SYNOPSIS
Accounting for corporate leasing activities has been examined and debated for more than 30 years. Currently both the Financial Accounting Standards Board (FASB) and International Accounting ...Standards Board (IASB) are developing standards to modify financial reporting for operating leases, which are currently reported off-balance sheet. In light of these proposals, we examine existing literature to better anticipate possible effects of any changes. Namely, we review existing studies to understand why firms engage in operating leases and how information about these arrangements impacts users. First, we review studies directly examining leases. As that review reports, some studies show that companies engage in off-balance sheet leasing at least in part to manage financial statement presentation. Other studies, however, suggest that firms utilize operating leases to manage costs and preserve capital. In general, the research reports that lenders, credit rating agencies, and other capital market participants sufficiently understand off-balance sheet leases and consider them in their decision making. Second, we provide commentary on one of the current proposals' more debated areas and a current point of FASB and IASB divergence: classification of expenses associated with operating leases. While the IASB proposes disaggregating interest and amortization elements, the FASB proposes reporting a single, combined lease expense. However, very little research explicitly addresses expenses associated with operating leases. Existing studies do, however, suggest that information disaggregation, particularly with regard to operating and financing activities, is important. Our review may be useful to regulators as the reporting standards for operating leases are debated.
Economic-financial analysis is the means by which a company can identify its own strengths and weaknesses, in relationship to the means at its disposal, as well as the opportunities and threats that ...it is facing. The economic-financial analysis represents a managerial tool meant to proceed to the examination of an economic entity, in order to identify and solve the problems that arise. The process of managing and administering the company, regardless of the field of activity and the proposed purpose is complex. The appreciation of the differences in performance and financial position depends on the nature of the company as well as on the system of instruments used in wealth management. The basis of our research and results for this company was the economic-financial analysis through which we identified its strengths and weaknesses in relation to the means at its disposal, but also the opportunities and threats to it. The objectives of the research are the analysis of certain indicators in order to identify and solve the problems that this company faces in an aggressive competitive environment, to anticipate the movements of the competition and to self-evaluate the resources it has. These objectives were achieved and explained through the diagnostic analysis within the article.
We explore the effects of reducing the overall size of the central bank's balance sheet and lowering its maturity structure. To do so, we consider an environment where fiscal policy is traditionally ...passive and the central bank follows the Taylor principle. In addition, the monetary authority has also explicit size and compositional rules regarding its balance sheet. Agents in this economy face limited commitment in some markets and government bonds can be used as collateral. When short‐ and long‐term public debt exhibit premia, changes in the central bank's balance sheet have implications for long‐run inflation and real allocations. To ensure a unique locally stable steady state, the central bank should target a low enough maturity composition of its balance sheet. In our numerical exercise, calibrated to the United States, we find that long‐term debt holdings by the central bank should be less than 0.5 times of their short‐term positions. Moreover, the process of balance sheet normalization should aggressively respond to the total debt issued in the economy relative to its target. These findings depend on the degree of liquidity of long‐term bonds. The more liquid long‐term bonds are, the lower is the value of the composition threshold and the parameter space consistent with unique and stable equilibria is smaller. In addition, we consider a modified Taylor rule that takes into account the premium. Such a rule increases the prevalence of multiplicity of steady states and delivers lower welfare. Thus, we argue that the traditional Taylor rule is appropriate for managing interest rates in the presence of premia.
Land resources are the material basis for human survival and development. Rapid economic development in the past has resulted in the over-utilization of land, and the undervaluation of land in market ...transactions has further exacerbated the loss of land benefits. This calls for monitoring the quantity and quality of land and reversing the undervaluation of land to reduce the waste of land resources. Based on this, a scientific natural capital accounting system of land resources should be established to understand the quantity and value of land resources in time. In order to provide a comprehensive evaluation of land utilization, this paper introduces the idea of compiling the land resources balance sheet. First, the physical quantity of land is calculated through the ecological footprint method improved by net primary productivity. Second, the value quantity of land is calculated through the equivalent factor method which is improved by the biologically productive land area obtained above, and then using ArcGIS to further demonstrate spatial and temporal changes in land resources. Taking the relevant data of Chongqing from 2000 to 2020 as an example, the land status is comprehensively evaluated from multiple perspectives, including quantity, value and spatial distribution. The results show that: (1) Under the dual impact of changes in the physical quantity and the unit price of land, the value quantity of land assets and equity in Chongqing realized 5.9 times and 5.1 times growth respectively during the study period. (2) Grassland was the most productive land type in Chongqing. Over a long time period, Chongqing prioritized the development of animal husbandry, placing too much emphasis on the production function of grassland and neglecting ecological protection, which was caused by an imbalance in the pasture area. In 2020, grassland utilization exceeded 40.9 % of the carrying capacity. (3) The value quantity of land in Chongqing existed in a spatial distribution pattern that was high in the southeast and northeast and low in the center and west, and there was a great imbalance in its growth rate among regions. The research results are helpful to the rational utilization and standardized transaction of land resources in Chongqing, and provide references for the inclusion of land resources in the management of state-owned assets.
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•The accounting system of land resource balance sheet is constructed.•The “land assets”, “land equity” and “land liabilities” are reasonably expressed through the ecological footprint.•Land quality is considered in the calculation of land ecosystem service value.
This study investigates how differences between the rating agencies' initial (at the date of debt issuance) and subsequent (post-issuance) monitoring incentives affect securitizing banks' rating ...accuracy. We hypothesize that the agencies have stronger incentives to monitor issuers when providing initial versus post-issuance ratings. We document that initial ratings are positively associated with off-balance sheet securitized assets and incrementally associated with on-balance sheet retained securities. However, subsequent ratings fail to capture current exposure to off-balance sheet securitizations. We also find that subsequent ratings reflect default risk less accurately than initial ratings. The subsequent ratings' responsiveness to default risk is worse when a bank has more off-balance sheet securitized assets. Collectively, our findings are consistent with lax post-issuance monitoring. They raise questions about the effectiveness of using ratings as an ongoing contracting mechanism and suggest that conclusions about rating accuracy could differ depending on whether researchers focus on initial versus post-issuance ratings.
Theory suggests that balance sheet information such as total assets, total equity, or total liabilities complements earnings information in helping investors assess a firm’s profitability and ...estimate earnings growth. The voluntary disclosure of balance sheet information at earnings announcement could help investors gather and process this information at a lower cost. We therefore predict that voluntary balance sheet disclosure at the time of an earnings announcement helps investors promptly understand the implication of current earnings news for future earnings and subsequently reduces post-earnings-announcement drift (PEAD). Consistent with these predictions, our results show that when firms provide voluntary balance sheet disclosures, the earnings response coefficient in the event window is significantly higher and the corresponding PEAD is significantly lower. We further find that the impact of voluntary balance sheet disclosure on PEAD is more pronounced when the magnitude of balance sheet value surprise is larger, when balance sheet value is more informative about future earnings, when earnings uncertainty is higher, or when information cost is higher, consistent with our conjectures that helping investors to better understand future earnings performance and lowering information costs are key mechanisms underlying the effect of voluntary balance sheet disclosure on PEAD.
Sustainability has become a global trend to which Argentina is no stranger. This trend is materialised, among other things, in the surge of the social balance sheet (SBS). In this article, based on ...the theory of the “system of professions” developed by Abbott (1988), we will try to understand how the Argentinean accounting profession has tried to extend its jurisdiction to the preparation and verification of social balance sheets. We will see how, despite its intellectual, academic and political actions, the Argentinean accounting profession has not succeeded in expanding its jurisdiction to the SBS. Thus, attempts to legislate the preparation and verification of the SBS have not always been successful. Although many Argentinean firms prepare an SBS, very few use the SBS model proposed by this profession or have their SBS verified by accountants.
The background of our analysis is the evolution of the power structure in Argentina, illustrating the tension between a profession originally organised in a corporatist way, which was inherited from a former economic model, and the new global trends, which are linked to the expansion of financial markets and the rise of sustainability. This structural change creates difficulties for the profession that will ultimately impede its expansionist purpose. We use this case to illustrate certain limitations of the Abbottian approach when it is applied to a context outside the Anglo-Saxon world.
We explore the practical relevance from a supervisor’s perspective of a popular market-based indicator of the exposure of a financial institution to systemic risk, the Marginal Expected Shortfall ...(MES). The MES of an institution can be defined as its expected equity loss when the market itself is in its left tail. We estimate the dynamic MES recently proposed by Brownlees and Engle (2012) for a panel of 68 large US banks over the last decade and a half. Running panel regressions of the MES on bank characteristics, we first find that the MES can be roughly rationalized in terms of standard balance-sheet indicators of bank financial soundness and systemic importance. We then ask whether the cross section of the MES can help to identify ex ante, i.e. before a crisis unfolds, which institutions are more likely to suffer the most severe losses ex post, i.e. once it has unfolded. Unfortunately, using the 2007–2009 crisis as a natural experiment, we find that some standard balance-sheet ratios are better able than the MES to predict large equity losses conditionally to a true crisis.
We study the effect of investor horizons on a comprehensive set of corporate decisions. We argue that monitoring by long-term investors generates decision making that maximizes shareholder value. We ...find that long-term investors strengthen governance and restrain managerial misbehaviors such as earnings management and financial fraud. They discourage a range of investment and financing activities but encourage payouts. Innovation increases, in quantity and quality. Shareholders benefit through higher profitability that the stock market does not fully anticipate, and lower risk.
An organization's financial statements reflect their financial well-being and determine their ability to meet the health care needs of the citizens in their community. It is imperative that nursing ...leadership recognize the key components of an organization's annual consolidated financial statements, the balance sheet and income statement, and know how to interpret them to provide efficient, high-quality health care and to be successful in their role as nurse leaders. This article provides exemplars of these key documents with detailed instructions for the interpretation and understanding of the organization's financial statements, which will enable the reader to accurately and adeptly interpret their own organization's financial statements, as well as the statements from other organizations.
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