We report that firms reversing impairments under IAS 36 are not more incentivized to engage in earnings management and do not actually engage in more earnings management than a control sample matched ...on size and industry. We observe that reversals are positively associated with stock market valuation changes but not with future operating performance. Bifurcating our reversal firms into earnings managers and other firms, we report that the impairment reversals of the latter are positively associated with future firm performance and current stock market returns, while those of the former are negatively associated with future operating performance and are unrelated to stock valuation. Thus, while on average impairment reversals are undertaken in an unbiased manner, a minority of firms exploit the latitude provided by this fair value accounting standard to manage earnings upward. This research provides useful information to accounting standard setters pertaining to the adoption of fair value accounting methods. It also assists investment analysts by demonstrating how to detect opportunistic reversals of impairments.
The IFRS mandatory adoption in European countries is an excellent context from which to assess the validity of accounting choice theory, which postulates that information asymmetry, contractual ...efficiency (agency costs) and managerial opportunism reasons could drive the choice. With this aim, we test the impact of these factors to explain the adoption of fair value for investment properties (IAS 40) in the real estate industry, taking into account the 'revaluation' option offered by IFRS1 and using historical cost without revaluations as a baseline category for comparison purposes. We select a sample of European real estate companies from Finland, France, Germany, Greece, Italy, Spain and Sweden, all first-time adopters of the IFRS. Using a multinomial logistic model, we show that information asymmetry, contractual efficiency and managerial opportunism could account for the fair value choice. Particularly, the most significant findings are that size as a proxy of political costs reduces the likelihood of using fair value while market-to-book ratio is negatively associated with the fair value choice. On the other hand, leverage, another typical proxy of contracting costs, seems not to influence the choice. This evidence confirms the current validity of traditional accounting choice theory even if it reveals, in such a context, the irrelevance of the usual relations between accounting choice and leverage.
The goal of this paper is to examine how disclosures of goodwill impairment tests under IAS 36 are prepared in conditions of high uncertainty. The data come from Polish companies listed at the Warsaw ...Stock Exchange, where economic and legal developments have been dynamic as compared to the main global equity markets, thus increasing uncertainty. We use interviews and content analysis, and we draw on genre theory to understand how narrative disclosures are written. We find that the disclosures follow clear rules of a genre, which require the financial statement disclosures to be a domain of facts. In cases where significant doubts concerning the reliability of impairment test outcomes exist, preparers place clues that professional readers can notice and follow to determine the reliability of test results themselves. These findings suggest that specific disclosure requirements are needed in countries where the national culture does not favor open discussions of the limitations to the reliability of accounting numbers.
La normativa contable internacional ofrece con la Norma Internacional de Contabilidad 40 (NIC 40) "Inversiones inmobiliarias" un caso referente para investigar la decisión que toman las empresas ...cuando se les ofrece el valor razonable o el coste histórico como criterios alternativos de valoración. En este trabajo aprovechamos la oportunidad que ofrece esta norma para aportar evidencia adicional en un contexto multinacional y multisectorial sobre cuáles son los motivos que explican la elección contable. Además, en este trabajo introducimos y comparamos el uso de las redes neuronales artificiales y los árboles de decisión, con el objetivo de evaluar la capacidad predictiva de estas metodologías, frente a la tradicionalmente utilizada regresión logística para la resolución de problemas de clasificación en este área. Los resultados de la clasificación indican que tanto las redes neuronales como los árboles de decisión pueden ser una alternativa interesante a los métodos clásicos estadísticos como la regresión logística. En particular, las dos metodologías mostraron una mayor capacidad predictiva frente a la regresión logística aunque no se encontraron diferencias significativas entre ambas.
Period costs are extremely important for financial disclosure because they are running directly in the P&L account, having an immediately impact on income statement, and thus on financial ...performance.In the management accounting, period costs are deducted from revenues without ever having been included as part of inventory, whereas in the financial accounting they are assigned to the accounting period.In this paper we posit that employees benefits (IAS19) represent period costs,highlighting the main difference in treatment of fringe benefits on the short term and on the long run, where accrual approach intervenes. (IAS37).
Este estudio analiza 14 empresas chilenas del sector energético que tienen la particularidad de haber revaluado sus propiedades, planta y equipo (PPE) en 2009 y continuado la aplicación de este ...modelo en los periodos posteriores hasta 2015, según la Norma Internacional de Contabilidad16. La metodología utilizada consistió en la revisión de los estados financieros de las empresas de la muestra. Los resultados muestran que el uso del modelo de revaluación de las PPE tuvo un fuerte impacto en el patrimonio de las empresas en el periodo estudiado, en donde el método utilizado corresponde a una metodología particular, adaptada al sector energético chileno para regular las tarifas, conocida como el valor nuevo de reemplazo (VNR).
The study analyzes 14 Chileans companies from the entire energetic economic sector. The totality of these companies revalued its Property, Plant and Equipment (PPE) and continued to applying this model in the subsequent periods up to 2015, according to the International Accounting Standard16. The methodology used consisted of the review of the financial statements of the companies in the sample. The results show that the use of the revaluation model of PPE had a strong impact on the companies’ equity, where the method used corresponds to a particular methodology adapted to the Chilean energy sector when it comes to regulate rates, known as the New Replacement Value (NRV).
Este estudo analisa 14 empresas chilenas no sector da energia que tem a distinção de ter reavaliadas suas propriedades, plantas e equipamentos (PPE) em 2009 e que continuaram a aplicação desse modelo nos períodos posteriores até 2015, de acordo com a Norma Internacional de Contabilidade16. A metodologia consistiu na revisão dos estados financeiros das empresas incluídas na amostra. Os resultados mostram que o uso do modelo de revalorização das PPE teve um forte impacto sobre o patrimônio das empresas no período estudado, onde o método utilizado corresponde a uma metodologia particular, adaptada para o setor de energia chileno para regular as tarifas, conhecida como o Valor Novo de Substituição (VNS).
Purpose - The purpose of this paper is to compare the segmental information disclosures of Jordanian companies under IFRS 8 for 2009 with disclosures under IAS 14R for 2008.Design methodology ...approach - A sample of 109 Jordanian companies is used in this research. A disclosure index checklist was constructed to assess the segmental information provided by the sample companies. In particular, the checklist collected information about: the number of segments reported; the number and type of segmental items published; the geographic segment definitions (areas) used; and the identity of the chief operating decision maker (CODM).Findings - The results suggest that segmental disclosures under IFRS 8 have increased compared to the information published under IAS 14R. There is an increase in the number of companies disclosing segmental information while the number of business and geographic segments for which information is provided rose under IFRS 8. Items required under the previous standard (IAS 14R) are still being provided in 2009, and the new segmental information required (if reviewed by the CODM) under IFRS 8 is also disclosed. As a result, the total number of segmental items disclosed increased. Moreover, a majority of companies identified the CODM as the chief executive officer.Research limitations implications - This research highlights that the introduction of IFRS 8 has been associated with more Jordanian companies now disclosing segmental information. However, factors other than IFRS 8 may have contributed to the increased disclosure; these are not considered in the current paper.Originality value - This research shows that IFRS 8 compliance amongst Jordanian first market companies has resulted in an increase in the number of segments and items per segment disclosed.
We examine the impact of adopting International Accounting Standard 39 - Financial Instruments: Recognition and Measurement (IAS 39) by non-US commercial banks cross-listed in the US on earnings ...volatility and its risk relevance. As IAS 39 requires the recognition of unrealized fair-value gains and losses for a larger set of financial and derivative-financial instruments, and the impairment charges for loans and receivables, we expect and find that IAS 39 adoption increased earnings volatility in IFRS-adopting firms from 2005 onwards. Furthermore, both hedge accounting and the fair value option under IAS 39 are designed to reduce mixed-measurement volatility and to improve the sensitivity of firm risk measures to earnings volatility. We also find that the relationship between credit ratings (proxy for risk) and earnings volatility increases for IFRS-adopting firms after 2005. The evidence is consistent with the argument that IAS 39 increases the credit relevance of earnings volatility. PUBLICATION ABSTRACT
This paper focuses on some issues related to the cash flow statement in the context of accounting education in Turkey. I identify eight aspects related to the cash flow statement based on my ...experience in teaching IAS 7 Statement of Cash Flows, and discuss their evolution over time. The paper also incorporates the educational perspective of Turkish accounting academics who teach an undergraduate level accounting course that covers this statement. For the purpose of this study, a survey of Turkish academics was conducted. The findings provide insights on how the students competencies related to the cash flow statement should be improved in the context of undergraduate level accounting education in Turkey and, by extension, in Central and Eastern European countries. While the paper is focused on the Turkish context, the findings might be of interest for other countries in the region, embarked in the modernization of financial reporting and International Financial Reporting Standards-based accounting education.
The IAS 34 "Interim financial reporting" defines the minimum information content of an interim financial report and the accounting recognition and measurement principles that should be applied for ...the complete or simplified financial reporting drawn for an interim period. This Standard does not mandate which entities should publish interim financial reports, how frequently, or how soon after the end of an interim period. These matters should be decided at the level of each country, by national governments, security regulators stock exchange and accountancy bodies. This standard applies if an entity is required or elects to publish an interim financial report in accordance with the International Financial Reporting Standards.
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