The revaluation of assets as a signalling device: a theoretical and an empirical analysis

In many countries, firms can choose whether or not to report a revaluation in the financial statements. An analytical model is developed to indicate conditions in which it is more likely that successful firms will choose not to revalue assets as a credible signal to potential investors. These industry settings include a high variance in performance and low equity-to-debt ratios. The empirical results for Belgium confirm that successful firms are less likely to revalue assets in those industries. However, only the revaluation of fixed tangible assets and not financial assets seems to be a credible signal. Finally, the results support the choice to revalue, but not the amount of revaluation, as a signalling device.     

加速折旧企业所得税政策与实体企业金融化——基于2014年固定资产加速折旧政策的准自然实验

本文选择2011-2017年我国沪深上市实体企业的样本数据,以2014年固定资产加速折旧所得税政策的出台为准自然实验,采用双重差分法实证检验了固定资产加速折旧政策对实体企业金融化行为的影响。研究发现,固定资产加速折旧政策出台带来的所得税抵税收益在提升实体企业固定资产和无形资产等实业投资的同时,会提升实体企业金融化水平。进一步研究发现,固定资产加速折旧政策的出台仅对现金流较贫乏、非国有企业、成长性较高以及规模较小的实体企业的金融化水平具有显著促进作用。研究结论不仅能够丰富企业金融化的理论研究,还有助于税务监管部门进一步调整优化固定资产加速折旧政策及相关配套税收政策,以便更好地防范、化解脱实向虚风险,促进实体企业高质量发展。     

Accounting Problems in Infrastructure Asset Valuation and Depreciation in New South Wales Local Government

The aim of this paper is twofold: (i) to investigate whether New South Wales (NSW) local government councils comply with Australian Accounting Standards in accounting for revaluation of their infrastructure assets and (ii) to assess any consequences for the reliability of financial reporting in NSW local government. Using road assets as an example, we analyse the results of revaluations of road assets undertaken by 89 NSW councils as reported in their financial statements during the period 2013 to 2016. In this analysis we focus on the effect of a change in accumulated depreciation and impairment loss component of fair value as a percentage of the gross replacement cost of the revalued assets. The analysis reveals that in most cases this effect is significant. However, the accounting and reporting of this effect is strikingly inconsistent between the councils. Based on a critical analysis of the accounting framework and disclosure of the revaluation effects, we conclude that the main reason for the change in the fair value of assets is altered estimates of remaining useful life. Furthermore, we argue that councils did not comply with the requirements of AASB 116 in determining the useful life of the assets.     

The Asset Price Theory of Shareholder Revaluations: Tests with the Tax Reforms of the 1980s

A tax reform providing incentives for fixed investment may increase shareholder wealth because after-tax cash flows on planned investment increase. Alternatively, shareholder wealth may decline because existing assets receive disadvantageous tax treatment relative to new ones and equities are largely claims on existing assets. This study tests the alternative hypothesis by predicting in a simulation model the revaluation of existing assets resulting from the 1981 and 1986 tax acts and then by comparing the predictions to stock returns data. The results reject the hypothesis that cumulative excess returns accruing because of tax reform equal the revaluation on existing assets.     

Fixed Asset Revaluations and Managerial Incentives

The study attempts to explain why Australian companies revalue their fixed assets, when a revaluation, by itself , has no discernible direct effect on cash flows and is costly to carry out. A revaluation is hypothesised to affect contracting and political costs. It may also help resolve problems associated with information asymmetries, or be used to signal information to investors. The results support the proposition that economic forces help explain the decision to revalue assets.     

折旧方法、心理感知和资本投资决策研究

本文采用模拟实验的方式通过问卷调查研究企业折旧方法、心理感知和管理者资本投资决策的关系机理。为此,进行了如下试验：管理者必须决定是继续使用现有的资产还是重置资产。研究结果表明：一、固定资产采取直线折旧法比采用加速折旧法被重置的可能性要小些。二、使用直线法折旧的资产比使用加速法折旧的资产所提供的追溯效用要小。三,由折旧方法引起的管理者追溯效用感知差异影响他们的预期效用感知,进而影响管理者的资产重置决策,心理感知在折旧方法和资本投资决策之间起部分中介作用。     

Motives for fixed-asset revaluation: An empirical analysis with Swiss data

This paper investigates the economic motives of fixed-asset revaluations of Swiss listed companies. We provide international insights on revaluation motives, particularly in a stakeholders' regime, over a period which is characterized by significant changes of the accounting standards relative to fixed-assets valuation. We also test the impact of international stakeholders on the choice of whether to revalue assets. Results from pooled data show positive associations between revaluation and both the proportion of foreign sales and leverage, and a negative association with the investment opportunities. These findings suggest that revaluation is used as a device to improve creditors' and foreign stakeholders' perceptions of the financial health of the firm and thereby improve the firm's borrowing capacity. Cross-sectional results show that although leverage has declined over the periods investigated, interest rates have become lower for firms that revalue upward their fixed assets (compared to non-revaluers), emphasizing the debt-costs hypothesis.     

Asset Revaluations in the Accounts of UK National Health Service Trusts

This paper reports the results of an investigation into the impact of the revaluation of fixed assets on the reported results of NHS ambulance services. It recalculates the accounting rate of return of individual trusts after removing revaluation adjustments and examines the published responses of trusts. The numerical analysis demonstrates that, in general, revaluation has depressed the stated rate of return in an inconsistent manner. Failure to meet the required rate of return may cause a trust to be subjected to additional monitoring and management reorganisation while the trusts respond by explaining deviations in the accounting return measure by referring to revaluations and other technical adjustments. Management decisions made in response to these accounting measures may be sub-optimal in delivering health care but appropriate in achieving the desired accounting outcome.     

上市公司利用减值准备进行盈余管理的实证研究--以吉林省上市公司为例

上市公司于2001年1月1日起开始执行新的企业会计制度,新的会计制度与原会计制度相比最显著的变化就是在原来四项资产减值准备计提的基础上又增加四项减值准备。这八项减值准备的计提,充分体现了谨慎性原则对历史成本原则的修正,目的是为了挤出上市公司资产中的水分,保护所有者和债权人的利益,从而化解其投资风险。通过对吉林省上市公司八项资产减值准备计提情况的分析,可以反映出吉林省上市公司利用减值准备进行盈余管理的实际情况。     

A Possible Economic Rationale for Straight-Line Depreciation

Straight-line depreciation (SL) appears to be a crude procedure that is unsupported by economic logic. Nevertheless, internationally, it is the most widely used method of allocating the costs of fixed assets to accounting periods by way of depreciation charges. Many authors attribute its use to its simplicity. That justification may be deemed to be insufficient, since ideally SL should provide accounting figures with economic meaning under known assumptions. Such meaning might be defined by reference to the net present value (NPV) calculus, which is recommended in the literature of financial management for the evaluation of economic flows associated with the acquisition of fixed assets. After briefly considering economic depreciation alternatives discussed in the literature, this article selects the Ladelle/Brief/Grinyer Earned Economic Income (EEI) calculus as a theoretical model for the examination of SL depreciation. EEI provides signals which are consistent with those given by NPV and can satisfy the accounting constraint that one should recognize realised profits only. The article employs mathematics and deterministic computer simulation to explore some circumstances in which SL provides figures which approximate to the net investment charges using the EEI calculus. It shows that there are many patterns of declining annual benefits from ownership for which SL provides an approximation to EEI net charges that could be considered to be adequate. Consequently SL often provides more economically interpretable information, and consequently is more defensible, than is typically assumed in the literature relating to accounting.     

现行税制缺陷对纳税人的负面影响及对策

国家税收与纳税人的利益休戚相关,特别是税收制度的缺陷将深刻影响企业的发展。现行增值税、所得税税制存在的问题、循环经济的税制障碍以及固定资产折旧政策对企业技术创新产生了负面影响,影响了企业的发展,应加以改进。     

A New Approach to Depreciation

This paper presents a new 'matching' based approach to depreciation that incorporates interest adjustments and generates accounting measurements that are consistent with the ex post Net Terminal Values of fixed assets. The method has been developed from the concept of Earned Economic Income by the application of concepts drawn from the existing literature. The calculations and ledger entries involved are illustrated in the appendices.     

Asset revaluations,future firm performance and firm-level corporate governance arrangements: New evidence from Brazil

Using a sample of Brazilian listed firms for the period 1998–2004 we find evidence that revaluations of fixed assets are negatively related to future firm performance, prices and returns. We also find that the decision to revalue is negatively associated with scores on a Brazilian Corporate Governance Index (BCGI) and positively associated with indebtedness and illiquidity. Our results suggest that revaluations of fixed assets in Brazil are not designed to convey information to external users of financial statements but rather to improve equity positions – opportunistic motivations. Our evidence also corroborates the idea that firms that adopt superior voluntary governance arrangements are less likely to engage in actions designed to manipulate their financial statements. These results lend support to the recent amendment to the Company law which eliminated the revaluation option for Brazilian firms despite the current process of IFRS convergence.     

Fixed Asset Revaluation and Equity Depletion in the UK

UK GAAP has traditionally allowed the write-off of purchased goodwill directly to reserves, resulting in the widespread depletion of book equity. Companies have also been permitted to revalue fixed assets at management's discretion. This study examines whether upward revaluations have been associated with the depletion of book equity and with other costly contracting explanations identified in prior research. Our results provide strong support for the equity depletion hypothesis, both with regard to the decision to revalue and the timing of the revaluations. Indebtedness, liquidity, size and fixed asset intensity are also consistently associated with upward revaluation.     

Fixed Asset Revaluation and Equity Depletion in the UK

UK GAAP has traditionally allowed the write-off of purchased goodwill directly to reserves, resulting in the widespread depletion of book equity. Companies have also been permitted to revalue fixed assets at management's discretion. This study examines whether upward revaluations have been associated with the depletion of book equity and with other costly contracting explanations identified in prior research. Our results provide strong support for the equity depletion hypothesis, both with regard to the decision to revalue and the timing of the revaluations. Indebtedness, liquidity, size and fixed asset intensity are also consistently associated with upward revaluation.     

The Case Against Asset Revaluations

The upward revaluation of non-current assets is a common feature of contemporary accounting in Australia. This paper presents a case against the practice. The effects of revaluations are examined and possible reasons why firms revalue are considered. It is argued that asset revaluation is theoretically unsound, being inconsistent with the accounting structure within which it occurs. It is concluded that there are significant costs but few obvious benefits associated with revaluation.     

Revaluations of fixed assets and future firm performance: Evidence from the UK

We find, as predicted, that upward revaluations of fixed assets by UK firms are significantly positively related to changes in future performance, measured by operating income and cash from operations, indicating revaluations reflect asset value changes. Current year revaluations (revaluation balances) also are significantly positively related to annual returns (prices). Relations between revaluations and future performance and prices are weaker for higher debt-to-equity ratio firms, indicating motivation affects how revaluations reflect asset value changes. The relations also are weaker for cross-listed firms and in a more volatile economic time period. Our inferences are robust to controlling for firms' acquisition activity.     

Assessing the Impact of Fair‐Value Accounting on Financial Statement Analysis: A Data Envelopment Analysis Approach

The historical‐cost and prudence principles have guided accounting for financial investments and tangible fixed assets in many jurisdictions around the globe. This situation might change as a consequence of the increasing number of countries adopting International Financial Reporting Standards (IFRS), which, to some extent, permit accounting on a fair‐value basis. It is unclear how such a change would affect the analysis of financial statements and to what extent it could modify analysts' perceptions of companies' condition and performance. This paper attempts to shed some light on this issue by restating the financial investments and tangible fixed assets of a sample of 85 Spanish insurance companies, applying fair value instead of historical‐cost‐based valuations and by simulating analyst perception of these companies' efficiency and profitability for both sets of data using data envelopment analysis (DEA). We find that the numbers on the face of the financial statements change considerably and observe that the magnitude of these changes varies between companies and classes of assets. However, only in a few cases does a change in the valuation basis lead to a relevant change in DEA scores; within our sample, the overall assessment of companies with regard to efficiency and profitability remains largely the same under both valuation bases. These findings seem to indicate that a change from historical‐cost to fair‐value accounting could alter analyst perceptions of a limited number of companies but likely will not have a major impact on the appraisal of the majority of them.     

Asset Revaluations and Assessment of Borrowing Capacity

Prior research has found support for contracting, political cost and information asymmetry explanations for managements’ decision to revalue non-current assets. This study proposes that asset revaluations occur to signal available borrowing capacity via an increase in collateral values at the time of increases in secured debt and that the economic benefits associated with an asset revaluation will be greatest for firms when they are experiencing times of declining cash flows from operations. Results imply that firms that have undertaken an asset revaluation are more likely to be experiencing declining cash flows from operations than firms that have not revalued. This study also investigates whether the incidence of valuations coincides with increases in levels of secured borrowings due to lenders’ demands for current values of assets offered as collateral. The evidence indicates that firms are more likely to record an asset revaluation if they have increased their secured borrowings, and that most non-year-end revaluations emanate directly from contracting with lenders.