Disaggregation of the investment property components and the aggregated reliability score

Abstract

This research is centered on the International Accounting Standard (IAS) 40: Investment Property to identify the additional characteristics of firms adopting the fair value model and to investigate the value relevance of investment property of firms in the Stock Exchange of Thailand during the years 2011 to 2014. This research presents, both firm views and investor views in Thailand, the concept of disaggregation deployed to classify the aggregated investment property into the non-depreciated and depreciated investment properties and the Aggregated Reliability Score (AR-score) initiative proposed for partitioning the sampled firms in accordance with their respective reliability of fair value measurements in order to hold constant the reliability effect and derive the modified value relevance of the investment properties. This research uses the secondary From firm views, the research findings reveal that the investment property components and the fair value measurement reliability influence the firms’ accounting choices (i.e. the fair value model versus the cost model). From investor views, the cost model is of greater value relevance vis-à-vis the fair value model due to the investors’ vehement attachment to the cost model, a phenomenon prevalent in many less advanced economies, including Thailand. Nevertheless, the post-partitioning results, in which the sampled firms are partitioned by their respective AR-scores, show that the fair value model offers more value relevance in the high reliability group. Specifically, the relative superiority of the fair value model to the cost model is reportedly identified in the aggregated investment property and the depreciated investment property, whereas no such superiority exists in the non-depreciated investment property. It can be claimed that the depreciated investment property is a representative of the aggregated investment property for investors' decision-making. Furthermore, it is expected that the improved reliability in fair value measurements would contribute to investors’ increased trust in and reliance on the fair value. Conclusively, the disaggregation of the investment property components and the use of AR-score develop a new set of knowledges that differ from prior value relevance publications.