STOCKHOLM BUSINESS SCHOOL
Accounting Analysis
Table of Contents
1. Accounting Analysis 2
1.1 Accounting Analysis 2
1.2 Investment Properties 2
1.3 Deferred Tax 3
1.4 Long-term Interest-bearing Liabilities 4
1.5 Property Costs 5
1.6 The Accounting Policies and its Application effects on financial statements 6
2. References 8
2.1 Annual 8
2.2 Literature 8
3. Appendices 9
3.1 Appendix 1 9
3.2 Appendix 2 10
3.3 Appendix 3 10
ACCOUNTING ANALYSIS[pic 1]
- Accounting Analysis
1.1 Accounting Analysis
The accounting analysis is the analysis for the accounting policies which involve recognizing, measuring and presenting the items that affect the overall company’s financial position. In our accounting analysis we included investment properties, deferred taxes, long-term interest-bearing liabilities and property costs. We chose to include these items because we thought they were important items affecting the company’s financial position.
The following text will follow a trend of talking about recognition to measurement and finally presentation without direct headlines to help the text flow.
1.2 Investment Properties
In accordance with IFRS investment properties are recognized as assets only when it is probable that future economic benefits flow to the holding entity and where a reliable cost can be measured for the asset. Castellum reports on assets using the fair value model with estimated yields which is fitting for a real estate company as their main assets value are prone to change in a rapidly shifting market, it is standard practice for the industry (Castellum, 2016).
Klövern also values their properties at fair value, however they revalue their entire portfolio each year divided in to 70-80% internal valuation and the rest external. Castellum does not disclose exactly how much of their portfolio gets revalued, instead they present the valuation of the external entities and present their deviations. Forum Fastighetsekonomi are responsible for their external valuations in Sweden and CBRE together with Cushman & Wakefield help in Denmark.
Klövern has a rolling 12-month cycle of revaluation of all their properties. The valuation model used by both internal and external values is yield valuation based on the cash flow model, meaning based on future cash flows.
During 2016 Castellum had external valuations on about 57% of their properties, skewing towards the larger assets, where about 27% of their overall assets are cross referenced with their own internal valuations. That is to say part of their portfolio where valued by both internal and external valuations. See appendix 4.
Both Castellum and Klövern exclude building and project/land rights in their calculations.
Besides valuations estimates are made around other factors that guarantee a solid yield for the assets. As the core business revolves around rental of properties the valuations have taken into consideration future earnings capacity in regard to changes in rental levels, occupancy rates as well as property costs.
They have taken their own valuation as the reference point, or the norm, and then made comparisons to external valuation as an average with all of their presented key values that were mentioned in the last paragraph. The core measurement is estimated yield requirements for individual assets and then the aggregated portfolio. Average valuation yield includes actual transactions and adjustments such as real occupancy rates, property administration, rent income and valuation changes year to year.