Search results

International Accounting Standards Rule 37 (IAS 37) for Contingent Liabilities and Assets were designed to make analysis of exposures facing a corporate entity easier to understand, but the rules may be insufficiently prescriptive making provisions inadequate predictors of potential outlays. The purpose of this research is to redress this problem. We apply financial option theory to objectively mark-to-market the appropriateness of provisions replacing subjective inputs with market derived calculations.

This study applies financial option theory to determine whether provisions are appropriate according to market data. This research supports inferences regarding the probability of a provision being used while evidencing scope for earnings management.

In addition to showing how IAS 37 provisions may be calibrated against market data, from the large sample of UK-listed companies, the proposition that over-provisioning is common and related to share price volatility, is supported, supporting the view that IAS 37 rules may facilitate earnings management.

The financial and reporting community have struggled in interpreting the appropriateness of IAS 37 provisions. Are they too large or too small? What is the probability they will be used? Using option theory and market data, various subjective judgements may now be validated. This research should have tangible value to analysts, auditors, investors and other stakeholders concerned in the accurate valuation of potential liabilities.

Replacing subjective judgement and insufficiently prescriptive guidance, this study shows that financial option theory and share price data may be used to objectively calibrate the size of IAS 37 provisions.

The purpose of this paper is to illustrate the extent of disclosure of provisions reported under IAS 37 provisions, contingent liabilities and contingent assets and explore the relation between provisions and corporate governance.

The current research utilizes a panel data analysis using a sample of 1,078 firm-year observations from Borsa Istanbul between the years 2005 and 2010.

Overall findings indicate that 62 percent of 1,078 firm-year observations recognize provisions, and among those, only 32 percent provide IAS 37’s full disclosure requirements. Firms that recognize provisions have larger board of directors and are more likely to be characterized with concentrated ownership and institutional owners. Also, firms with larger board of directors, greater independence and concentrated ownership have higher total provision/total debt ratios. Finally, firms that make full disclosure of provisions are more likely to have larger boards, higher ownership concentration and institutional owners and less likely to have CEO duality.

As with all research, there are several limitations of this study. The study suffers from a lack of literature about provisions under IAS 37. The lack of literature directly focusing on provisions or IAS 37 appears to be one of the main limitations as well as one of the main contributions. Since this study focuses on one country, the comparison is not possible. Further research may contribute to literature by the use of other emerging economy’s capital market data. Moreover, further research can cover any other mandatory disclosure information specified in IASs/IFRSs and can provide comparative results about the compliance and strictness of the mandatory disclosure regime.

This study can be of interest to government, investors, business management, regulatory bodies, educators, researchers, accountants, auditors and scholars particularly in the field of accounting by seeking to make theoretical and practical contributions in the area of accounting disclosures and also serves as benchmark for future researches on corporate disclosures. Also this study provides significant insights to accounting regulators who set disclosure requirements.

Accurate corporate reporting is a necessary tool for the short- and long-term survival of the firms, hence the capital markets. Studying the level of disclosure will enable us to have additional insights about corporate reporting and will enhance the understanding of the nature of corporate reporting in developing countries. Disclosure practices by developing countries were empirically investigated in the past; however, the relation between provisions under IAS 37 and corporate governance has been unexplored in the literature. Thus, to the best of the authors’ knowledge, this is a pioneering research on provisions and corporate governance structure.

The purpose of this paper is to examine whether International Financial Reporting Standards (IFRS) can be used for monitoring environmental degradation. A comprehensive review of academic and professional literature indicates that the IFRS regime provides useful conceptual and practical frameworks for monitoring firms that are operating in environmentally sensitive industries.

Using qualitative and case study research methods, the financial statements of three environmentally sensitive companies were studied.

The sustainability reports produced by the companies contained both information and propaganda. The credibility of published sustainability reports is unclear. The size and adequacy of the contributions of the companies towards sharing the costs of decommissioning, rehabilitation and restoration of the environment are not disclosed. A new statement is proposed.

Policy implications at national and international level are many.

The paper shows that environment has both financial and non‐financial implications. The effects of environmental degradations on the habitat and society are serious.

The paper contributes to new knowledge in several ways. There are at least three major conclusions from this paper, and the ideas are original.

Part IV provides readers with the extant requirements for the application of materiality to recognition, measurement, presentation, and disclosure in the financial statements. This part also includes a detailed critical review of the recent Practice Statement on materiality, the FASB’s proposed ASU on the notes and the amendments to the Conceptual Framework proposed by the IASB and the FASB.

The part expands to issues that are typical of Management Commentary, including the SEC guidance on materiality in Management Discussion and Analysis.

It informs about the complexities and subtle differences between financial statements and bookkeeping and the different standards of reasonableness versus materiality.

A section moves from materiality to material misstatements and covers the application of materiality in auditing.

Another section goes in depth on internal control over financial reporting, showing the linkages between materiality and risk appetite and risk tolerance and the related application guidance.

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.

Although the intention of the International Accounting Standards Board (IASB) is not to permit choices in the accounting treatment of similar transactions and events, International Financial Reporting Standards (IFRSs) still contain various choices of accounting treatment. Different accounting alternatives for similar transactions limit the comparability of financial information. Certain accounting policies result in differences in recognition, measurement and disclosures. This article identifies 16 such accounting policy choices and presents the descriptive empirical results on which accounting policies were in fact chosen by a sample of 157 South African listed companies, in cases where IFRSs allow a choice between alternative accounting policies. Disclosure of accounting policies is necessary for the users of financial statements to enable them to compare the financial statements of various entities in making economic decisions. The research also found a lack of disclosures relating to chosen accounting policies in limited cases.

This paper aims to examine the drivers of companies’ compliance with International Financial Reporting Standards (IFRS) using the stakeholder salience theory.

The authors have used panel data from 205 companies to examine the IFRS compliance level across 13 African countries. This study has also established the relationship between stakeholders’ attributes and firms’ compliance with IFRS.

On IFRS compliance, the authors found that the average compliance score among the companies over the period was 73.09 per cent, with a minimum score of 62.86 per cent and a maximum of 85.61 per cent. The authors found a significant positive association between audit committee competence and compliance, as well as among chartered accountants on board. There is less compliance with the latest standards, such as IFRS 3, 7 and 13. Also, IAS 17, 19, 36 and 37 are problematic across the sample. The authors also found that compliance has been increasing over the years.

For companies, this study provides empirical evidence on the importance of having chartered accountants’ corporate boards, as well as competent audit committees involved in ensuring high compliance with IFRS. The findings also provide valuable information for professional accounting organizations on the role of their members (chartered accountants) in the effectiveness of IFRS compliance.

This study complements and updates prior studies on IFRS compliance with findings from Africa, a region that has been neglected in the literature. It provides empirical evidence on the importance of chartered accountants sitting on corporate boards in ensuring high compliance with IFRS.

This paper aims to examine the influence of firm characteristics on harmonisation of companies listed on the Egypt, Morocco and Tunisia Stock Exchanges.

This study uses a checklist based mainly on the International Financial Reporting Standards (IFRS).

The findings of the study are 6that the level of compliance with IFRS was higher in 2010 than in 2005. Multiple regression analysis indicates that the level of compliance with IFRS increases with company size, institutional ownership, industry and language of disclosure.

The findings of this study suggest that both institutional- and firm-level forces influence the harmonisation process.

This study contributes to the literature on accounting harmonisation in the context of North Africa.

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.

The purpose of this paper is to address recent calls for research regarding the valuation implications of mandatory disclosure requirements (cf. Hassan et al., 2009; Leuz and Wysocki, 2008; Schipper, 2007).

The paper measures compliance with all International Financial Reporting Standards (IFRS) mandatory disclosure requirements for a sample of firms. The paper subsequently explores whether the compliance scores (i.e. the mandatory disclosure levels) are value relevant and whether the value relevance of accounting numbers differs across high- and low-compliance/disclosure companies.

The paper finds that the levels of mandatory disclosures are value relevant. Additionally, not only the relative value relevance (i.e. R2) but also the valuation coefficient of net income of high-compliance companies is significantly higher than that of low-compliance companies.

This paper is an indicative single country case study that focuses on the IFRS adoption year (2005) in the EU. It forms a new avenue for research regarding the valuation implications of mandatory disclosure requirements. It remains to future research to examine whether the findings also hold in other countries and periods.

These findings are expected to be particularly relevant to standard setters and regulatory bodies that are concerned about the implications of mandatory disclosure requirements (Schipper, 2007).

To the best of authors’ knowledge, this is the first paper that examines the value relevance implications of IFRS mandatory disclosure requirements, focusing on European country after 2005. The authors indicate that IFRS mandatory disclosures do lead to more transparent financial statements (cf. Pownall and Schipper, 1999), mitigating concerns about companies’ fundamentals (cf. Anctil et al., 2004).