Problems in the Valuation of Investment Property in the Context of Crisis
Abstract
Investment property is long-term investments of enterprises in land and/or buildings. As a whole or in parts, they are used for lease and/or increase of the value of equity, or for both operations simultaneously during the same porting period. Enterprises do not use them for administrative purposes or in their ordinary economic activity, but bring additional long-term income from rent and lease, which differ from income earned from the enterprises’ usual operations. Enterprises’ interest in investment property they have acquired through in-kind contributions of partners and shareholders in the fixed capital, through purchase, construction, barter, for free, through finance lease, or leased from other natural persons or legal entities for sub-leasing purposes, becomes even higher. They are an alternative investment intended for improvement of enterprises’ investment portfolios. They are specific object of the accounting. They are accounted for as long-term investments of enterprises in fixed tangible assets that individually generate inflows and outflows, in comparison to the other fixed tangible assets. Their adequate measurement in the context of crisis is crucial for their accounting and disclosure in the enterprises’ financial statements. Initially, they are measured upon acquisition at historic cost (acquisition price, cost, fair value), and subsequently they are measured in the process of their use at carrying amount equal to their amortized value less the accumulated impairment or fair value (sales price or current market value). It is crucial for enterprises to keep the level of their initial and subsequent measurement of investment property in the context of crisis, in order to maintain their investments in them.
Investment property is the object of this study.
The subject matter of the study refers to the initial and subsequent measurement and disclosure of the investment property in the enterprises’ financial statements, and the main problems that occur in its measurement in the context of crisis.
The objective is to present the major guidelines and possible solutions for enterprises enabling them to overcome the occurred problems in the measurement of investment property in the context of crisis. These guidelines will significantly contribute to the more effective accounting, management, maintenance, spending (amortization, impairment, discarding or sale) of investment property, and the subsequent disclosure of their valuation in the enterprises’ financial statements.
References
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