where there are uncertainty associated with the recognition and measurement. If the right balance between the administrativ burden and information value not will be kept, one of the consequences may be, that accounting users will nevertheless require companies to obtain the information that is omitted in the annual reports. Which will mean that the administrative burden for the companies will be the same or even more as it was before the implementing of the EU accounting Direcitve. The uncertainty associated with fair value measurement increases the risk that the accounting user receives incorrect infromation as a basis for making financial decisions. The risk of misleading information can be reduced by formulating more concrete requirements to the information that has to be given in the annual reports when companies measure investment properties at fair value. Companies that hold investment properties and want to make further investments have often the need for external funding. Therefore another consequence may be that, due to increased uncertainty and lack of information, the company will suffer from a poorer credit rating which will cause the lender to demand more expensive loan terms or at very least, cause the company to have no lending options

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2018
Number of pages75