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This study aims to provide insights into US and Australian analysts' views regarding the relative importance of disclosing the direct method (DM) or indirect method (IM) statement of cash flows and forecasting firm performance.

Evidence is collected from responses to 104 surveys and 52 interviews completed by US and Australian analysts from 2017 to 2022. The survey and interview questions are developed with reference to the literature.

US and Australian analysts believe that the DM format provides incremental benefits compared to the IM for (1) confirming the reliability of earnings; (2) improving earnings confidence; (3) more accurate ex ante forecasts of operating cash flow and earnings; and (4) identifying opportunistic accruals manipulation. Analysts view that DM disclosure can lower firm-level cost of equity, although US interviewees more uniformly expect lower costs of equity under DM disclosure when firms yield low earnings quality. DM disclosure is also more important during unstable economic periods, as proxied by COVID-19.

Limited research currently exists regarding disclosure of the DM or IM and its impact on analysts' forecasting accuracy, earnings quality, economic uncertainty and cost of equity. Previous research has relied on archival research to examine differences between the DM and IM methods and are limited by data availability. Our findings are particularly relevant to the US market with few US firms reporting the DM format.

This case study will allow students to understand and analyse the process for conducting equity valuation by building a three-statement financial model, to understand and apply the workings of discounted cash flow (DCF) valuation methodology and its components, to apply the concepts related to the calculation of the weighted average cost of capital in the determination of discounting rate, to understand the terminal value calculation and assumptions thereof and to analyse the intrinsic valuation for the target company using the traditional multi-stage DCF model for investment decision-making.

In July 2019, Kapil Agarwal, an equity analyst operating out of Mumbai, India, was carefully looking over the financials of Asian Paints, a leading paints company in India. As an equity analyst, Kapil was constantly on the lookout for fundamentally strong but undervalued companies that could create long-term wealth for his equity fund. To decide upon the right valuation of Asian Paints, Kapil conducted fundamental analysis using the DCF method on the basis of available financial information. This case study puts students in an investment analyst role wherein they forecast financial statements and conduct DCF valuation for Asian Paints to discover potentially undervalued stocks for investment decision-making.

This case study is designed for use in an undergraduate or postgraduate programme in business management, particularly in a course on business valuation or investment management or security analysis.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.

The purpose of this explanatory research was to understand how firms align strategic planning and budgeting both ex ante and ex post. After the literature review indicated that there was a shortcoming in explaining how the alignment was done, we interviewed management accountants at 20 large, profitable, stock-market listed firms with head offices in the Toronto area of Canada. To understand practice through interviews, we used qualitative, multi-case field research to address our research question, how do firms achieve alignment between their strategic plans and budgets, both ex ante and ex post? Our findings and contribution were that, rather than multiple processes (strategy, strategic planning, budgeting, and forecasting), strategic planning and budgeting are part of a single process. Alignment of strategic planning and budgeting is undertaken prior to the beginning of the fiscal year (ex ante) and during the fiscal year (ex post). Both provide opportunities to change ineffective strategies, strategic plans, and actions to minimize financial harm. Ex ante and ex post alignments enable the accomplishment of firms’ financial objectives through explicit and verifiable decisions. With forecasting heretofore being an unclear and ambiguous subprocess, this chapter has made it transparent and manageable in assisting with accomplishing the strategy, strategic plan, and budget.

This paper empirically demonstrates the major organizational events of a rolling forecasting process and the roles of controllers therein. In particular, this study aims to investigate how the understanding of a “realistic forecast” is translated and questioned by various mediators in the rolling forecasting process and how it affects the quality of planning as the ultimate accuracy of forecasts is seen as important.

This study follows an actor-network theory (ANT) approach and maps the key points of translation in the rolling forecasting process by inspecting the roles of mediators. This qualitative case study is based on interviews with controllers and managers involved in the forecasting process in a single manufacturing company.

The paper identified two episodes of translation in the forecasting process, in which the forecast partially stabilized to create room for managerial discussion and debate. The abilities of controllers to infiltrate various functional groups and calculative practices appeared to be one way to control the accuracy of forecasting, although this was built on a façade of neutrality.

Prior literature identifies the aims of interactive planning processes as being to improve the quality of planning. The authors apply ANT to better understand the nature of mediators in constructing an entity called a “realistic rolling forecast”.

This paper aims to examine the dynamism of causal relationships among cloud computing (CC) adoption factors in the Indian context, considering the perspectives of both the cloud adopter and cloud provider.

The case-study method has been used to understand the dynamics among the factors. Using data from specific cases in India, causal loop diagrams (CLDs) have been developed. System dynamic modeling (SDM) and simulation are used to study the relationships and their effect on the adoption rate.

The results revealed that adoption of CC depends on various factors such as persuasion (time-saving, cost-saving and word of mouth) and constraint factors (security and financial loss). However, it is seen that the adoption rate is very sensitive to changes in adoption per contact and word of mouth. Further, the adopter firm has a quicker time to market, which gives an added advantage to the firm. Also, with CC services, a firm can fulfill its projects or clients' requirements with little to no upfront investment in information technology (IT) services.

Lack of security, standardization and undefined service-level agreements are a few pressing issues that make it difficult for firms to evaluate the performance and reliability of services. Hence, immediate attention is needed to make transparent policies on CC and its services, thereby building trust.

This is the first and only work that has tried to explore and empirically test the dynamics of critical factors while making an adoption decision, considering both the adopter and provider perspectives. This study shows the journey of a firm, starting from being a prospective adopter to an adopter and continuous user. The work also empirically tested how adopters of technology benefit from the technology.

Government organisations, small and medium-sized businesses, education, and the entertainment industries all use multimedia technology to communicate information and ideas across digital, print, catalogue, and advertising mediums. Any message delivered by businesses, whether digital or printed graphics, images, text, movies, or animation, is more likely to be accepted by the target audience. The financial sector is no exception. Multimedia technology refers to activities involving computers, software development, and online media distribution. Professionals and experts in computer or software development use multimedia technology to create a variety of mechanisms including product demos, web pages, news sites, and presentations to attract attention or convey any message to a specific audience. Multimedia technology such as multimedia software, transaction processing, electronic payments, voicemail, and networked communication required banks and the financial sector to adopt new practices for delivering banking services and making the financial system more user-friendly for consumers and the financial industry’s operation. Banks and other financial institutions are compelled to innovate as computer technologies advance to maintain competitiveness. Multimedia technology offers lower occupancy costs with a smaller staff and lower transaction processing expenses. New technologies in the financial sector are replacing traditional methods of operation because multimedia technology makes work simpler, faster, and more effective. The industry is trying to switch to a self-service model through technology by providing the same level of convenience at a lower price.

This paper examines the impact of International Financial Reporting Standards (IFRS) 9 on earnings management (EM) using data from 2011 to 2019 of 100 commercial banks in Europe.

Using data from 2011 to 2019 of 100 commercial banks in Europe, the authors conducted several empirical investigations to test the mediating role of IFRS 9 on earnings manipulation through loan loss provision (LLP) by banks.

The result shows that the new accounting standards (IFRS 9) significantly affect the way banks report LLP. This paper provides evidence that non-listed banks in the EU engage in EM through LLP following IFRS 9 but experience less volatility of net income following the adoption. The findings indicate that such behaviour by banks cannot be suppressed by level of audit quality; suggesting that an improvement in accounting standards might not always guarantee accounting quality.

This finding has some policy implications; and regulators will need to identify additional tools to regulate or supervise EM behaviour.

The purpose of this study is to examine how US farm sector performed in 2020, the first year of the pandemic. There were significant supply and demand shocks due to the pandemic. Furthermore, there was significant fluctuation in commodity prices and record high government payments in 2020. This study aims to examine the performance and position of US farm sector (financially) to system (and global economy) wide shocks.

The authors examine 2020 values for farm sector financial ratios before and after the onset of the Coronavirus (COVID-19) pandemic using the data from the United States Department of Agriculture to understand the financial position and performance of the US farm sector.

The authors find solvency ratios (which are indicators of the sector's ability to repay financial liabilities via the sale of assets) worsened in 2020 relative to pre-pandemic expectations. Efficiency ratios (which evaluate the conversion of assets into production and revenue) and liquidity ratios (which are indicators of the availability of cash to cover debt payments) showed mixed outcomes for the realized results in 2020 relative to the pre-pandemic forecasts. Four profitability ratios were stronger in 2020 relative to pre-pandemic expectations. All solvency, liquidity and profitability ratios plus 2 out of 5 efficiency ratios for 2020 were weaker than their respective average ratios obtained from 2000 to 2019 data.

This research is one of the first papers to use financial ratios to examine how the US farm sector performed in 2020 compared to expectations prior to the pandemic.

Research questions: Is there a systemic relationship between different methods of screening candidates for predictive maintenance? How do the goals of a predictive project influence the choice of a dropout method? How do the company’s characteristics implementing the predictive project influence the selection of the dropout method?

The authors described and compiled a taxonomy of currently known methods of screening candidate aircraft components for predictive maintenance for maintenance, repairs and overhaul organizations; identified the boundaries of each way; analyzed the advantages and disadvantages of existing methods; and formulated directions for further development of methods of screening for maintenance, repairs and overhaul organizations.

The authors identified the relationship between various screening methods by developing the approach proposed by Tiddens WW and supplementing it with economic methods. The authors built them into a single hierarchical structure and linked them with the parameters of the predictive project. The principal advantage of the proposed taxonomy is a clear relationship between the structure of the screening methods and the goals of the predictive project and the characteristics of the company that implements the project.

The authors of the article proposed groups of screening methods for predictive maintenance based on economic indicators to improve the effectiveness and efficiency of the screening process.