Fair value accounting by listed South African companies in the non-financial sector

This study uses a content analysis of 82 listed South African companies' annual reports to determine the extent to which South African listed companies in the non-financial sector choose optional fair value accounting (FVA). The study found that almost all companies disclosed historical cost as their primary measurement basis, disclosed FVA for financial instruments as the exception to the historical cost basis, and generally did not choose the fair value option in areas where International Financial Reporting Standards offer a free choice of whether or not to apply FVA. More specifically, most companies did not choose optional FVA for property, plant and equipment and did not choose optional FVA for intangible assets. Seventy-eight percent (78%) of the non-property investment companies did not choose optional FVA for investment properties in contrast to the property-investment companies where nearly all adopted optional FVA to account for their investment properties. Ninety-six percent (96%) of companies did not account for investments in subsidiaries, associates and joint ventures at fair value in their separate financial statements. The study therefore concludes that companies generally do not adopt optional FVA where there is a choice of whether to do so or not.