La scelta della Fair Value Option nello IAS 40: evidenze empiriche sul settore Real Estate

The adoption of IAS/IFRS by the European Union has represented a key accounting change for European companies and offers a rich source of analysis to the scientific community. This thesis is part of the debate on-going on the choice between fair value and historical cost as the optimal evaluation criterium. The empirical research focuses on the accounting standard IAS 40, which is particularly suitable for this type of investigation as it is one of the few principles that allow the right to choose between the above mentioned assessment criteria (i.e., fair value and historical cost). In particular, IAS 40 deals with the accounting evaluation and representation of investment property in the financial statement. Investment property represents any fixed asset held for the purpose of obtaining profits in the form of rent or capital gains. The empirical investigation focuses on companies belonging to the real estate industry, because, as showed by previous research, companies belonging to this industry have significant investment properties as accounting entries on total assets. Therefore, the accounting choice between fair value and cost should have a greater impact on the balance sheet. A preference for a given option in connection with certain firm characteristics is expected. The empirical research is conducted on a sample of listed real estate companies based in four European countries (France, Germany, Sweden and Italy) that draw up consolidated financial statements. In particular, it investigates the determinants of the first-application choice between fair value and historical cost in 2005, when international accounting standards were adopted for the first time. By analyzing the firm characteristics in the four-year period preceding the choice (period 2001-2004), the thesis investigates the main determinants (financial position, leverage, return on investment and company size) of the “fair value vs cost” accounting choice. As control variables, the variables “sector” and “country” are included. The results show that financial position, leverage and return on investment do not drive the choice of opting for fair value rather than historical cost. This evidence may imply that the motivation underlying this choice is independent from accounting evaluations, but mainly oriented to the adequate development of corporate real assets by selecting the more suitable criteria. Moreover, it is found that the company size is lower for those firms that chose fair value rather than cost. This result can be due to the fact that, as the company size increases business complexity and, therefore, the so-called “agency costs”, companies might opt for the cost method to reduce agency costs. The cost method, indeed, is perceived more reliable and verifiable and companies might prefer it to the information relevance of the fair value. In addition, as expected, a positive relationship between the fair value adoption and medium-long term investment activities in the real estate is found. Finally, Swedish firms, that belong to an Anglo-Saxon context, are more likely to adopt fair value. In conclusion, this work provides a contribution to accounting regulatory bodies, suggesting that the choice of fair value does not seem driven by opportunistic considerations but rather by the assessment of the effective value of real estate investments.