Scholarly record
FAIR VALUE ACCOUNTING FOR INVESTMENT PROPERTY: A CASE STUDY
Abstract
As the rate of globalisation is rapidly increasing, all the countries are taking the necessary measures to ensure the correct presentation of data about the financial position and performance results of the company. According to the International Financial Reporting Standards and Lithuanian Business Accounting Standards, investment property is valued using the cost or fair value method at one's choice. Therefore, one faces the problem of selecting the appropriate property valuation method so that financial statementswould offer a true and fair view. The objective of the research is to anlyze how the selection of the fair value method, in comparison to the cost method, for investment property valuation influences the financial results of company performance. In order provide substantiation for the scientific issue and to develop research methodology, the analysis, comparison and synthesis methods of scientific literature were used. The research was performed using the case study and graphic method and referring to investment property data provided by the specific company in its financial statements. The fair value was determined using real estate prices in an active market during the analysis period. The analysis of scientific literature showed that both Lithuanian and foreign authors frequently disagree on the appropriate property valuation method to be used by companies in accounting. However, the majority of authors are in favour of the fair value method. Although this method is more complex and requires more labour expenditures, the use of the fair value method ensures the more accurate reflection of the company's financial position and financial results, which is very important when it is necessary to make sure that financial statements give a true and fair view. The results of the research demonstrated how the selection of the investment property valuation method affects the size of the company' property, performance result and capital in financial statements as a result of which inappropriate management decions can be reached.
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