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Verkligt värde: implementation of IAS 40 in quoted real estate companies on the Stockholm stock exchange, and effect on the company key ratios
Södertörn University College, School of Business Studies.
Södertörn University College, School of Business Studies.
2006 (Swedish)Independent thesis Basic level (degree of Bachelor), 10 points / 15 hpStudent thesisAlternative title
True and fair value (English)
Abstract [en]

Background: Within real estate companies assets according to IFRS/ IAS 40 should be valued at fair value, to compare with previous valuation criteria according to which real estate should valued at cost. Two models can be used within IAS 40, these are value at cost and fair value. When valued at cost the real estate value in the balance sheet should be specified at cost. The method chosen by the company should be used for all real estate within the company except for the premises used by the company.

Purpose: The purpose of the study is to analyse and evaluate how real estate companies experienced the problems that arose when converting to IAS 40, and to analyse the effects on the companies key ratios as a result of the change of accounting method. Key ratios examined were, return on equity, solvency ratio, P/E-ratio and debt/equity ratio.

Method: The essay is made on a qualitative effort in the form of four interviews with experts within the chosen subject area. The compilation of key ratio is made in a quantitative form and is made up of secondary data. Conclusions: With the implementing of IAS 40 for real estate accounting, the ability to better compare the accounting between real estate companies increased, even though all companies do not account for their real estate in the same way. It appeared that the regulation requirements need to be adjusted and formed in a way that better matches the reality in which real estate companies act. Valuation with fair value proved to have both advantages and disadvantages. The advantage was that the comparability and the fair picture between real estate companies increased. The disadvantage was that the valuation of the fair value gives an increased risk for the real estate companies to be over- or undervalued. A wrong valuation gives a wrong picture of the real estate companies and effects the key ratios in a volatile manner.

Place, publisher, year, edition, pages
Huddinge: Institutionen för ekonomi och företagande , 2006. , 92 p.
Keyword [en]
Investment property, true and fair value, IAS 40, key ratios
Keyword [sv]
Förvaltningsfastigheter, verkligt värde, IAS 40, nyckeltal
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:sh:diva-762OAI: oai:DiVA.org:sh-762DiVA: diva2:16487
Uppsok
samhälle/juridik
Supervisors
Examiners
Available from: 2006-06-21 Created: 2006-06-21

Open Access in DiVA

fulltext(1968 kB)849 downloads
File information
File name FULLTEXT01.pdfFile size 1968 kBChecksum MD5
a02ab10b4c3ae87beeb1f32323e836fbb536c2a3f31431af8550fd20508fecebb4807382
Type fulltextMimetype application/pdf

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf