- The Study of Fair Value Accounting for Investment Property in Vietnamese Enterprises. - This paper studies the overview of investment property accounting and the presentation of the fair value of investment property in Vietnamese enterprises. - The research results show that 83.8% of enterprises do not present the fair value of investment property on their financial statements at the end of the accounting year. - In addition, the results of the research also show necessary reasons to apply fair value accounting to the investment property. - Based on the results of the research, the paper proposes some recommendations for the State agencies and enterprises to move forward with the usage of fair value accounting for investment property in Vietnamese enterprises.. - Keywords: Fair value, Investment property.. - In the 1990s and in the early years of 21st century "arguments on accounting with the aim at output pricing models with a focus on the use of fair value in accounting". - The fair value model thrives in accounting, in an effort to implement the project of. - developing and issuing IFRS of the IASB, in May 2011, the IASB issued IFRS 13 - Fair Value Measurement to unify the identification and usage of fair value under IAS/IFRS for current financial statements. - supplements the concept of fair value in Article 3. - Accordingly, “fair value is a value determined in accordance with the market price which may be obtained when a property is sold or a liability is transferred at the time of evaluation”. - So far, so many studies have focused on using the fair value model instead of the historical cost model. - These studies conclude that the use of fair value in accounting is an indispensable trend, but must be careful, should avoid making use of the fair value for adjusting the business results and perfecting the financial statements of the enterprise.. - Investment Property accounting is also under this influence. - The results of the survey show that 100% of selected enterprises now are applying the historical cost model for investment property, the historical cost model in accounting applied for the investment property is experiencing some shortcomings. - At this point the remaining value of the investment property in the historical cost model will be much smaller than the actual value of the property on the market. - Or if the value of the investment property is lower than the residual value, then this situation is not reflected by the historical cost model. - This article is designed to study the assessment of the investment property accounting status and the presentation of the fair value of investment property in real estate enterprises. - Some recommendations thereby are proposed for the State agencies and enterprises to move forward the timetable of using accounting under the fair value for real estate enterprises in Vietnam.. - Review of research shows that research is often focused on studying the effect of accounting on the fair value for the usefulness of accounting information in the property market, with a focus on research the investment property accounting. - The research by Nicole Promper explored the effect of accounting on the fair value for the usefulness of property market accounting information derived from the difference between the rules for investment property accounting of IFRS and US GAAP. - According to IFRS, investment property accounting are selected according to their historical cost model or fair value model. - However, USGAAP does not allow the use of fair value models for investment property accounting.. - Through surveys, most companies in Europe apply a fair value model to investment property accounting under International Accounting Standard 40 (IAS 40). - The results of the study show that the difference between the usefulness of accounting information for real estate enterprises in Europe and United States. - In his study, Nicole Promper concludes that, in European enterprises, the application of a fair value model to the investment property accounting, after the initial note the author observed for several years, it has provided useful information to investors even in difficult times of the market, even during the financial crisis of 2008, Nicole Promper's research also showed that the fair value model in most European enterprises have provided more useful information than the conservative approach model of the enterprises in the United States. - The authors focus mainly on the influence of two accounting models: fair value and historical cost on recognizing the value of the property in accounting. - In this study, the authors focused on the impact of applying a fair value model to investment property in 17 Canadian real estate companies when Canada switched to apply IFRS from 01/01/2011. - Research has shown the importance of accounting, being cautious about the appropriateness of fair value determination in accordance with IAS 40 - investment property. - At the same time, in this study, the authors examine the random relevance of fair value determination in Canadian companies with forecasting future cash flows and pointing out that the determination of fair value on investment property has a positive impact on future cash flow and stock prices.. - In addition, research on the application of fair value models in emerging markets is also very important. - For the content of investment property accounting, the use of IFRS is particularly complex because a fair value report will require reliable estimates from an active market. - The study concludes that in surveyed Chinese enterprises, firms listed on the international stock market tend to use accounting at fair value more than firms listed in the domestic stock market. - The study by Fadia Burhan Alhaj Ahmad1 and Mohammad Suleiman Aladwan on the application of IFRS in one of the developing economies in the Middle East region of Jordan has provided additional insight into the application of IFRS in a developing country, where some previous studies suggest that the use of fair value models in developing countries is not very effective for many reasons, such as the absence of active markets with many properties and liabilities. - Fadia Burhan and his colleagues suggest that a study in a developing country will give more insight into the application of fair value models in the implementation of IFRS. - In Jordan, the investment property accounting applied a fair value model at the end of 2007 and revised it at the end of 2011. - The objective of this study was to examine the usefulness of the information presented in the financial report of investment property after applying the IFRS in Jordan real estate companies. - The study confirmed that the measurement of fair value was closely related to market value and that it provided useful information during the study period.. - In general, the authors' conclusions conclude that the use of the fair value model is most appropriate and the fair value is the best basis for calculating the future cash flow. - Survey method: The survey method was used to collect the actual information on the situation of the fair value presentation of the investment property in Vietnamese enterprises.. - The results of the survey method are the data on the fair value presentation of the investment property in Vietnamese enterprises, limitations and shortcomings in the presentation of the fair value of the investment property.. - Actual situation of fair value accounting for investment property in Vietnamese enterprises. - Current status of fair value regulation according to current accounting system of Vietnam. - The Vietnamese accounting system is currently developed on the basis of the historical cost method. - However, Vietnam has also been gradually updated with a fair value method, combining historical cost accounting and re-evaluation in line with the characteristics of each property type at the time of making the financial statement.. - Accordingly, fair value has been mentioned for more than 10 years, and is first defined in VAS 14 - Revenue and other income: "Fair value is the value of a property that can be exchanged or value of a debt that is voluntarily paid among parties who have full knowledge in horizontal exchange". - For the investment property accounting, VAS 05 - Investment property must present "fair value of the investment property at the end of accounting year, making financial statements. - When the enterprise can not determine the fair value of the investment property, the enterprise must explain: the list of investment property. - the reason for not determining the fair value of the investment property”. - In the amended and supplemented Accounting Law No.88/2015/QH13, one of the important contents to be supplemented is to prescribe accounting principles related to fair value. - This is considered as a strong step forward, but it can be said that the application of fair value in Vietnam is just at the introductory stage and there has not been a formal and consistent guidance on the. - method of identification, there has not been a clear direction of fair value usage, there has not been specifically included in the accounting standard.. - Situation of fair value accounting of investment property in Vietnamese enterprises According to the survey of 68 enterprises in Hanoi, 83.8% of enterprises do not present the fair value of the investment property on their financial statements at the end of the accounting year. - Table 1: The results of the survey on fair value presentation of the investment property on the financial statements of enterprises in Hanoi. - At the same time, 58.9% of enterprises are interested in presenting the fair value to the respondents. - Table 2: Survey results of enterprises interested in presenting fair value of investment property in Hanoi.. - Also interviewed at the the 8 enterprises in Hanoi, business leaders (chief financial officer, chief accountant) all said that the use of fair value model for the investment property is necessary to overcome the weaknesses of the historical cost model, for the following two main reasons:. - Fair value accounting for an investment property will ensure that the financial. - value of the investment property. - Describe the reason the fair value of the investment property can not be determined show the fair value of the investment property. - the fair value of the investment property Concern but can not determine the fair value of the investment property. - Concern and determine the fair value of the investment property. - The enterprises themselves, when loaning from credit institutions, must also determine the fair value of property for loan appraisal.. - However, the managers of the 8 selected groups are concerned about how the fair value is determined in the context of inefficient market conditions, without a transparent market, financial information can be misleading, negatively affecting on the economic decisions of information users. - On the other hand, at present, Vietnam does not have any specific guideline on fair value. - Therefore, it is necessary to define an appropriate timetable for the application of fair value model for Vietnamese enterprises.. - Under the pressure of integration requirements and the pressure of demand for developing a market economy, the use of fair value in Vietnam in general and the use of fair value for investment property in particular have taken some steps. - The fair value model meets the information needs for decision making, the basis for calculating the market price is proven to be most appropriate and the fair value model is the best basis for calculating the future cash flow. - However, financial and accounting experts argue that in order to use fair value as a base for valuing in accounting and that to apply a fair value basis in Vietnam in accordance with international practice must have a reasonable timetable. - Based on the results of the study, the authors propose some recommendations to apply fair value for investment property accounting in Vietnamese enterprises in the near future.. - It can be said that the most important change is the revision Add the concept of 'fair value' to provide the basis for the issuance, revision of relevant accounting standards such as investment property, financial instruments, fixed assets. - There is a need of studying, developing and issuing Vietnamese accounting standards on fair value measurement. - In principle, the application of fair value models must be consistent with international practices and conditions in Vietnam. - This standard is developed in an approach that is appropriate to IFRS 13 - fair value measurement. - Then, the system of accounting standards applying fair value should be completed as the basis for measurement. - At the same time, the system of Vietnamese accounting standards, applying fair value should be completed as a basis for measurement in addition to applying the historical cost bases as currently.. - However, it is not an early, one-way thing to put a fair value model into the Vietnamese accounting system in general and the real estate market in particular. - The core issue of using fair value accounting is to have adequate economic conditions. - If the socioeconomic conditions are not adequate, the use of fair value may be misused or misleading financial information. - In the short term, when Vietnamese accountants do not have enough socio-economic conditions to apply fair value right away to investment property, it is necessary to minimize the disadvantages of the historical cost model in current investment property accounting.. - The authors suggest that accounting should be taken to recognize the impairment of investment property in enterprises in the coming time and from then forward to use the fair value model for investment property in future.. - Current standards still can not meet the "fair value". - determination in the investment property accounting. - It can be said that fair value accounting is relatively complex and confusing for users, even in developed economies. - Determining fair value is usually accompanied by estimates, assumptions in the future. - With the need to provide useful information, enterprises will be more and more aware of the important role of using fair value in accounting in general and in investment property in particular. - Based on the results of the study, the article proposes some recommendations for state agencies and enterprises to move forward the route of using the fair value model for investment property in Vietnamese enterprises.. - However, when Vietnam issues new and revised accounting standards in integration with IFRS, new research projects may be implemented such as: Study the factors that lead to the decision to apply the fair value model or the historical cost model to the investment property in businesses. - Study on the usefulness of the information presented in the financial report s on the investment property after Vietnam issued the standard accounting system in the integration with IFRS.. - Chen Chen, Kin Lo, Desmon Tsang and Jing Zhang (2013), Earnings management, firm location, and financial reporting choice: An analysis of fair value reporting for investment properties in emerging market, Contemporary Accounting Research, Singgapore Management University. - Mohammad Suleiman Aladwan2 (2015), “The Effect of Fair Value Accounting on Jordanian Investment Properties An Empirical Study on Jordanian Listed Real Estate Companies”, International Journal of Financial Research Vol. - International Accounting Standards Boad (2012), IFRS 13 - Fair Value Measurement.. - Nicole Promper (2010) “Fair value accounting in the real estate industry - An empirical investigation of the decision usefulness of accounting figures based on IFRS and US GAAP”, Working paper, Department of Accounting and Auditing Johannes Kepler University Linz, Austria.. - Pham Thi Minh Hong and Tran Manh Dung Historical cost model and fair value model for tangible fixed asset accounting", Journal of Economics and Development, Special Issue 10/2013.. - Tran Quang Chung and Vu Thi Lan Huong Discussing the Application of International Financial Reporting Standard 13 in Fair Value Measuring of Equity Instruments in the Stock Market "Journal of Economics and Development, 10/2013.. - Bandyopadhyaya, Changling Chena, Mindy Wolfeb (2017), “The predictive ability of investment property fair value adjustments under IFRS and the role of accounting conservatism”, Journal of Advances in Accounting 05.2017.. - National Assembly of the Socialist Republic of Vietnam (2014), Law No. - National Assembly of the Socialist Republic of Vietnam (2015), Law No.. - 88/2015/QH13 of the National Assembly: Law on Accounting, issued on . - Vu Dinh Hien Fair value - the basis of value measurement in financial reporting", Journal of Economics and Development, December 2015.
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