VALUE ALLOCATION – CONTRIBUTION AND RISK TO THE RELIABILITY OF FINANCIAL REPORTING

105 2, XIX, 2016 DOI: 10.15240/ ul/001/2016-2-007 Business Adminis a ion and Managemen In oduc ion The decision-use ulness heo y (S aubus, 2008) connec s he quali y o he i nancial in o ma ion disclosed wi h he igh business decisions made by i s use s, and i is based on he no ion ha he ele ance and eliabili y o i nancial epo ing is c ucial, ha ing impo an p ac ical implica ions. Mo eo e , acco ding o he basic economic heo y, i is shown ha high i nancial epo ing quali y is a na u al ou come o p i a e equi y moni o ing and go e nance (Beuselinck & Maniga , 2007). All hese i s ly imply ha he s anda d se e s de elop quali y accoun ing s anda ds ha a e accessible o p epa e s, unde s andable and use ul o in e nal (manage s) and ex e nal use s o make hei decisions. Secondly, his implies he co ec use o accoun ing s anda ds and egula ions and co ec es ima es. The mos impo an es ima ion in accoun ing is due o he use o he ai alue concep , a alue connec ed o he ma ke , which is an al e na i e o his o ical cos , as he la e was he dominan alua ion basis up o wo decades ago. The deba es on he ai alue pa adigm a e no ecen . They had a g adual e olu ion and became mo e in ense wi h he awa eness o he cu en i nancial c isis e ec s. Fai alue can be analyzed heo e ically and no ma i ely. In his s udy we ea he no ma i e app oach o ai alue, namely accoun ing and alua ion s anda ds. Focusing on he in e na ional e e- en ial issued by he In e na ional Accoun ing S anda ds Boa d (IASB), ou esea ch shows ha he In e na ional Financial Repo ing S anda ds (IFRS) in ensi y ai alue use, peaking wi h he issue o IFRS 13 Fai alue measu emen . This FV accoun ing s anda d cla i i es he de i ni ion o ai alue, es ablishes a amewo k o measu emen and equi es disclosu es abou his measu emen . Es ima- ions a e done in h ee s ages, wi h a s ic p e e ence o ma ke -based measu es, ai alue being an exi alue unde idealized condi ions (Deaconu & Buiga, 2010). In e na ional Valua ion S anda ds Council (IVSC), he p o essional associa ion ha b ings unde egula ion he ac i i y o asse s and businesses alua ion a he in e na ional le el, has i s own amendmen s ega ding he concep o ai alue. Acco ding o IVSC, he de i ni ion o ai alue is p esen ed in he accoun ing s anda ds, as he concep is gene ally consis en wi h he concep o ma ke alue. In e na ional Valua ion S anda d (IVS) 300 en i led Valua ions o Financial Repo ing p esen s he iew o alua ion egula o s in wha conce ns he alua ion bases in accoun ing and ai alue es ima es. S a ing om hese coo dina es and he in e dependence be ween alua ion p ac ice o i nancial epo ing and a co ec es ima e o ai alue, we es ablished as esea ch ques ion he analysis o he isk inhe en o he p ocess o alue alloca ion. This is one s age in he sequence o alue es ima e echniques o an asse o business and i is implied by he use o wo classical alua ion app oaches, namely he ma ke and he income app oaches. These wo app oaches lead o he es ima e o a global alue o a g oup o asse s. Howe e , o ecogni ion in he i nancial s a emen s he alue needs o be alloca ed o each asse . The alloca ion p ocess is somewha a i i cial, a leas o a pa o he asse s in he g oup, as alloca ion keys need o be used. Usually, hese can be based on alue es ima es made by alue s o on book alues which a e no always e alua ed acco ding o he equi emen s o alua ion s anda ds. The la e solu ion p esen ed needs o be ea ed wi h cau ion, and his is wha we will be ocusing on in ou p esen esea ch, especially as we discuss a ypical economic con ex s. Acco ding o (Deaconu & Buiga, 2010) a ypical VALUE ALLOCATION – CONTRIBUTION AND RISK TO THE RELIABILITY OF FINANCIAL REPORTING Adela Deaconu, So ana C isan, Anu a Buiga EM_2_2016.indd 105EM_2_2016.indd 105 3.6.2016 11:47:563.6.2016 11:47:56 106 2016, XIX, 2 Ekonomika a managemen ma ke s e e o asse s ha a e no held o sale o specialized, illiquid ma ke s o non-o dina y ansac ions, and ma ke s less ac i e speci i c o eme gen economies. The li e a u e shows ha he exi p ice and he p emises ega ding a pe ec ma ke a e no applicable o any ype o economy (Hi z, 2007; Ronen, 2008; Whi ing on, 2008). Focusing on an eme gen con ex , we conside he ele ance o his o ical cos , which is some imes used in i nancial epo ing, and he ele ance o ai alues ob ained by using a key o alue alloca ion, while conside ing he case s udy o he Romanian ma ke . P ac ically, we adop an empi ical app oach in o de o in es iga e he alue alloca ion p ocess in wha conce ns ypes o asse s unde alua ion, alua ion app oaches used, and alue alloca ion keys used by p o essional alue s. All o hese enable us o conclude on he ele ance o he alue alloca ion p ocess o i nancial epo ing, and hus he eliabili y o ai alue. The emainde o he pape is o ganized as ollows: Sec ion 1 explains he esea ch amewo k, p esen ing e e ence o he i ems impo an o his esea ch in he li e a u e; Sec ion 2 p esen s he esea ch design, while desc ibing he esea ch ques ion and he cons uc o he empi ical app oach; Sec ion 3 e eals he esul s o he s a is ical analysis; and he i nal sec ion concludes. 1. Resea ch F amewo k 1.1 Value Alloca ion P ocess Wi hou going in o de ails ega ding he deba e on ai alue e sus his o ical cos – deba e which is s ill ongoing – we only wish o men ion ha ai alue is cha ac e ized by ele ance and accoun ing neu ali y (Cas a, Colasse e al., 2001), while his o ical cos is mo e objec i e and eliable as he e a e no echnical issues o i s es ima ion. The pa allel p esen a ion o he wo concep s unde lines he impo ance o co ec ai alue es ima ion as his leads o ano he imagine o he ansac ions and ac i i ies o a business compa ed o he adi ional sys em o his o ical cos , o ano he economic eali y (Ronen, 2008; Ré olle, 2008; Whi ing on, 2008). In wha conce ns he e e ence o ai alue in he accoun ing and alua ion s anda ds, we s a wi h he accoun ing s anda ds ou o which IFRS 13 Fai alue measu emen cla i i es he accoun ing alua ion sys em and epeals ea lie de i ni ions on his subjec om a ious IFRS. IFRS 13 de i nes he ai alue o an asse as he p ice ha would be ecei ed o sell an asse in an o de ly ansac ion be ween ma ke pa icipan s a he measu emen da e. IFRS 13 includes a  ai alue hie a chy which classi i es measu emen s acco ding o he na u e o a ailable inpu da a, namely, in he case o asse s: le el 1 inpu s a e quo ed p ices (unadjus ed) in ac i e ma ke s o iden ical asse s ha he en i y own a he measu emen da e; le el 2 inpu s a e inpu s o he han quo ed p ices included in le el 1 ha a e obse able o he asse ei he di ec ly o indi ec ly; le el 3 inpu s a e inpu s unobse able o he asse . The e a e addi ional accoun ing equi emen s conce ning measu emen s done using le el 3 inpu s. A alua ion epo is adequa e i i includes su i cien in o ma ion on he alua ion inpu s used (especially le el 3 inpu s) o enable he epo ing en i y o co ec ly ca ego ize asse s wi hin his hie a chy (IASB, 2013). Wi hin he alua ion s anda ds, he s anda d dedica ed o ai alue measu emen , in o he e ms i nancial epo ing, is IVS 300 Valua ions o Financial Repo ing. The alua ion s anda d shows ha IFRS akes on wo models o asse s’ ecogni ion in he i nancial s a emen s: a model based on cos , en i led basic accoun ing app oach, and espec i ely a model based on ai alue which ep esen s he al e na i e accoun ing app oach admissible in ce ain pa icula cases. Ma ke alues a e de e mined when he ai alue app oach is applied. Acco ding o IVSC (2011), he e e ences o ma ke pa icipan s, an o de ly ansac ion, he ansac ion aking place in he p incipal o he mos ad an ageous ma ke and o he highes and bes use o an asse make i clea ha ai alue unde IFRS is consis en wi h he concep o ma ke alue as de i ned and discussed in he IVS F amewo k. Acco ding o IVS 300 (IVSC, 2011), when he book alue o an elemen is based on i s ai alue, and when he alue o indi idual componen s canno be eliably de e mined, he ai alue needs o be alloca ed o each componen . Jus like accoun ing s anda ds, IVS ecommend ha he alue alloca ion p ocess should be desc ibed so ha he logic behind he alloca ion can be ollowed, and he alloca ion keys should be p esen ed, and hei usage jus i i ed (IVSC, 2011). In wha conce ns he alloca ion keys, IVS 300 shows ha he a io be ween he cos o he elemen EM_2_2016.indd 106EM_2_2016.indd 106 3.6.2016 11:47:563.6.2016 11:47:56 107 2, XIX, 2016 Business Adminis a ion and Managemen and he cos o he agg ega ed g oup could be conside ed an adequa e alloca ion basis. The h ee adi ional alua ion echniques o asse s o businesses a e: he ma ke , he income and he cos app oach espec i ely. In ela ion o he es ima ion le els men ioned in he accoun ing s anda ds and in he ligh o he alue alloca ion p ocess, we could s a e ha he ma ke app oach is adequa e only o asse s o businesses ha a e equen ly subjec o ma ke ansac ions and hus ha e an ac i e ma ke . I is he only app oach ha leads o alues which could be classi i ed as pa o Le el 1 in he ai alue hie a chy, when hey a e compa ed o iden ical asse s. The income app oach is applicable when u u e income/p o i s gene a ed by he asse can be es ima ed eliably, he o ecas pe iod should be easonable o hese p edic ions as well as he capi aliza ion/ discoun a e used o he o ecas pe iod and he p o i abili y o he asse discoun ed wi h he isk o ob ain he income. Es ima es based on he income app oach could lead o Le el 2 and 3 da a in he alue hie a chy. The cos app oach is gene ally adequa e in he case o specialized and/o new asse s, when ac i e ma ke s canno be iden i i ed. Gene ally, i s implemen a ion does no incu alloca ion issues and will lead o es ima es ha all in o Le el 3 o he ai alue hie a chy. In wha conce ns he alua ion app oach chosen, he alues ob ained could belong o an indi idual asse o o a g oup o asse s. In he second case he alue is ob ained globally. The issue o alue alloca ion among he componen s o he g oup occu s in he case o ma ke and income app oaches, as he global alue needs o be di e en ia ed o each asse / p ope y in o de o disclose i sepa a ely in he accoun s. F om he s andpoin o alue s he p ocess is en i led alue alloca ion o componen s. Value alloca ion is implied by se e al scopes o he alua ion p ocess. The main one, and he subjec o ou esea ch, is i nancial epo ing ( e alua ion, goodwill measu emen ), bu in he alua ion p ac ice he e a e also he cases o alua ion o ax pu poses, loan colla e als, insu ance, cases when he ax and i nancial equi emen s a e di e en o each componen . As objec s o alue alloca ion, he cases men ioned in he in e na ional alua ion s anda ds IVS (IVSC, 2011) a e mainly: land and buildings ha o m he same p ope y, se e al buildings (a e he ini ial alloca ion o land), se e al pieces o equipmen om a p oduc ion line, capi alized subsequen expendi u es, acco ding o IAS 16 P ope y, Plan and Equipmen and IAS 23 Bo owing Cos s, which need o be alloca ed o di e en i xed asse s, he alloca ion o he acquisi ion cos o an en i e business acco ding o IFRS 3 Business Combina ion. The i s h ee cases o en occu in p ac ice and a e some imes men ioned in he li e a u e which only e e s o he di i cul ies o alue alloca ion be ween land and buildings. One o he majo issues ha a ise is he possibili y ha a ma ke o buildings wi hou land does exis , and he second issue is he di i cul y o sepa a e he wo componen s (Hend iks, 2005). The mos equen case o alue alloca ion as his objec e e s o eal es a e (land + building), as some imes he land is no subjec o alua ion (Ma onis & De ango, 1993). As echniques used by alua ion p o essionals, he li e a u e ecommends wo deduc i e app oaches om he es ima ed alue o he eal es a e o med o land and building (Hend iks, 2005): (a) es ima ing he ma ke alue o he land wi hou he building and hen deduc ing his om he ca ying amoun o he p ope y, and (b) es ima ing he ne eplacemen cos o he building and hen deduc ing his om he ca ying amoun o he p ope y. App oach (a) is also ecommended by IVS 300 which conside s he esul a ` heo e ical alue` (`no ional alue`) o he building (Kucha ska-S asiak & Zelazowski, 2006). The li e a u e also p esen s a hi d app oach (c) o alue alloca ion, namely he use o a p opo ional a io es ablished h ough s a is ical analyses (Hend iks, 2005). The i s wo app oaches a e based on he heo y o esidual alue (Hend iks, 2005). The hi d app oach akes in o accoun he ac ha he wo elemen s con ibu e oge he o he alue c ea ed. In he case o eal es a e, he ne eplacemen cos is he econs uc ion cos o he g oss eplacemen cos dec eased by physical impai men and unc ional inadequacy o he building, some imes e en ex e nal (economic) inadequacies (Fishman e al., 2007). The alua ion app oaches ha a e applicable o any solu ion adop ed o alue alloca ion a e he cos app oach, which is manda o y, and espec i ely one o he o he wo app oaches, namely he income o he ma ke app oach (Fishe & Len z, 1990; Bel a ge, 2001). The a gumen behind he use o a leas wo EM_2_2016.indd 107EM_2_2016.indd 107 3.6.2016 11:47:563.6.2016 11:47:56 108 2016, XIX, 2 Ekonomika a managemen app oaches is achie ing some con ol keys. Thus, i he alue o he building es ablished a e he ma ke alue o he land was deduc ed om he esul o he income app oach o ma ke app oach is less han he alue o he building es ablished h ough he cos app oach, using only wo o ms o impai men (physical and unc ional), hen in addi ion a hi d o m o dep ecia ion (ex e nal) will ha e o be applied in o de o ob ain he alue o he building. I in he p e ious men ioned case he a io is ice e sa hen he alue o he building is gi en by he cos app oach, and he di e ence is conside ed o be he alue o he land. A second case o alue alloca ion men ioned in he IVS, bu insu i cien ly de ailed in wha conce ns me hodology, and e y poo ly discussed in he li e a u e is (2) he case o se e al buildings ha a e subjec o di e en dep ecia ion echniques and hus ha e o be ecognized sepa a ely in he i nancial s a emen s. IVS 300 indica es as a possible al e na i e he use o a a io sugges ing he con ibu ion o he i ems o he cos o he whole. In he Romanian p ac ice, he alua ion p o essionals eso o one o he ollowing echniques: (a) a esidual al e na i e ha implies he measu emen o dis inc alues o hose i xed asse s (usually he mos impo an ) o which i is possible, and alue alloca ion based on a key in he case o he o he asse s; his implies ha he cha ac e is ics and ea u es o hese asse s a e known; he mos equen ly used app oach is he ne eplacemen cos ; (b) an al e na i e ha is based on alue alloca ion acco ding o a key applied o he whole alue in o de o ob ain indi idual alues. The alloca ion key can be de e mined based on ma ke in o ma ion ans o med in o ne o g oss eplacemen cos o ne o g oss book alues (wi h o wi hou deduc ion o dep ecia ion). The li e a u e on pa icula alua ion cases such as he cash gene a ion uni s (Fishe & Kinna d, 1990; Ma d, 2009; Fishe & Kinna d, 2001). The p esen s ye ano he me hod o alue alloca ion, based on he ma ke alues o he componen s (as o en as his is possible). In his case he income is alloca ed o he componen s acco ding o he pe o mance a io o he in es men in hose componen s. The esidual income is de e mined o he esidual componen , ei he eal es a e o in angible asse s, as he di e ence be ween he o al income gene a ed by he cash gene a ing uni and he income alloca ed o he o he componen s. A e wa ds, he esidual income is capi alized by an adequa e a e in o de o ob ain he alue o he esidual componen . The li e a u e also men ions ha he p ocess o alue alloca ion in gene al implies ho ough p o essional knowledge om he alue and a he same ime he esponsibili y o know and apply na ional alua ion s anda ds on his subjec (Ha pe , 2008). Likewise, o he egula o y bodies in he i eld o alua ion ( o example he Ame ican egula o y body) include in hei s anda ds equi emen s o hei membe s o p o ide in he alue alloca ion p ocess accu acy and an objec i e opinion ega ding he alue o he componen s. The impo ance o he subjec leads o p elimina y discussions in he alua ion p ac ice be ween he alue and he audi o o i nancial s a emen s ega ding a consensus abou he alua ion app oaches and esidual echniques. P o essional easoning is ex emely impo an in he alue alloca ion p ocess as long as he e is no in ensi e p ac ice o line o easoning ha can be ollowed. 1.2 Eme gen Ma ke s Fo eme gen ma ke s in pa icula he e is a mul i- ie ed alua ion p ac ice and a e y limi ed a ailabili y o in es men ansac ional e idence, wi h e ec s on he accu acy o alua ions (Kucha ska-S asiak & Zelazowski, 2006; Mans i eld & Roys on, 2007). Al hough in es o s equi e a common denomina o such as p ope y indices o asse s alua ion and income p edic ion, he e a e di e ences ega ding public in o ma ion a ailabili y in a uni a y amewo k in compa ison o de eloped coun ies. When i does exis , he in o ma ion is no consis en and comple e among he alua o s in a low in o ma ion en i onmen such as he eme gen one. The his o y o he sale and en ansac ions is eco ded by eal es a e agen s, such as eal es a e b oke s and app aisal p ac i ione s who assemble hei pe sonal da abases, a cen al da abase de elopmen being a an incipien s age (Cohen & Galiniene, 2013). Thus, he ma ke app oach is no applicable o all ypes o asse s and a e e y gi en ime, as Le els 1 and 2 o he alue hie a chy (ma k- o-ma ke model) canno be ob ained. When he ma ke s a e ola ile, such as eme gen ma ke s o a e a ec ed by economic c ises, he main app oach sus ainable on he EM_2_2016.indd 108EM_2_2016.indd 108 3.6.2016 11:47:563.6.2016 11:47:56 109 2, XIX, 2016 Business Adminis a ion and Managemen long un is based on income (Baumga en, 1978; Fanning e al., 2011; H dý & Šimek, 2012). Howe e , e en his app oach poses he issue o ob aining he ma ke in o ma ion necessa y o he assessmen . Likewise, p o essional easoning becomes e y impo an when he ma ke s a e unbalanced (including eme gen ma ke s), and alue s need o be able o dis inguish be ween in o ma ion ha will enable a measu emen based on e i cien , balanced and s abile da a (Ma d, 2009). This app oach will lead in gene al o Le el 2 and 3 alues in he ai alue hie a chy. Thus, i he speci i c ma ke o an asse does no exis o is no ac i e, e i cien , hen he ai alue will no be es ablished di ec ly, based on in o ma ion ha is gene ally desc ibed as objec i e, bu a he by using alua ion models based on se e al subjec i e es ima es, less e i i able. Rega ding le el 3 o measu emen (ma k- o-model) which conce ns he income o cos app oach, he isk o alue alloca ion is connec ed o he income app oach. In o de o mi iga e his isk, he accu acy o alloca ion needs o be aken in o conside a ion as well as he way in which he alue s disclose hei unde akings. The li e a u e issued a e he s a o he i nancial c isis insis s on he need o disclosu es o p o ide some de ails conce ning he cons uc o ai alue and i s in l uence o e he esul o he pe iod (Hi z, 2007; Go diene , 2008). Fo example, in he case o he income app oach one needs o es ima e: he use ul li e o he asse , i s esidual alue, he cash in l ows he asse will gene a e o e ime and he discoun a e. Es ima es hemsel es a e subjec i e. In addi ion, in en ional dis o ion o ce ain me ics can occu . Thus, he alua ion model implies an inhe en isk, plus ano he isk connec ed o in en ional manipula ion o in o ma ion (Géla d, 2002). We could say ha he Romanian con ex has been cha ac e ized by in l a ion o he pas wo decades, wi h a high isk o he his o ical cos o mo e u he away om eali y. This is also due o he ac ha some e alua ions we e no always conduc ed acco ding o he equi emen s o he alua ion p o ession. O he di i cul ies conce ning ai alue es ima es a e connec ed o he income app oach which has been di i cul o apply gi en he possibili y o o ecas s o be in alida ed by he e e -changing economic con ex , and espec i ely o he ma ke app oach which has been some imes impossible o apply because o he lack o ansac ions, as shown abo e. S a is ical echniques o alue alloca ion based on he his o y o p e ious ansac ions canno be applied on such a ma ke as a esul o he lack o anspa ency in wha conce ns he speci i c e olu ion o he ma ke o di e en ypes o asse s. I we we e o p esen he e olu ion o he Romanian eal es a e ma ke – which is he subjec o ou analysis – in he las decade he e a e h ee di e en pe iods. Fi s he e is he pe iod be ween 2002 and 2007 when p ices signi i can ly g ew including because o he ac ha Romania was p epa ing o adhe e o he Eu opean Union ( he adhe ence ook place in 2007). Then he p ices plunged as a esul o he economic c isis. A e h ee yea s o powe ul decline, 2008–2010, in he las pa o 2010 he eco e y o he eal es a e ma ke s a ed, wi h posi i e signals o 2011. The sligh eco e y o he ma ke is sugges ed by he g owing numbe o ansac ions o all ypes o eal es a e, e en wi h inc easing p ices. In wha conce ns ou analysis pe iod, he yea 2013, we could s a e ha he ma ke is ela i ely s able, and he ma ke app oach in alua ion can be applied, e en i no o all ypes o asse s. 2. Resea ch Design 2.1 Resea ch Ques ion Good alua ions depend upon p ope analysis and weighing o he ac ual ma ix in any si ua ion. These a e guided by he p o essional s anda ds. Then, ce ain cha ac e is ics o alua ion p ac ice a e de e mined by he con ex o he asse and he ma ke , along wi h he p o essional easoning o he alua o . In ou pape , s a ing om he equi emen s in he s anda ds, we e i y he p ac ical app oaches o alue alloca ion, a sugges i e heme o he eliabili y o alua ions o i nancial epo ing. The p ocess o alue alloca ion is an in l uen ial ac o o a eliable and ele an alue, conside ing ha he use o an inadequa e alloca ion key and/o an inco ec implemen a ion o he keys could lead o dis o ed alues o he componen s. The consequences can be ound in accoun ing ecogni ion o an asse ha is he subjec o a di e en e i ciency analysis o in es men s o hey a e ax ela ed wi h impac on he alue o p ope y ax and p o i ax, in he case o asse s subjec o dep ecia ion. Fo a ypical/eme gen ma ke s he issue o alue alloca ion is all he mo e impo an EM_2_2016.indd 109EM_2_2016.indd 109 3.6.2016 11:47:563.6.2016 11:47:56 110 2016, XIX, 2 Ekonomika a managemen as ma ke in o ma ion is insu i cien , ew ansac ions occu , and book alues lose hei signi i cance due o mone a y dep ecia ion and ha d o p edic ola ile ma ke s o ce ain asse s. Thus, he alua ion o each ype o asse o he ma ke could no be possible, and so alloca ion keys need o be used. The alue alloca ion echnique ha uses a a io es ablished h ough s a is ical analyses is o be used wi h cau ion because such con ex s con on wi h he lack o a eliable da abase which would p o ide his o ical ends s a is ically alida ed. The comp omise solu ion would be o use book alues. On he o he hand book alues canno e l ec he s a e and iewpoin o he ma ke , co ela ed wi h he bes possible use iden i i ed o he asse s unde alua ion. Mo eo e , he use o alloca ion keys based on accoun ing in o ma ion could lead o dis o ed esul s, especially i he book alues ha e been dis o ed by old e alua ions ha we e inaccu a ely made, o due o di e en dep ecia ion app oaches used o he asse s aken in o accoun . The esea ch ques ion needs o be co ela ed wi h he Romanian con ex . Fi s ly, we e i y he deg ee o which ai alue is used in he Romanian con ex , hus he equency o alua ions o i nancial epo ing, and om he e he alue alloca ion. In he Romanian accoun ing egula ions, issued by he public au ho i y, he Minis y o Finance (OMPF no 3055 om 2009) ai alue is explici ly men ioned o e alua ion o angible asse s and o i nancial ins umen s. O he e e ences o ai alue a e implici , such as he alue de e mined o he non-cash inc ease o capi al ha has o be es ablished as a esul o alua ion. Conside ing he alua ion app oaches pe mi ed by he Romanian accoun ing legisla ion, he ma ke and alua ion p o essionals which should de e mine ai alue a e men ioned in he al e na i e alua ion ules sec ion. Also, o he alua ion me hods besides ma ke compa ison a e accep ed i he e is no enough ma ke in o ma ion. The egula ions desc ibed a e applicable o all companies and coexis wi h he egula ion ha en isages he implemen a ion o IFRS by lis ed companies o hei consolida ed accoun s, s a ing wi h Janua y 2007 (OMPF no 1121 om 2006). Because he use o i nancial ins umen s has an ex emely slow e olu ion in Romania, we can conclude ha angible i xed asse s e alua ion was he mos common case o ai alue es ima ion explici ly s ipula ed in he Romanian egula ions. Thus, we will ocus on a su ey answe s p o ided by he alua o s o his objec i e o alua ion o i nancial epo ing, and we will u he discuss he p emises o e alua ion ope a ions in he Romanian companies. A speci i c impo ance has been gi en in Romania o e alua ion, and he app oach we a e going o desc ibe can also be ound in o he coun ies, as he alue es ablished has i scal conno a ions. Local axes on company eal es a e a e de e mined as a pe cen age o he book alue o hose asse s, which may o may no be e alua ed. The e ec s a e ob ious, bo h o he i nancial pe o mance and p o i abili y o he company e l ec ed in he i nancial s a emen s a e he e alua ion, and o he income o public au ho i ies. The legal pe missi e na u e o e alua ions mani es ed o all i xed asse s such as plan , p ope ies and equipmen by he g adual issue o ce ain no ma i e ac s. These ac s had he objec i e o adap he elemen s in he i nancial s a emen s o companies o he economic en i onmen by he upda e o his o ical cos and he unimpai ed alue o asse s. We a e alking abou Go e nmen Decision (GD) no 945/1990, GD no 266/1992, GD no 500/1994, GD no 983/1998 amended and es a ed by GD no. 95/1999. These egula ions we e applicable ei he o all i xed asse s o only o plan s and p ope ies. The egula ions had ei he a compulso y na u e ( o he companies in which he s a e was he majo sha eholde ) o an op ional na u e (as he case o GD no. 983/1998). All o hese e alua ions used he index upda ing me hod and we e classi i ed in he li e a u e as adminis a i e e alua ions, as hey ha e been subjec o c i icism because o he me hod in which he indexes a e selec ed and because only one me hod o alua ion is used. They did no lead o ue ma ke alues, bu hey did ep esen a i s s ep owa d ma ke app oach in alua ion. The p ocess o alue upda e was he esponsibili y o a commi ee o med by company employees. GD no 403/2000 lea es i xed asse s e alua ion up o he companies. The di e ence in compa ison o p e ious e alua ions is ha companies which conduc ed e alua ions (in he ci cums ances desc ibed by he GD ega ding he economic en i onmen , measu ed using he in l a ion a e) a e able o use o he alua ion me hods EM_2_2016.indd 110EM_2_2016.indd 110 3.6.2016 11:47:573.6.2016 11:47:57 111 2, XIX, 2016 Business Adminis a ion and Managemen conside ed adequa e, and can also eso o an ex e nal p o essional alua o . Concluding, a his da e, we can alk abou ai alue in he ue sense o he concep , i he companies ha e eso ed o au ho ized alua o s ha applied dedica ed alua ion app oaches, and did no jus upda e he alue by he in l a ion a e. The consequence o ou s udy is ha book alues mus be conside ed wi h p ecau ion in gene al on he alua ion ma ke , as he e is he possibili y hey con ain e alua ions ha ha e no been made acco ding o he equi emen s o alua ion s anda ds. In his con ex ou esea ch ocuses on he way in which alue alloca ion is made. Thus ou esea ch ques ion is: o wha ex en do alua o s om eme gen ma ke s apply in hei alua ion epo s alue alloca ion o componen s, wha a e he alua ion app oaches mos equen ly used, and wha a e he alloca ion keys mos o en used. The use o he ma ke app oach would educe he isk o he model igge ed by he o he wo app oaches, he income and he cos app oach. In wha conce ns he alloca ion keys, we wan o de e mine i he alue s base hei opinion on keys ha do no lead o dis o ions in he i nancial posi ion which a ec he decisions made by s akeholde s o i nancial si ua ions. 2.2 Ins umen , Sample and S a is ical Tes s Conside ing he objec i e o ou esea ch, he empi ics o he s udy y o cap u e he pe cep ions o Romanian alue s as p oduce s o ai alue o i nancial epo ing pu poses. By using a su ey we es he expe ience o alua o s and hei app oaches in mo e complex si ua ions ha imply he use o p o essional easoning, pa icula ly i hey a e amilia wi h and apply se e al me hods o alue alloca ion be ween componen s o i xed asse s wi h di e en accoun ing ea men s. In his espec , we designed a sel - cons uc ed ins umen , o semi-s uc u ed ype, add essed o he Romanian alua o s communi y. The su ey con ains in he i s pa a se ies o suppo ques ions ha a e designed o ga he in o ma ion on he quali y and expe ience o he esponden s. These ques ions ocus on he quali i ca ions and expe ience wi h alua ions o he esponden s, hei a i lia ion o p o essional bodies, and he size o he businesses hey alua ed, which gi es insigh on he expe ience hey ha e wi h mo e complex cases. The ins umen was also designed o in es iga e he elemen s p io o he alue alloca ion p ocess which ela e o he na u e o he asse unde alua ion and he applied me hodology, and espec i ely, o deepen he p ac ical p ocess o alue alloca ion. Table 1 sho ly p esen s he in e iew ins umen , which is de ailed in Appendix 1. The su ey ins umen was conduc ed online om Feb ua y 2013 o Ma ch 2013, on a web pla o m which was a ailable o ou weeks, while he p oposed in es iga ion was made public on he o i cial websi e o he Na ional Associa ion o Romanian Value s (ANEVAR). ANEVAR also made he in es iga ion public h ough i s egional cen e s, by e-mailing he message o i s membe s. The popula ion s udied is ep esen ed by alue s, cu en membe s o ANEVAR, which is also a membe o he in e na ional body IVSC and he Eu opean o um TEGoVA. We add essed he membe s who a e enlis ed wi h an e-mail accoun in he da abase o he associa ion, ou o he o al numbe o 4,718 exis ing membe s. The numbe o ac i e membe s ha could ha e answe ed is lowe , al hough we do no hold public in o ma ion ega ding he numbe o inac i e membe s, which we can only es ima e o 3,200–3,500. This is he eason why we did no use samples, Pa s o he ins umen Numbe and ype o i ems Pa 1 Cha ac e is ics o he ac i i y o alue s p ac ical expe ience as senio i y and quali i ca ion, espec i ely size and na u e o he alua ed asse s and ype o alua ion app oaches 3 open-ended ques ions 3 ca ego ical ques ions Pa 2 Pe cep ions on he p ocess o alue alloca ion ega ding means o alue alloca ion and keys o alue alloca ion 3 open-ended ques ions 1 ca ego ical ques ion Sou ce: own Tab. 1: The su ey ins umen o alue s EM_2_2016.indd 111EM_2_2016.indd 111 3.6.2016 11:47:573.6.2016 11:47:57 112 2016, XIX, 2 Ekonomika a managemen bu he whole da abase o ANEVAR. The ini ial olume o he sample summed up o 377 alue s. The su eys no i lled ou o a minimum o 90% we e elimina ed om he analysis. And hus we eached he i nal sample o 250 subjec s. In wha conce ns s a is ical es , we used desc ip i e s a is ics ( equencies), and he T- es , One-Sample e sion. The T- es is usually used o he analysis o a sample ou o a de i ned popula ion in o de o de e mine i he e a e signi i can di e ences be ween he di e en analyzed ca ego ies. 3. Analysis Resul s 3.1 Desc ip i e S a is ics The cha ac e is ics o he alue s’ ac i i y a e p esen ed below. In wha conce ns quali i ca ion we no iced an o e specializa ion ega ding eal es a e and plan & Equipmen . As a esul , we educed he weigh s o hese specializa ions also in o de o ha e a s uc u e almos simila o he s uc u e o he popula ion. In wha conce ns he equency o alua ions acco ding o he na u e o he asse , we compa ed he ob ained alues o he binomials o med by he ca ego ies in o de o es ablish he connec ion be ween he alues. Cha ac e is ics o alue s P o essional expe ience (yea s)* Less han 2 yea s Be ween 2-5 yea s O e 5 yea s 10% 18% 72% Quali i ca ion** Real es a e Business, in angibles, goodwill Plan & equipmen Financial ins umen s 78% 55% 30% 0% Magni ude o alua ions o i nancial epo ing pu poses Weigh in he o al olume o ac i i ies unde aken* Less 10 % Be ween 10 and 25% Be ween 25 and 40% O e 40% 24% 35% 20% 21% F equency o alua ions o companies wi h pa imony o di e en sizes*** Consis en pa imony Medium pa imony Low pa imony Insigni i can pa imony Consis en – 12% 10% 12% Medium 47% – 22% 25% Low 47% 46% – 31% Insigni i can 46% 43% 45% – Cha ac e is ics o he alua ions acco ding o he na u e o he asse s and he alua ion app oaches Ca ego ies o asse s*** Land Buildings Plan & equipmen Land – 14% 39% Buildings 65% – 51% Plan & equipmen 17% 9% – Valua ion app oaches* Land Buildings Plan & equipmen Ma ke 93% 27% 37% Income 6% 34% 8% Cos 1% 39% 55% No es: *We used he pe cen age wi hou aking in o conside a ion he non-answe s; **The g oss sample became a weigh ed sample by ela ing i o he popula ion, in o de o ex apola e he dis ibu ion obse ed o he whole popula ion; ***The di e ences in equency be ween he ca ego ies wi h bolded alues a e s a is ically signi i can , o a signi i cance le el ( h eshold) o 95%. Sou ce: own Tab. 2: Cha ac e is ics o he alue s’ ac i i y EM_2_2016.indd 112EM_2_2016.indd 112 3.6.2016 11:47:573.6.2016 11:47:57 113 2, XIX, 2016 Business Adminis a ion and Managemen In wha conce ns he yea s o expe ience held by he alue s, compa ed o he senio i y o he alua ion p o ession in Romania, which is ins i u ionalized h ough ANEVAR ha was inco po a ed 20 yea s ago, we conside ha he ob ained dis ibu ion is ele an o he alue s in Romania. The obse a ions in Table 2 also indica e ha he alue s a e mul i- specialized, and he dominan specializa ion is eal es a e. A he same ime a conside able pa o he sample is specialized (also) in business, in angible and goodwill alua ions, and mo e han a hi d a e (also) specialized in plan & equipmen . These i ndings con i m he compe encies o p o essionals conside ing he alue alloca ion p ocess ha implies knowledge o se e al disciplines. Mo eo e , we no e ha hese p o essionals a e amilia ized wi h i nancial epo ing alua ion, as long as o e hal o he sample conduc s his ype o alua ion be ween 10% and 40% o hei ac i i y. A u he a gumen o he alida ion o he sample is he numbe o alua ions o i nancial epo ing pu poses compa ed o he size o he pa imony alua ed. Value s conduc ela i ely o en complex alua ions, o companies wi h consis en pa imony, al hough he mos equen alua ions a e conduc ed o companies wi h low pa imony, and he equency o he alua ions dec eases as he size o he pa imony inc eases. The equency o alua ion epo s conduc ed o i nancial epo ing pu poses ollows he succeeding gene al o de : buildings, land and plan & equipmen . In compa ison o land alua ions, buildings a e mo e o en he subjec o alua ions in 65% o he cases, while he opposi e si ua ion occu s only in 14% o he cases. A e applying he One-sample T- es we obse ed ha 51% o he alue s conside buildings a e mo e o en subjec o alua ion compa ed o plan & equipmen while 9% conside he opposi e si ua ion. Fu he mo e, wi h espec o alua ion app oached applied, while 93% use he ma ke app oach o land alua ions, o buildings he ma ke , income and cos app oaches a e equally used, and o plan & equipmen he cos and ma ke app oaches a e mainly used. Wha is use ul o ou u he analysis is ha alue s ha e mos ly applied he ma ke and income app oaches, which a e conside ed global app oaches. This shows, heo e ically, ha alue alloca ion was applied in he alua ion epo s o all he h ee ypes o i xed asse s, hus he p emise o u he analysis exis s. 3.2 The Analysis o he Value s’ Pe cep ions Rega ding he Value Alloca ion P ocess Ou i ndings con i m ha alue alloca ion as a s age o he alua ion p ocess o i nancial epo ing pu poses is co ec ly applied in he Romanian p ac ice. Thus, 98% o he alue s s a e ha hey deli e he alue o each componen , a e using one o he alloca ion op ions. Ou o hese, 64% conduc he alua ion as a whole and a e wa ds hey alloca e he alue o he componen s, while 34% es ima e he alue di ec ly o each componen , and an insigni i can pe cen age s a e hey lea e he alue alloca ion a he will o he bene i cia y, wi hou ge ing in ol ed in his p ocess. We conclude ha Romanian alue s apply alua ion s anda ds as hey eso o alue alloca ion i his is needed, despi e he di i cul ies igge ed by he a ypical ma ke . In wha conce ns alue alloca ion be ween land and buildings, 78% o he answe s desc ibed he p e e ence o deduc ing he es ima ed ma ke alue o he land wi hou he building om he es ima ed alue o he p ope y. Only 17% o he esponden s con i med hey use he second al e na i e i.e. deduc ing he es ima ed ne eplacemen cos o he building om he o al es ima ed alue o he p ope y. Wha is in e es ing is ha 5% o he alue s use o he al e na i es o alue alloca ion, depending on he p ope y igh s o he land, he bes possible use o he asse compa ed o i s cu en use, o he es o enclosing he esidual alue o he building in o he es ima ed ne eplacemen cos . We no e he ocus on ma ke alues and ma ke app oach (co ela ed wi h he answe s ega ding he app oach mos ly used, which in he case o land alua ions is he ma ke app oach), which is mo e eliable han he cos app oach, and also he ad anced echnical knowledge o alue s ha eso o alloca ion echniques. In wha conce ns alue alloca ion be ween di e en ypes o buildings, 69% o he esponden s wi h an opinion on his subjec s a e hey deduc he alue o he buildings ha was possible o be es ima ed sepa a ely by using a classical alua ion app oach, and o he emaining buildings hey alloca e he es o he alue by using alloca ion keys. A qua e EM_2_2016.indd 113EM_2_2016.indd 113 3.6.2016 11:47:573.6.2016 11:47:57