Untitled

Abstract

In this paper we examine whether there are differences in the reliability of asset revaluations made by boards of directors versus independent (external) appraisers. We use a sample of recognized Australian asset revaluations. As a first step we examine the determinants of the choice between director-based revaluations and those undertaken by independent appraisers. We find that independent appraisers are more likely to be used for revaluations of land and buildings and directors are more likely for investments, plant and equipment and identifiable intangibles.We interpret this as evidence of firms harnessing directors' knowledge of asset specificities. We also find that firms with less independent boards are more likely to use independent appraisers.We interpret this as evidence of substitutability between governance mechanisms. As for differences in reliability, we find that revaluations of plant and equipment that are made by independent appraisers are more reliable than those by directors. However, we are unable to detect a difference for other classes of non-current assets. We define reliability in terms of expost adjustments of recognized value increases. Reliability is determined by an examination of the extent to which upward revaluations are subsequently reversed.

Influence of Fair Value on the Qualitative Characteristics and Decision Usefulness of Accounting Information

“…In other words, when a financial commodity does not have an active market (lower representational faithfulness), then its fair value is of little relevance (Nelson, 1996). Cotter and Richardson (2002) investigated the means by which the source of fair value information influences its usefulness in Australian companies. They found that when an independent third party (rather than an internal board of directors) reassesses the value of factory buildings and equipment, investors are more likely to treat the findings as reliable.…”

“…In a review of the literature associated with fair value, Landsman (2007) discovered that most researchers consider fair values (recognized or disclosed) to be useful in investor decisions. However, other studies have found that the degree of usefulness is affected by the number and source of errors in fair value measurement, such as the internal management or external appraisal of corporations (Cotter & Richardson, 2002), and that fair value is obtained from the final price in an active market (Song et al, 2010).…”

Revaluation as a Model of Subsequent Measurement of Property, Plant, and Equipment – Case of Croatia

“…International standards require the disclosure of information on whether an independent (external) appraiser was involved in the assessment of the fair value of PPE. Cotter and Richardson (2002) found that companies are less likely to involve an external appraiser for plant and equipment (as opposed to property) and attribute this finding to internal appraisers' specific knowledge about the use of these assets. Müller, Riedl, and Sellhorn (2015) highlighted that companies holding an asset for which fair value estimates can be determined less reliably are more likely to engage an external appraiser.…”

Güncel Gelişmeler Ekseninde Muhasebe ve Denetim

“…Elde ettikleri bulgular; dış değerleme uzmanlarının yaptıkları değerlemenin nispeten daha güvenilir gerçeğe uygun değer tahminleri sağladığını, yine Big6 denetçileri tarafından denetlenen ve şirket içi değerleme uzmanı kullanan şirketlerde daha doğru gerçeğe uygun değer tahminleri sağlandığını, ancak Big6 denetçileri tarafından denetlenmeyen şirketlerde dış değerleme uzmanı tarafından yapılan değerlemelerin, Big6 denetçileri tarafından denetlenen ve firma içi uzmanların yaptığı değerlemeye göre daha fazla doğruluk taşıdığı sonucuna ulaşmışlardır. Richardson (2002) arazi, bina, ekipman, bitkiler gibi maddi duran varlıkların gerçeğe uygun değer tahminlerinde değerlemenin içsel ve dışsal olarak yapılmasına göre tahminlerin güvenilirliğini araştırırken, düşük değerlemeler yerine (ABD'de bu konuda yeterli derecede çalışma olduğu belirtilmiş) özellikle yüksek değerlemeler üzerine odaklanmışlardır. Daha önceki araştırmalarda, firmaya borç kapasitesindeki artışlar, hisse senedi piyasalarına olumlu sinyaller ve politika maliyetlerdeki düşüşler gibi faydalar sağladığının tespit edilmesi göz önünde bulundurularak hipotezlerini firmaların varlıklarının değerlerini artırmaya yönelik hareket ettikleri varsayımına dayandırmışlardır.…”