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Article
Publication date: 1 April 2002

Clare McParland, Alastair Adair and Stanley McGreal

Outlines the case for the harmonisation of European investment valuation standards. Specific attention focuses upon the national valuation standards within Sweden, The…

Abstract

Outlines the case for the harmonisation of European investment valuation standards. Specific attention focuses upon the national valuation standards within Sweden, The Netherlands, Germany and France with a view to assessing the prospects for uniformly accepted European investment valuation standards. Current practice and perceptions from interviews with 110 valuers are analysed. Educational background and professional training are shown to be influential in decisions upon whether to use national standards, TEGOVA standards or the RICS Red Book. The advent of property performance index series is shown to be a major factor influencing the harmonisation of valuation methods and standards. Conclusions reflect upon the variation between the four countries and the limited progress on the adoption of harmonised standards in Europe.

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Journal of Property Investment & Finance, vol. 20 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 October 2004

P. Olivier and I. DuRand

Scrip dividends have become increasingly popular in South Africa since the introduction of secondary tax on companies (STC) in the 1993 budget. To date there is no…

Abstract

Scrip dividends have become increasingly popular in South Africa since the introduction of secondary tax on companies (STC) in the 1993 budget. To date there is no accounting standard in South Africa that prescribes a particular accounting treatment for scrip dividends; therefore, different accounting approaches are used in South Africa to account for scrip dividends. These different approaches do not always meet the substance over form principle, as required by Generally Accepted Accounting Practice (GAAP). The result is that the information disclosed to the users of the financial statements differs from company to company. This study proposes an accounting treatment for scrip dividend schemes in South Africa. It concludes that the reinvestment approach is the most acceptable accounting treatment for scrip dividend schemes in South Africa.

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Meditari Accountancy Research, vol. 12 no. 2
Type: Research Article
ISSN: 1022-2529

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Article
Publication date: 1 April 2003

Neil Crosby

In 1996, an International Accounting Standards Committee (IASC) working party suggested that current methods of accounting for leases should be changed and in 1999 this…

Abstract

In 1996, an International Accounting Standards Committee (IASC) working party suggested that current methods of accounting for leases should be changed and in 1999 this work culminated in a position paper from the UK Accounting Standards Board (ASB) which made a number of suggestions for consultation (ASB, 1999). The paper assumes that the overall thrust of the proposed changes will be accepted and that will mean that occupying lessees will be required to capitalise the liability to pay rent for their lease and place that liability on the balance sheet. It will also require that property owners identify the value of the lease and the residual property value separately. These are by no means the only issues that are raised by the position paper but it is the implications of these two proposals for valuation methodology that is the subject of this paper. The property industry response in the UK to these two proposals is outlined and it shows that a minimalist approach is recommended, which incidentally is the preferred approach of the UK ASB. This paper argues that market valuations should already be carried out by techniques that attempt to identify the different values of the lease and the residual property value. The minimalist approach will replace one missing set of information with a misleading set, meaning that the IASC attempt to improve the ability of accounts to provide a “fair view” of companies will be thwarted. Alternative valuation models should be adopted which accurately appraise the assets and liabilities distributed by the lease and also identify the residual property value. Conventional market valuation approaches do not work in this context.

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Journal of Property Investment & Finance, vol. 21 no. 2
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 27 July 2012

Konstantinos Drakos

The purpose of this paper is to investigate whether there are any differences in the capitalization speed‐of‐adjustment across regulatory capitalization buckets of…

Abstract

Purpose

The purpose of this paper is to investigate whether there are any differences in the capitalization speed‐of‐adjustment across regulatory capitalization buckets of commercial banks in the USA, for the period 2002‐2009.

Design/methodology/approach

The Federal Deposit Insurance Corporation (FDIC) monitors banks' capital ratio using the bucketing approach. Thus, this discrete and ordered variable is modeled in the context of a partial adjustment specification, controlling for initial conditions and cross‐sectional heterogeneity. Parameters are estimated with the generalized dynamic random effects ordered probit technique that is flexible enough to allow for differential effects of covariates across capitalization categories.

Findings

The main result is that the speed of adjustment is monotonically increasing for banks belonging in lower capitalization buckets, after controlling for bank‐specific capitalization determinants. In addition, substantial differential impacts of capitalization drivers across regulatory buckets are uncovered.

Practical implications

This an important finding both for regulators and market participants since it sheds light on a very crucial aspect of banks' behaviour.

Originality/value

This is the first paper that adopts the FDIC bucketing in the actual modelling. In addition, it uses the generalized dynamic random effects ordered probit technique in order to explore potential differential impact of capital ratio determinants across buckets.

Details

Journal of Financial Economic Policy, vol. 4 no. 3
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 1 March 1976

Michael Firth

The purpose of this paper is to discuss briefly the types of research that have been undertaken, to reference a number of American and British studies and to summarise…

Abstract

The purpose of this paper is to discuss briefly the types of research that have been undertaken, to reference a number of American and British studies and to summarise some work in this general area that has been completed by the author whilst at Bradford University and subsequently at Stirling University.

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Managerial Finance, vol. 2 no. 3
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 10 August 2010

Bo Nordlund

The purpose of the article is to discuss how the demand for disclosure regarding property valuation in financial reports can be fulfilled.

Abstract

Purpose

The purpose of the article is to discuss how the demand for disclosure regarding property valuation in financial reports can be fulfilled.

Design/methodology/approach

The starting point is the generally established methods for property valuation and the different types of data that they need. From this it is deduced what kind of information that it is necessary to supply.

Findings

An important conclusion from the research reported in this paper is that disclosure regarding applied methods, significant assumptions in property valuations and statements about the connections between appraised values and market evidence needs refinement in financial reports, according to International Financial Reporting Standards (IFRS). As the uncertainty in property valuations cannot be removed, it has to be managed. Providing explicit disclosure about valuations is one important way to manage this issue by reducing the gap of information asymmetry between those who perform valuations and those who are users of financial statements.

Practical implications

Providing high quality disclosure on these issues would make analysis and the application of individual judgement by users of financial reports far easier. Findings reported in this paper imply that many companies have not so far found the right balance between cost and benefits regarding what amount of disclosure would be appropriate on this issue in financial reports.

Originality/value

The detailed discussion about what information that should be disclosed concerning property valuation is an original contribution of the paper.

Details

Journal of Property Investment & Finance, vol. 28 no. 5
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 December 2001

Timothy Eccles and Andrew Holt

Traditionally in the UK, accountants and their concepts of value have held little interest for those involved with the technical aspects of property management. Indeed…

Abstract

Traditionally in the UK, accountants and their concepts of value have held little interest for those involved with the technical aspects of property management. Indeed, property valuers and accountants have traditionally adopted differing professional approaches towards the concept of valuation, despite nominally agreed valuing practices dating back to 1974. Most particularly, notwithstanding these agreements, the accounting profession has regarded the theory of property valuation for company accounts as a monopoly of its professional domination of the creation and implementation of accounting standards. Because of the lack of a codified conceptual framework, property assets were regarded identically to other assets. Equally, property managers attended to technical, infrastructural and legal aspects of managing properties. Examined in this paper, the development process behind Financial Reporting Standard 15: Tangible Fixed Assets (FRS 15) provided a realistic and fundamental shift of attitude. Not only were the opinions of valuers actively sought over the issue, but also the final standard adopted the definitions of value created by The Royal Institution of Chartered Surveyors (RICS). Moreover, property assets now figure prominently in financial statements and so impinge directly on the net asset value and borrowing capability of the firm. Property management and modes of holding property have become central to running the business. This paper examines some of the arguments presented within the discussion process undertaken in the creation of FRS 15, highlighting the different approaches to the issue, and noting the likely negotiations to the standard to follow.

Details

Property Management, vol. 19 no. 5
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 5 October 2015

Syed Ali Raza, Syed Tehseen Jawaid, Sahar Afshan and Mohd Zaini Abd Karim

The purpose of this study is to investigate the impact of foreign capital inflows and economic growth on stock market capitalization in Pakistan by using the annual time…

Abstract

Purpose

The purpose of this study is to investigate the impact of foreign capital inflows and economic growth on stock market capitalization in Pakistan by using the annual time series data from the period of 1976 to 2011.

Design/methodology/approach

The autoregressive distributed lag bound testing cointegration approach, the error correction model and the rolling window estimation procedures have been performed to analyze the long run, short run and behavior of coefficients, respectively.

Findings

Results indicate that foreign direct investment (FDI), workers’ remittances and economic growth have significant positive relationship with the stock market capitalization in long run as well as in short run. Results of the dynamic ordinary least square and the fully modified ordinary least square suggest that the initial results of long-run coefficients are robust. Results of variance decomposition test show the bidirectional causal relationship of FDI and economic growth with stock market capitalization. However, unidirectional causal relationship is found in between workers’ remittances and stock market capitalization.

Practical implications

It is suggested that in Pakistan, investors can make their investment decisions through keeping an eye on the direction of the considered foreign capital inflows and economic growth.

Originality/value

This paper makes a unique contribution to the literature with reference to Pakistan, being a pioneering attempt to investigate the effects of foreign capital inflows and economic growth on stock market by using long time series data and applying more rigorous techniques.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 8 no. 3
Type: Research Article
ISSN: 1754-4408

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Article
Publication date: 7 April 2015

John McDonald

The purpose of this paper is to present a basic model of commercial real estate valuation in which the capitalization rate is the critical variable, and to present…

Abstract

Purpose

The purpose of this paper is to present a basic model of commercial real estate valuation in which the capitalization rate is the critical variable, and to present empirical results for a study of office building capitalization rates.

Design/methodology/approach

The model is derived from standard economic and financial theories. The empirical study uses data from the sale of office buildings in 37 downtown markets for 2012. The empirical results are related to concepts of asset market efficiency.

Findings

The empirical results show that capitalization rates depend on features of the office buildings, vacancy rate, and recent change in the office building market as captured by the vacancy rate. In other words, investors are using variables implied by standard economic and financial theory and basic economic data from the recent past to determine the capitalization rate.

Practical implications

The empirical results show how investors determine capitalization rates for office buildings, so potential investors can gauge the state of a property market.

Originality/value

The paper shows that changes in capitalization rates are predictable; investors use past data to adjust their capitalization rates. Furthermore, if an investor does not agree that current trends will continue, then the investment decision should be determined accordingly. For example, if an investor thinks that the future will not be as robust as the recent past, then other investors will bid more than the investor thinks is reasonable. However, if the investor sees a future that is brighter than the recent past, it is time to buy.

Details

Journal of Property Investment & Finance, vol. 33 no. 3
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 10 June 2014

T.V. Grissom, M. McCord, D. McIlhatton and M. Haran

The purpose of this paper, which is the first of a two-part series, is to build upon the established research on environmental economics and sustainability theory…

Abstract

Purpose

The purpose of this paper, which is the first of a two-part series, is to build upon the established research on environmental economics and sustainability theory developed by Ramsey (1928), Weitzman (2007) and Gollier (2010). The Ramsey-Weitzman-Gollier model, with the contribution of Howarth (2009) and Nordhaus (2007a, b), focuses on discount rate development for environmental and long-term assets, linking discounted utility analysis embedded in the CCAPM model of Lucas (1978) to the policy concerns associated with the valuation of public and sustainable resources. This paper further investigates these issues to the rates structure appropriate for exhaustible resources with a particular emphasis on urban land, based upon the differentiation of strong and weak form sustainability concepts constrained by the objectives of the sustainable criterion of Daly and Cobb (1994).

Design/methodology/approach

The paper integrates the concepts of discount rate development for environmental and long-term assets and discounted utility analysis to the policy concerns associated with the valuation of public and sustainable resources. It develops new theoretical insight in order to allow the theoretical formulation of discount and capitalization rates that can be empirically applied and tested.

Findings

The paper provides theoretical support for a new approach concerned with the development of capitalization and discount rates in the valuation of non-renewable resources. A key concern of valuing non-renewable or limited resource endowments (in space or time) is the problem of irreversible investment or irrevocable decision implementation as suggested by Arrow-Fisher (1974), Krautkraemer (1985) and Daly and Cobb (1994). It investigates the challenge with developing capitalization rates and valuation of depleting resources temporally, within the constraints of sustainability. To achieve this, an optimal control discounting procedure subject to a sustainable objective statement is employed – in this context it suggests that sustainability should be treated as an alternative to traditional growth and the maximization of near-term returns.

Originality/value

This paper extends the construct of developing rates structures appropriate for the valuation of exhaustible resources. It places a conceptual emphasis on urban land development. The measures developed and the insights gained may serve as a basis for future research on the optimal levels of sustainable development appropriate for different nations.

Details

Property Management, vol. 32 no. 3
Type: Research Article
ISSN: 0263-7472

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