The Research On The Selection Of The Investment Property Measurement Model

In order to reflect the true value of the real estate and to converge with the International Financial Reporting Standards, the Ministry of Finance issued specialized accounting standards for investment property in the new accounting standards on February15,2006. It put forward a new measurement choice, fair value model for investment property, and stated that an entity could choose this model to measure its investment property under some certain conditions. Investment property is attracting continually increasing concern for it not only is an investment instrument but also is the first non-financial asset that can be measured by fair value. This is a great progress as to our accounting practice. As a result of this important reform, it provokes a new question that how firms make choice between the cost model and the fair value model.Given this situation, the paper carried on a study on the selection of the measurement model for investment property. Many standard-setters and researchers have predicted that most listed companies will choose fair value model to measure their investment real estate after recognition, but this is not the case according to the annual reports of the A-share companies in the Shanghai and Shenzhen securities markets. This paper found out that entities still tend to adopt cost model to measure the investment property; generally they hold a conservative attitude to fair value model because there are some difficulties and limitations in its practical application. Based on the analysis of the annual reports from the listed companies in recent years, This paper presents the current situation of the investment property measurement model selection, describes such problems as low adoption of fair value model, reasonableness of the method to obtain fair value, great influence on financial outcomes of fair value model as well. Furthermore this paper gives some specific suggestions for the selection practice of the investment property measurement model so as to promote the application of fair value model. No doubt this research is of great importance to both the theory study and the practical application of the fair value measurement model.This paper includes the following six parts:Part one introduces the background and usefulness of this study, reviews the relevant literature at home and abroad, and then states the research content and innovations of this paper.Part two lays the foundation for the selection of the measurement model of the investment property. In this part it defines the investment property, presents the specific terms in standards of the two measurement models and meanwhile analyses their merits and demerits respectively.Part three presents the current situation of the investment property measurement model selection. It begins with the predictions of the selection status of researchers when the standards were issued, then describes the actual application based on the analysis of2007～2011annual reports of listed companies, and makes comments on the current status, mainly focusing on the impact of the selection on the entities.Part four analyses the reasons why the current situation doesn’t match with the predictions, including macro and micro these two perspectives.Part five gives some suggestions to improve the current situation of the investment property measurement model selection according to the above analysis in order to promote the application of the fair value measurement model.Part six concludes the research and offers some advice for future study.