Revaluation and Altman`s Z-score –the Case of the Serbian Capital Market

The bankruptcy prediction models based on accounting information are sensitive to accounting changes based on real business events and some based on artificial valuation as well. Revaluation is a concept primarily connected with fair value accounting and estimation of market price for classes of property, plants and equipment. In this paper, the hypothesis that elimination of revaluation, as artificial accounting change,from the balance sheet could increase the accuracy of Altman’s model has been tested. The aim of this paper is to establish how significant the impact of revaluation on Altman`s models calculation is. The results have shown that cosmetic changes cannot improve the accuracy of the Z score model. The results also confirmed previous research which rejected Z score application in Serbia. This research proves that the cosmetic changes cannot improve the accuracy of the Z score model. The users should turn to models created for local specific markets. Study[22] has shown that applying the models to time periods and industries other than those used to develop the models may result in a significant decline in the models’ accuracies.