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Property Assets Fair Value Accounting Under Uncertainty

Author

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  • Anastasios Tsamis
  • Konstantinos Liapis

Abstract

Accounting fairness refers mostly to the fair presentation, and therefore, measurement or valuation of an element recognized in the entity’s financial statements. In accounting and finance, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. Applying different accounting and valuation methods across firms or countries makes financial statements incomparable to each other. The research objects of the paper are: a literature view of IFRS2 and US GAAP3 principles and accounting standards for fixed assets; a critical perspective of the used accounting frameworks, providing comparison for each framework and each portfolio; the incorporation of uncertainty into the WLC4 methodology for the valuation and management of real property assets. The methodology of WLC with the NPV5 technique of a property asset, are used. These methods are incorporated into a decision-making mathematical model using the PERT 6 probability distribution function for the input variables. The model is applied to a typical property asset (an office building as a part of a company’s fixed assets portfolio) in order to explore the significance of impacts from changes in structured variables by using the Monte Carlo Simulation. After the above procedure a unique fair value accounting model is founded on the dynamic integration of WLC fundamental concepts and the widely used appraisal measures for property assets with quantitative risk analysis to address the endemic in the property assets uncertainty.

Suggested Citation

  • Anastasios Tsamis & Konstantinos Liapis, 2014. "Property Assets Fair Value Accounting Under Uncertainty," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 35-54.
    • Handle: RePEc:ers:journl:v:xvii:y:2014:i:4:p:35-54
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    File URL: http://www.ersj.eu/repec/ers/papers/14_4_p3.pdf
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    References listed on IDEAS

    as
    1. Y.C. Lin & Ken V. Peasnell, 2000. "Fixed Asset Revaluation and Equity Depletion in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3-4), pages 359-394.
    2. Missonier-Piera, Franck, 2007. "Reply to discussion of "Motives for fixed asset revaluation: An empirical analysis with Swiss data"," The International Journal of Accounting, Elsevier, vol. 42(2), pages 210-212.
    3. Konstantinos J. Liapis & Dimitrios D. Kantianis & Christos L. Galanos, 2014. "Commercial property whole-life costing and the taxation environment," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 32(1), pages 56-77, January.
    4. Eleftherios J. Thalassinos & Evagelos D. Politis, 2011. "International Stock Markets: A Co-integration Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 113-130.
    5. Pavlos Loizou & Nick French, 2012. "Risk and uncertainty in development," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(2), pages 198-210, March.
    6. Y.C. Lin & Ken V. Peasnell, 2000. "Fixed Asset Revaluation and Equity Depletion in the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3&4), pages 359-394.
    7. Missonier-Piera, Franck, 2007. "Motives for fixed-asset revaluation: An empirical analysis with Swiss data," The International Journal of Accounting, Elsevier, vol. 42(2), pages 186-205.
    8. Richard Dietrich, J. & Harris, Mary S. & MullerIII, Karl A., 2000. "The reliability of investment property fair value estimates," Journal of Accounting and Economics, Elsevier, vol. 30(2), pages 125-158, October.
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    Cited by:

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    2. Christos L. Galanos, 2017. "Stress Testing the Effect of Income Tax Scale on a Full Time Agricultural Income in Greece After the New Tax Legislation," European Research Studies Journal, European Research Studies Journal, vol. 0(4A), pages 684-695.

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    More about this item

    Keywords

    Fair Value Accounting; Valuation; WLC; PERT; Monte Carlo Simulation; Real Property;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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