Determinants and Consequences of the Dual Choices in IAS 40

• Main Authors: Hsuan-Pin Wang, 王炫斌
• Other Authors: 林嬋娟
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/ezw83f

博士 === 國立臺灣大學 === 會計學研究所 === 105 === [Part I: Determinants and Consequences of the Dual Choices in IAS 40] International Accounting Standard (IAS) 40, Investment Property, is one of few accounting standards allowing firms to use fair value to account their non-financial assets. IAS 40 gives firms the dual choices: (1) for evaluating investment properties, firms shall choose to adopt the fair value model or the cost model; (2) for valuing fair value, firms shall choose to employ external appraisers or value by themselves. The application of IAS 40 in Taiwan created a unique setting to test the dual choices. In 2013, the first year of adopting IAS 40, the regulator asked firms to adopt cost model, but firms could choose the source of fair value information. By analyzing this period, this study examines the determination of external appraisal and the external appraisal effect on value relevance of fair value. In 2014, the second year of adopting IAS 40, the regulator further allowed firms to adopt either fair value or cost model, so firms have the dual choices on the reporting decisions of investment properties. By analyzing this period, this study also examines the determination of using different reporting decisions and whether different choices affect value relevance of fair value. The empirical results show that (1) investment property exposure, debt construct, information asymmetry, and CEO duality affect the possibility of external appraisal or fair value model. This implies that firms are more likely to employ external appraisers or adopt fair value model when they seek to improve the reliability of fair value information or when stakeholders have high informaion demand on fair value; and (2) employing external appraisers in 2013 or adopting fair value model in 2014 improves the value relevance of fair value information. This implies that, from an investor point of view, the information content of fair value is increased by external appraisal or adoption of fair value model. [Part II: The Effect of IAS 40 on Audit Tasks] By adopting of International Accounting Standard (IAS) 40, firms must disclose investment property''s fair value in financial statement. This regulation could make a significant effect on audit tasks. IAS 40 also gives firms the dual choices: (1) for evaluating investment properties, firms shall choose to adopt the fair value model or the cost model; (2) for valuing fair value, firms shall choose to employ external appraisers or value by themselves. Choices in reporting decision on investment properties might result in different effect on audit tasks. This study discusses Taiwan firms and examines the effect on audit fee post to adoption of IAS 40. The empirical results show that, employing external appraisers decreases audit fees when firms choose to adopt cost model, but that effect disappears when firms choose to adopt fair value model. Besides, this paper also finds some evidences to support, the average level of audit fees significantly increases after fair value model be allowed by regulators in 2014, and the firms which employ external appraisers (apply fair value model) have significantly lower (higher) audit fees in 2013(2014).