Fair Value Disclosure Requirements - A study of Investment property valuations in Sweden before and after IFRS 13

Sammanfattning: The new accounting standard IFRS 13 had its mandatory implementation January 1 st 2013. The main reason for the implementation was to eliminate inconsistencies and reduce complexities in fair value measurements. The new disclosure would therefore enable public real estate companies to be more transparent towards investors, who base their financial decision on the information that is presented in the financial report. Since the market value of investment properties is important for investors when making their financial decisions, this study focuses on the disclosure requirements of IFRS 13 in Sweden. The aim of this research was to study how well Swedish real estate companies follow the new disclosure requirements and how this may affect the investors’ financial decisions. In order to conduct the study a mixed method approach was undertaken. The study consisted of a sampled of 90 financial reports from 15 public real estate companies in Sweden before and after IFRS 13. The disclosure requirements were later calculated in accordance to an unweighted disclosure index and then tested against a hypothesis with the help of the Wilcoxon matched pair test. The comparison of the financial reports during the period 2010- 2015, that is before and after IFRS 13, enabled us to see how well the new requirements were followed. If a certain disclosure requirement was not followed an analysis of the audit reports was made in order to conclude if a modified opinion had been left by the auditor or not. In order to strengthen this specific part of the study a qualitative method was undertaken to get an expert’s point of view regarding the new requirement as well how the investors may be affected. Four auditors were interviewed in order to acquire this information but also to get a better insight regarding the investors’ point of view. After the data collection and analysis, our findings reveal that the overall compliance of public real estate companies in Sweden was high and that the disclosure quality had increased after the implementation of IFRS 13. However, not all disclosure requirements were fulfilled and none of the company’s auditors chose to give a modified statement. The results from the qualitative part of the study showed that all participants consider auditors to have sufficient knowledge of IFRS 13. Furthermore, the participants’ also claimed that the change of disclosure requirements has little impact on investors’ financial decisions.