Revaluation Effects on Certain Financial Measures

From 2005 shall all listed entities in European Union present their financial statements in full accordance to International Financial Reporting Standards (IFRS). Historically the continental accounting in Europe is based on historical costs measurement. Reporting under IFRS framework shifts this paradigm towards fair value approach. This paper deals with the revaluation issues in financial reporting from the position of the company as well as from the position of potential investor. The results of performed analysis shown different effects of several revaluation methods used for measurement of securities on ROA (Return on Assets), ROE (Return on Equity) and EPS (Earnings per Share). All ratios are sensitive to revaluation processes via P/L (Profit or Loss), however the revaluation via OCI (Other Comprehensive Income) have any effect on EPS. 
The various effect plays crucial role also in the current stage of financial markets, where for certain financial securities in difficult to find the correct information about fair (market) value. Having in mind the words of Allan Greenspan (2008): “A model is an abstraction from the full detail of the real world” and Isaac Newton: “I can calculate the movement of the stars, but not the madness of people”, hoping that brand new definition of fair value and current discussion on measurement issues in financial reporting will really lead towards “true-and-fair view”.
Key words: Financial reporting; revaluation issues; IFRS; ratio analysis
JEL codes: M41, G30