Disclosure versus recognition: The case of asset revaluations
Article
Article Title | Disclosure versus recognition: The case of asset revaluations |
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ERA Journal ID | 18501 |
Article Category | Article |
Authors | Cotter, Julie (Author) and Zimmer, Ian (Author) |
Journal Title | Asia-Pacific Journal of Accounting and Economics |
Journal Citation | 10 (1), pp. 81-99 |
Number of Pages | 19 |
Year | 2003 |
Place of Publication | Hong Kong |
ISSN | 1029-3574 |
1608-1625 | |
Abstract | Australian GAAP requires firms to either disclose or recognize the current values of real estate in their financial statements. Given recognition criteria related to reliable measurement, the propensity to recognize an upward revaluation is subject to the inherent uncertainty of the assessed increase in value. Accordingly, we predict and find that managers are more likely to recognize (rather than just disclose) revaluations when the revaluation estimate is more reliable. The recognition criteria contained in Australian GAAP implies that market participants will rationally infer that revaluations recognized in the balance sheet are more reliably measured than those disclosed in footnotes. An analysis of share market effects finds that the market discounts disclosure compared to recognition of real estate revaluations. This effect becomes insignificant when controls for the reliability of revaluations are included in the analysis, and we therefore conclude that the value relevance of recognized revaluations is not due to recognition per se, but rather to the fact that the assets being revalued are more reliably measured. |
Keywords | recognition, disclosure, asset revaluation, revaluation |
ANZSRC Field of Research 2020 | 350103. Financial accounting |
350799. Strategy, management and organisational behaviour not elsewhere classified | |
Public Notes | Files associated with this item cannot be displayed due to copyright restrictions. |
Byline Affiliations | Faculty of Business |
University of Queensland |
https://research.usq.edu.au/item/9y2z9/disclosure-versus-recognition-the-case-of-asset-revaluations
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