An Empirical Study on the Determinants of Management’s Decision for Reporting Long Term Non-Financial Assets at Fair Value in Companies Listed on Borsa Istanbul Equity Market

Abstract

This study is to examine the determinants of management’s fair value choice decision for reporting long term non-financial assets in companies listed on “Borsa Istanbul Equity Market” whose financial statements have to be prepared under International Accounting Standards / International Financial Reporting Standards and thus Turkey Accounting Standards / Turkey Financial Reporting Standards. In this study, Watts and Zimmerman’s Positive Accounting Theory methodology is adopted, and Mann-Whitney U test and logistic regression analysis have been used to analyze data. As a result of analysis, it has been identified that companies reporting property, plant and equipment at revalued amount are funded by more debt and to be smaller companies than companies reporting those assets at amortized historical cost. However, the results indicate that debt contracting, political cost and information asymmetry factors are not the determinants of management’s decision for reporting long term non-financial assets at fair value. The company size explains the management’s decision for reporting property, plant and equipment at revalued amount, but contrary to what is predicted, the revaluation method is chosen by small companies.