Research On The Effect And Economic Consequences Of The Subsequent Measurement Model For The Investment Property

The accounting policy choices have always been research hot issues of the accounting and the capital market research study. To have a comprehensive understanding of the influence factors of the fair value measurement model and the corresponding economic consequences as well as the implementation consequences of the China Accounting Standards 39(CAS 39), the subsequent measurement model selection of the investment property are chosen and studied in this paper. With the rapid development of the market economy in our country, the investment property has become one of investments of the domestic listed corporations. It was not until the accounting standard was promulgated that the investment property was regarded as the fixed or intangible assets. In recent years, real estate industry becomes more and more hot, and the market value of investment property was significantly higher than its book value, thus it is not correct to treat the investment property as fixed or intangible assets. To better fit the global competition and make the accounting standards compatible with the international ones, the investment property is treated as a separate asset and two subsequent measurement models are provided, namely the fair value measurement model and cost measurement model. These two measurement model are expected to provide some more fair and objective information to evaluate the investment property.Top management team who is the corporate strategic planners, decides the corporate decision-making behavior and has an important influence on the corporate accounting policy choices. Therefore, some A-share listed companies of the investment property from 2012 to 2014 are studied as samples. We have empirically tested the fair value influence factors of the investment property from the view of executive characteristics. The research results show that the average age of executives, their educational level and female sex ratios have a negative correlation with the possibility of the investment property that choosing the fair value measurement model. Moreover, the companies with high executive pay and high proportion of institutional ownership are more inclined to choose the fair value measurement model. Additionally, working time of the executives has a positive correlation with the possibility of the investment property that choosing the fair value measurement model, but the result is not obvious. In addition, by using the event study, we examine whether the announcement of annual report will bring abnormal return to the A-share listed companies that choosing the fair value measurement model, and the companies are from 2012 to 2014. The research results show that these companies will have significant abnormal returns five days before and after the annual report announcement, especially from the fifth trading days before the announcement, the market changes obviously and the share price begins to rise. However, the market doesn’t have a strong reaction on this, namely the fair value information of the investment property has little influence on the market. In a word, based on the selection of the measurement model of the investment property, this paper explores the influencing factors and the economic consequences of the fair value model selection. The research results can be an additional to the existing literature about the accounting policy choice, and can provide useful suggestion to optimize the company’s senior management team. Additionally, this paper can provide an initial support to the implementation of the China Accounting Standards 39(CAS 39).