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An Empirical Assessment of IFRS No.16 “Property, Plant, and Equipment”
Zhemin Wang,
University Of Wisconsin - Parkside
Zhijun Lin, Hong Kong Baptist University
Zheng Wang, California State University San Marcos
John Eichenseher, University of Wisconsin - Madison
Fang Zhang, Chinese University Of Hong Kong
ABSTRACT. Significant controversies currently exist regarding IFRS No.16, “Property, Plant, and Equipment.” Specifically, as an allowed alternative, IFRS No.16 permits the use of fair value for the valuation of plant assets. Critics argue that IFRS No.16 allows firms to report estimates of market prices, which introduces a reporting noise in the financial statements. Such criticism has become a major obstacle to IFRS’ acceptance by the SEC for cross-board listing and for IFRS to become a truly global standard. This study empirically assesses the reported plant assets under IFRS No.16. Based on the data of 3,449 observations from 1,370 companies representing 50 countries, whose consolidated financial statements were prepared using IFRS, this study documented significant empirical evidence suggesting that plant assets reported by sample firms under IFRS No. 16 reflect their economic value as perceived by investors.
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