The Australian Accounting Standards Board (AASB) and the Financial Reporting Standards Board (FRSB) have issued a joint proposal that will allow reporting entities to choose between the direct and ...indirect method of reporting cash flow statements. This evidence presented in this paper indicates that the direct cash flow reporting format, relative to the indirect method, leads to better prediction of future firm performance and has a stronger association with share prices. The AASB and the FRSB have to decide whether to support high quality reporting or harmonisation.
This study examines differences in audit fees and fee components (i.e., audit hours and billing rates) among the big five auditors (BIG5) in a for‐profit, public sector setting. Most prior audit ...hours literature employs evidence from a single auditor. As we employ evidence from all BIG5 auditors, we are able to generalize the results of prior research. We show that higher financial risk increases the number of audit hours but not fee per hours and that a different mix of audit hours and billing rates is used to audit different industries. This suggests that it is important to control for industry in future audit effort studies. We also show that the BIG5 auditors have similar audit fees. However, within the BIG5, auditors employ a different mix of audit hours and billing rates and we show that this difference reflects whether the auditors are classified as structured or unstructured. These results should be interpreted in the light of the limitations of this study, which include the small sample size, the public sector setting and the classification of auditors as structured or unstructured.
Carlin and Finch (2009)
compare the reported goodwill impairment discount rates to their own ‘independent’ estimate for a sample of 105 Australian firms. On the basis of this comparison they claim ...(but do not show) that the discretion in determining the discount rate ‘could be used opportunistically’ and ‘fundamental questions must be asked about the quality of reported earnings … produced in conformity with the IFRS regime’. This commentary points out that the research design does not permit the assessment of either of these claims.
This study examines the association between the existence of an audit committee and audit fees. We adapt the model in Griffin et al. and include an interaction term to capture possible joint ...countervailing effects between the audit committee and audit risk. The sample comprises New Zealand public sector entities for the period 1998–2000, when audit committee formation was voluntary. For profit‐oriented public sector entities there is a positive association between audit committees and audit fees but no significant interaction terms. For public‐benefit entities, audit committees are associated with lower audit fees and interact with audit risk. The results are consistent with audit committees being a more important mechanism for public‐benefit entities.
Haswell and Langfield‐Smith (2008)
(HLS) catalogue 57 ‘serious defects' in International Financial Reporting Standards (IFRS) and conclude that IFRS dilute pre‐IFRS Australian accounting standards. ...They question the adoption of the Australian IFRS protocol. I review each of their 57 ‘serious defects' and classify them as (1) where the defect existed in pre‐IFRS Australian standards; (2) where the defect is trivial rather than serious; or (3) where HLS ignore the possibility of alternative explanations. In most cases the alternative explanations can be found in IFRS and, unlike the arguments of HLS, have been through process. Alternatively the argument provided by HLS had been through due process and discarded. I conclude that HLS is neither a serious empirical study nor a well‐reasoned a priori analysis. It is simply a catalogue of personal assertions. The conclusions they reach on IFRS are not possible from evidence they provide.
Abstract
This paper collects survey evidence on the costs and benefits of adopting
I
nternational
F
inancial
R
eporting
S
tandards (
IFRS
). It also examines the motivations for the timing of
IFRS
...adoption. Significant differences exist between early and late adopters for three of nine benefits and for one of six cost measures. No significant differences exist in terms of firm size or the impact of
IFRS
on contracts. Early adopters perceive themselves as market leaders. They are more certain about the manageability of implementing
IFRS
and are more specific with regard to the impact of
IFRS
adoption. Late adoption decisions are motivated by adverse consequences and uncertainty.
This study investigates demand and supply characteristics associated with firms that voluntarily established audit committees meeting 'best practice' membership guidelines. We focus on a set of best ...practice criteria rather than on the separate elements of the best practice criteria as in past studies. We conduct our tests using a sample of New Zealand listed companies that, relative to firms in other capital markets, are smaller and have more concentrated ownership. This setting differs from prior research because we expect the costs of voluntarily achieving best practice to be reasonably high. The results show that demand factors are not significantly related to the presence of an audit committee that conforms with best practice membership guidelines. However, supply factors (i.e. those firms with larger and more independent boards) are more likely to form audit committees that meet best practice. These results suggest that compliance costs will be greater for firms with smaller and less independent boards of directors if they are required to comply with best practice requirements.
Capitalizing Non-cancelable Operating Leases Bennett, Bruce K.; Bradbury, Michael E.
Journal of international financial management & accounting,
July 2003, Letnik:
14, Številka:
2
Journal Article
Recenzirano
There have been recent international moves to require the capitalization of non‐cancelable operating leases. Most prior research on the constructive capitalization of leases has been undertaken on US ...data. The results from US studies may not apply to international firms because non‐US operating lease contracts may differ in lease term, discount rates, and renewal options. This study presents the financial statement impact of constructive capitalization for 38 firms listed on the New Zealand Stock Exchange. New Zealand is an appropriate institutional setting because the required footnote disclosures for operating leases are similar to the International Accounting Standard. The method of constructive capitalization follows the general approach developed by Imhoff, et al. (1991). The results show that constructive capitalization has a material impact on reported liabilities and financial ratios. The results suggest that, relative to present value procedures of constructive lease capitalization, heuristics used by analysts lead to the overstatement of lease liabilities and lease assets. However, the use of single cross‐sectional parameters (e.g., discount rates, lease life) results in constructed lease assets and liabilities that are similar to more elaborate firm‐specific procedures.
Several studies report an asymmetry in the distribution of earnings around specified benchmarks. However, doubt has arisen over whether the observed ‘kink’ in the distribution of earnings is solely ...caused by earnings management. We use a ratio analysis approach to examine a range of specific accruals for evidence of earnings management. We find little evidence that firms immediately above the benchmark have abnormal receivables, inventories or provisions. However, they do increase cash‐from‐customers and reduce inventory. Thus, our results support the recent research that suggests that firms engage in real actions to meet earnings benchmarks.
Theory indicates that hedging can increase firm value by reducing expected taxes, expected costs of financial distress, and other agency costs. Prior research, based on survey data, has found only ...weak evidence consistent with theory. This study provides evidence on the corporate use of derivative instruments from the 1994 audited financial statements of 116 firms. We use the fair and contract values scaled by the market value of each firm to measure the extent of derivatives usage. The results are largely insensitive to our measure of derivatives usage and generally in line with theoretical models of corporate risk management.
