Consequences of Voluntary and Mandatory Fair Value Accounting: Evidence Surrounding IFRS Adoption in the EU Real Estate Industry

Karl A. Muller (), Edward J. Riedl () and Thorsten Sellhorn ()
Additional contact information
Karl A. Muller: Pennsylvania State University - Department of Accounting
Edward J. Riedl: Harvard Business School, Accounting and Management Unit

No 09-033, Harvard Business School Working Papers from Harvard Business School

Abstract: We examine the causes and consequences of European real estate firms' decisions to provide investment property fair values prior to the required disclosure of this information under International Financial Reporting Standards (IFRS). We find evidence that investor demand for fair value information-reflected in more dispersed ownership-and a firm's commitment to transparency increase the likelihood of providing fair values prior to their required provision under International Accounting Standard 40 - Investment Property. We also find that firms not providing these fair values face higher information asymmetry. However, we fail to find that the relatively higher information asymmetry was reduced following mandatory adoption of IFRS. Rather, we find that differences in information asymmetry largely remain. Taken together, this evidence suggests that common adoption of fair value accounting due to the mandatory adoption of IFRS does not necessarily level the informational playing field.

Keywords: Fair value; disclosure; IFRS; information asymmetry (search for similar items in EconPapers)
Pages: 43 pages
Date: 2008-08
New Economics Papers: this item is included in nep-acc and nep-eec
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Citations: View citations in EconPapers (10)

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