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The purpose of this study is to investigate the impact of International Accounting Standard 39 (IAS 39) on income-smoothing activities and pro-cyclical behavior through loan loss provisions using a sample of Hong Kong banks.

Fixed effects estimator is used, and the analysis covers the period from 2000 to 2009.

The results suggest that Hong Kong banks engage less in income-smoothing activity after they comply with the IAS 39. No evidence supports loan loss provisions of Hong Kong banks exhibiting more pro-cyclical behavior after IAS 39 adoption.

Compliance with IAS 39 should improve the quality of bank financial reporting. The reduction in income-smoothing activities among Hong Kong banks after IAS 39 adoption fairly supports the effectiveness of International Financial Reporting Standard (IFRS) and countries that have yet to comply with IFRS may take action to apply the standards. Bank regulators should take pro-active action in addressing the issue of pro-cyclicality of loan loss provisions, as IAS 39 focuses more on improving the financial information quality, while pro-cyclicality is associated with the economic cycles.

Hong Kong banking industry is unique, as it was among the first IFRS adopters in the East Asia region and it has its own legal framework for developing accounting standards. The results of this study are expected to shed some light on the effects of IAS 39 adoption on income smoothing and pro-cyclicality of banks in the East Asia region, where the accounting cultural value dimensions and institutional structures are different than that of European countries.

The purpose of this study is to examine the impact of the reclassification of International accounting standard (IAS) 39 on income smoothing using loan loss provisions among European banks.

Regression methodology is used to determine the extent of income smoothing using loan loss provisions before and after IAS 39 reclassification. The authors predict that the strict recognition and re-classification requirements of IAS 139 reduced banks’ ability to smooth income using bank securities and derivatives, motivating them to rely more on loan loss provisions to smooth income. The authors test this hypothesis over a sample of 114 European banking institutions over the period 2005 to 2013.

The findings do not support the prediction for income smoothing through loan loss provisions. Also, there is no evidence for income smoothing in the pre- and post-IAS 39 reclassification period.

The implication of the findings is that the European banks did not use loan loss provisions to smooth income during the period examined, and rather rely on other accounting numbers to smooth income. This implies that the International Accounting Standards Board’s strict disclosure regulation improved the reliability and informativeness of loan loss provision estimates among European banks during the period of analysis.

This study is the first attempt to analyze the effect of IAS 39 re-classification on bank’s ability to smooth income in Europe.

The study aims to examine the role of unrealized gains and losses recognized under international accounting standards (IAS) 39 in explaining stock prices for investment companies listed on the Kuwait Stock Exchange (KSE), and how the inclusion of unrealized gains and losses in income numbers affect the incremental explanatory power of earnings.

The study utilizes Ohlson’s (1995) valuation model combined with a technique developed by Theil (1971) that has been applied in several prior studies.

The results of the cross-sectional regression indicate that net income and book values jointly and individually are positively and significantly related to stock prices; the incremental information content of net income is greater than that of book values; the inclusion of unrealized gain in income numbers increases the explanatory power of the model; and the incremental information content of net income before unrealized gains and losses is lower than that of book value. Thus, including unrealized gains and losses from investment in net income enhances the incremental information content of earnings. Our overall results show that unrealized gains and losses play an important role in explaining stock prices for investment companies in Kuwait, and that including them in the income numbers increases the incremental explanatory power of earnings.

This study is original because it is the first to empirically investigate the role of unrealized gains and losses recognized under IAS 39 in explaining stock prices for investment companies listed on the KSE and how the inclusion of unrealized gains and losses in income numbers affect the incremental explanatory power of earnings.

One of the most fundamental changes to affect financial reporting in recent years has been the introduction of International Financial Reporting Standards (IFRS). This paper aims to examine the nature of the Income Statement and Net Equity IFRS adjustments for a sample of companies from the UK, Ireland and Italy following the introduction of IFRS.

A sample of IFRS Reconciliation Statements are examined to identify the most significant IFRS adjustments. Using an index of conservatism, these amounts are further analysed to assess their impact on the accounting numbers reported under previous national GAAP.

For all three countries, the IFRS profit was greater than that reported under previous national GAAP. IFRS also had a significant effect on net worth; while UK and Italian companies experienced an increase in equity upon the adoption of IFRS, the Irish firms in the sample recorded a decrease. The analysis also indicated that the impact of IFRS on profit and net worth was primarily attributable to a few core standards including IFRS 2, IFRS 3, IFRS 5, IAS 10, IAS 12, IAS 16, IAS 17, IAS 19, IAS 38 and IAS 39.

A multi‐country perspective for future IFRS research is required as the impact of individual IFRS varies in importance from one country to another.

By analysing the IFRS that have had a significant impact on accounting numbers prepared under previous national GAAP, opportunities for future research are identified.

This paper investigates the financial disclosure practices of corporate annual reports published in Asian countries including Bangladesh, Indonesian, Malaysia and the Middle East countries including Bahrain, Iran, Jordan, Kuwait, Oman, Pakistan, Qatar, Saudi Arabia and Turkey. The purpose of the study is to measure the financial disclosure diversity in these countries, with a view to developing a classification of their similarities and differences in respect to their compliance with International Accounting Standards (IAS). Annual reports of 126 public companies liisted on the countries' stock exchanges are the central data source, supplemented with other relevant information about financial disclosure practices in each country. A disclosure checklist adopted from all IASs and summarised in 306 individual items of financial disclosures is used as a means of extending an understanding of financial reporting in these countries. Results show the relative degree of conformity with IASs for each of the countries included in this study.

This paper aims to examine the frequency and the nature of International Financial Reporting Standards/International Accounting Standards (IFRS/IAS) violations that resulted in modified audit opinions (MAOs); determinants of MAO decision; and underlying motives, targets and techniques of accounting manipulations.

Descriptive statistics and in-depth investigation on archival data collected from the published audit reports are used to analyse the frequency and the nature of IFRS violations that resulted in MAOs, while the logistic regression is applied to identify the possible determinants of MAO decisions. A survey instrument is used to identify the relative importance of different manipulation motives, targets and techniques from the perspective of an external auditor.

Results from the archival research show that MAOs are expressed in 29% of audit reports of listed companies in Croatia. A majority of the qualifications refer to noncompliance with provisions of IAS 39, IAS 16, IAS 1, IAS 2 and IAS 36. The survey results show that manipulations are principally oriented towards creditors, tax authorities and suppliers with the intention to hide bad performance, get better terms of crediting and minimize fiscal and political costs. Results from the field study complement and confirm the archival research results in respect to the accounting areas and techniques used for manipulation purposes.

The analysis provides a rather robust estimation of the extent of accounting manipulations, compared to commonly used earnings management metrics. Application of multi-method research that integrates archival research and field study offers significant contribution to the existing earnings management literature in methodological approach. The results directly address particular provisions of the IFRS that are frequently violated and provide better understanding of the features of accounting manipulations in a specific institutional setting.

This paper seeks to examine the risk relevance of fair value income measures under IAS 39 and IAS 40.

The study sample comprises Jordanian insurance companies. Data were collected from two main sources: Jordanian insurance companies' annual reports, and the official website of the Amman Stock Exchange. The study begins by investigating the volatility of four income measures, calculated by including and excluding holding gains or losses of financial instruments and property investments. Then it examines the association between its four income volatility measures and one stock market‐based risk factor, in order to provide evidence on the risk‐related information content of each income volatility measure.

Income based on fair values reflects income volatility more than historical cost‐based income. It is also found that income is (not) more volatile with the recognition of unrealized fair value gains/losses on financial instruments (investment property). Results of assessing the relative explanatory power of income volatility measures suggest that not all fair value income volatility measures can be a good proxy of the total risk. On the contrary, none of our income volatility measures provides significant incremental risk‐relevant information for total risk.

Most prior studies have focused on the value relevance of fair value accounting in Western developed countries, and mainly in the banking sector. This study makes a significant contribution to existing knowledge via exploring the applications of fair value accounting by insurance companies and investigating the implications of mark‐to‐market on risk, instead of share price, in an emerging country – Jordan. The findings of this study are useful to researchers and capital‐market participants interested in explaining accounting and market risk measures.

This study examines how International Financial Reporting Standards (IFRS) are applied, disaggregates the cumulative effect of the IFRS transition into magnitude measurements of the standard-to-standard differences (by standard) and management discretionary choices (by choice) and tests which transitory effects at every level of disaggregation alter investor behavior.

Using hand-collected data from the IFRS 1 disclosures, the research design consists of eight regression models which test fluctuations in investment behavior as a function of varying measures of IFRS adjustments at aggregated and disaggregated levels including magnitude measurements of pronouncements and management choices.

Findings from the study identify specific standards and management discretionary choices associated with market reaction. Evidence from this study demonstrates the value of disaggregated measures to obtain a more comprehensive understanding of market reaction and associations with transitory effects of IFRS. Findings from the study suggest that the market favors management discretionary choices that decrease retained earnings and potentially increase future net income. Overall, model results suggest that a more comprehensive understanding of the specific standards is obtained that alters market behavior and how the market responds to positive and negative equity adjustments.

This study contributes to the literature examining the capital market effects of IFRS by decomposing the generally accepted accounting principle (GAAP) transition into magnitude measurements of specific standard-to-standard differences (by standard) and management discretionary choices (by choice) to understand how the market responds to the transitory effects of a GAAP change. This is important because it puts regulators, standard setters, investors and researchers on notice that the way in which the authors analyze and measure equity components could be consequential to the authors ability to assess a GAAP change. This study informs all jurisdictions which have adopted or are deliberating the adoption of IFRS how IFRS is being implemented and which areas of application are relevant to investors. Further, market reactions to accounting information pertaining to a GAAP change may only be revealed at the disaggregated and decomposed levels of the retrospective application of the GAAP implementation.

This paper investigates the factors influencing the future of the IASB, using as the point of departure, a review of its historical progression towards becoming the global accounting standard‐setting authority. It concludes that the IASB is an organisation vulnerable to (1) political lobbying of influential institutions, (2) US accounting authorities decision makers, (3) potential accounting scandals, and (4) cultural differences resulting in the misapplication of its standards around the world. Such factors should be borne in mind when charting the next steps for the IASB and in evaluating the comparability and quality of accounts produced under IFRSs around the world.

Part V analyzes the details of how to assess materiality. It first tackles qualitative versus quantitative criteria and the role of professional judgment. It then analyzes the selection of quantitative threshold, to expand to the choice of benchmarks. It contrasts the whole financial statements with subaggregates, line items, and components.

Specific sections contrast IASB, FASB, SEC, and other guidance on materiality applied to comparative information, interim reporting, and segment reporting.

The section on estimates mingles complex guidance coming from accounting, auditing, and internal control over financial reporting to explain how the management can improve its assessment of materiality concerning estimates.

After explaining the techniques to move from individual to cumulative misstatements, the part tackles verification ex post, and finally summarizes the intricacies of whether immaterial misstatements are permissible and their consequences.