| Abstract [eng] |
Financial statements are the key source of financial information about the company, its performance and efficiency. This financial information is used by investors, competitors, suppliers, creditors, public institutions, shareholders, directors, managers and others. According to this information, they make various decisions about company‘s business prospects. Therefore, the quality of financial information in the financial statements must be ensured. One of the requirements for determining the accounting policies of an enterprise is to determine how the assets and liabilities will be valued. In recent years, a lot of academic literature comparing historical cost and fair value was written. Majority of those studies provided arguments for and against fair value, but the final decision wasn‘t made. The most common topic of the fair value method is the two main qualitative characteristics of accounting information: relevance and reliability. This valuation method allows to provide relevant information based on market, but at the same time, it gives the opportunity to manipulate accounting information. Historical cost based on transaction documents is well-established and well-known, but with fair value trend, historical cost approach also begins to be analyzed with the advanteges and disadvantages of this method. Therefore, it is important to analyze how the quality of financial information changes, using fair value and historical cost. The objective of this Master‘s final degree project is fair value and historical cost valuation methods. The main purpose is to determine whether the use of fair value increases the quality of the financial statements more than historical cost. Four goals have been identified to achieve the main purpose: 1) to analyze the academic literature about the quality of financial reports using fair value and historical cost; 2) to provide theoretical solutions for determining the quality of the financial statements and for the use of fair value and historical cost methods; 3) to develop a methodology for analysis of the quality of financial statements using fair value and historical cost; 4) to perform an empirical research on the quality of financial statements using fair value and historical cost and to present the results. Results of the empirical research on the quality of financial statements using fair value and historical cost showed that none of the valuation methods analyses have a significant impact on the quality of the financial statements. This means that applying either the fair value or the historical cost method does not provide higher or lower quality of the financial statements compared to each other. |
