engleski

Impact of Revaluation Policy Choice on Financial Performance Measures: A Multi-Criteria Approach

Accounting standards are mainly based on historical cost valuation paradigm. Nowadays it has been replaced by other measurement models, like fair value. E.g., IAS 16 permits two valuation models for measurement after initial recognition: the cost model and the revaluation model. Research hypothesis implies that application of revaluation model can significantly affect the financial ranking of company in investment decision making process. MCDA classification methods are used for financial ranking simulations. Results indicate that company’s ranking differs with regard to the mode of ratio calculations, i.e. if effects of revaluation policy are excluded or not. The research show that, despite of the efforts of regulatory authorities to ensure reliable and comparable information in financial statements, revaluation policy choice has remarkable impact on disclosed company’s financial position, and can be (ab)used as “window dressing” tool. Also, it can be concluded that revaluation policy choice is used more often under conditions of global financial crisis.

revaluation; fair value; accounting policy choice; financial performance; MCDA methods

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