Fair value disclosure quality and earnings management across economic cycles: A content analysis through the lens of creative accounting in Swedish real estate firms

Sammanfattning

This study investigates whether and how the quality of fair value disclosures under IAS 40varies across different economic states in Swedish listed real estate firms. Although priorresearch has demonstrated a negative relationship between disclosure quality and earningsmanagement, limited attention has been given to how economic cycles influence thetransparency of IAS 40 disclosures in the real estate sector. Using a content analysis approach,the study evaluates 54 annual reports from nine Swedish real estate firms during the financialcrisis period 2008-2010 and the boom period 2016-2018. The results suggest that disclosurequality was generally lower during the crisis period, particularly regarding sensitivityanalysis, unobservable valuation inputs and explanations behind fair value changes. Incontrast, more standardized disclosures, like choice of valuation method, remained stable inquality across both economic periods. A closer analysis of the firms with the lowestdisclosure quality show some patterns consistent with potential earnings managementbehavior. However, the study also highlights the challenge of establishing definitive evidenceof earnings management, as fair value accounting relies heavily on subjective assumptionsand managerial judgement. At a minimum, the findings suggest that economic uncertaintymay influence how transparently firms communicate fair value information, especially indisclosure areas characterized by greater accounting discretion.