The value relevance of fair value accounting: evidence from the real estate industry

Mukesh Garg, Dean Hanlon

Research output: Contribution to journalArticleResearchpeer-review


This study examines whether investors use the fair value of real estate investments in the balance sheet, and unrealized fair value gains and losses in the income statement, in their price setting process. Drawing on sample firms from the real estate development industry in New Zealand, the results of the current study suggest that: (1) unrealized fair value gains and losses on real estate investments have incremental value relevance compared to historical cost earnings, controlling for the method of recognition of the fair value gain or loss; and (2) current fair value of real estate investments has incremental value over historical book value of real estate investments. Such investigation is important given the current international debate concerning fair value accounting.
Original languageEnglish
Pages (from-to)408-417
Number of pages10
JournalCorporate Ownership and Control
Issue number4
Publication statusPublished - 2012

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