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Although operating reserves can aid nonprofit organizations in alleviating periods of fiscal stress, they are not widely used. This study examines organizational factors that impact the level of operating reserves in nonprofit organizations. It also explores the relationship of operating reserves with organizational demographics and financial health variables using a six-year (1998-2003) unbalanced panel regression model containing 460,437 observations. Findings demonstrate a positive relationship between operating reserves and administration ratio, profit margin, operating margin, and organization age. Conversely, the size of operating reserves is negatively related to leverage ratio, donations, and organization size. Revenue diversification, however, shows a mixed relationship with operating reserves among different types of nonprofit indicating complexity in risk-reducing strategy. This study contributes to understanding factors relevant to the presence, or absence, of nonprofit operating reserves.

Examines the usefulness of two information technology (IT) managerial control measures in the insurance industry – the ratios of IT expense to premium income and total operating expense. Demonstrates the use of the ratios as predictors to differentiate organisational performance. Concludes that the predictive ability of the models can be used to identify areas where firms may be weak.

New lease accounting rules are proposed that will fundamentally change the way leases are accounted for and reported in financial statements. This paper seeks to provide information on the proposed new rules and to illustrate their impact on financial statements and financial ratios using a single restaurant company.

The case of a single restaurant company, CEC International, is used to illustrate the potential impact of the new rules. Additional examples are used to illustrate the impact on financial policies. Financial statements were adjusted and various financial ratios such as interest coverage, leverage and profitability ratios were computed before and after capitalization.

The results show that financial statements presented will change dramatically when lease assets and liabilities are added to the balance‐sheet. The expense recognition pattern will change significantly and negatively impact performance measures such as interest coverage and capital ratios but improve cash flow measures such as EBIT and EBITDA.

Limitations of this study include the assumptions used to capitalize leases such as interest rate, life of leases, no new leases, and exclusion of contingent rentals.

All restaurant companies and managers must assess the costs and benefits of complying with the proposed new rules and start analyzing and evaluating their impact on existing debt agreements, executive compensation plans, and the lease versus buy decision.

This paper serves to inform restaurant managers about the potential implications of the new rules, so managers can prepare, plan and formulate strategies to mitigate their impact.

This chapter focuses on the IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases in the airline industry considering the case of Air France – KLM (AF-KLM). This airline timely adopted IFRS 15 and early adopted IFRS 16 for the year 2018 and restated its 2017 financial statements using the full retrospective method so that the 2018 financial statements of the airline provide comparative financial information during the transition phase from IAS 18 to IFRS 15 as well as from IAS 17 to IFRS 16. In the first part of the chapter, liquidity, solvency, and profitability ratios along with cash flow ratios were used to analyze the cumulative effect of IFRS 15 and IFRS 16 using 2017 and restated 2017 financial statements. In this context, results indicate that the liquidity ratios decreased, and the solvency ratios increased in general. In addition, the cumulative effect of IFRS 15 and IFRS 16 created an upward change in general on profitability ratios based on the several performance parameters that should be considered during the transition from IAS 18 to IFRS 15 and from IAS 17 to IFRS 16. Overall, IFRS 15 has minor effect and IFRS 16 has major effect on the financial statements of AF-KLM. In the second part of the chapter, the compliance level of the mandatory disclosures requirements of the airline was examined from the lessee standpoint and the research pointed out that the airline fully complied with these disclosures at its first adoption of IFRS 16 and provided some voluntary disclosures as well.

Recent public policy initiatives seek greater transparency in financial reporting through an honest, balanced and thorough management discussion of company performance in the annual report. Management’s discussion invariably includes key performance indicators, such as financial ratios, relevant to external stakeholders. We model the impact of accounting estimates, assumptions, choices and errors on the risk of misleading financial ratios. This framework is illustrated through good and bad examples of financial reporting practices and by simulation of financial data of public companies. We provide a structured approach to inform policymakers, auditors and other stakeholders of the incremental financial reporting risk that accompanies current regulatory efforts.

The typical accounting curriculum focuses on technical knowledge, which makes it challenging to devote time toward developing other important skills, such as examining how accounting rules may impact a company’s financial statements. Recently, the accounting rules for lease transactions changed significantly, and this chapter provides an overview of an assignment used in an intermediate accounting course to engage students in a real-world application. Students had the opportunity to apply accounting rules to a publicly traded company, measure the significance of changes to generally accepted accounting principles, read financial disclosures, reinforce concepts of present value and ratio analysis, and engage in critical thinking. This type of assignment does not have to be limited to leases, and instructors could discuss any accounting rule by following a similar model, whether the rule itself is current or proposed. This would offer students context beyond textbook learning.

The present study investigates whether companies that exhibit high performance characteristics in the pre-financial crisis period can maintain their high performance in the financial crisis period of 2007–2009 and, in particular, the post-financial crisis period of 2010–2011.

The current study of 1,473 companies in 25 countries and 66 industries (MSCI index) (1) extends the empirical research of prior studies through the year 2011; (2) identifies the operating characteristics (performance drivers and performance measures) and associated risk factors which were most critical with regard to sustaining, exiting, and entering HPC companies during the five 10-year periods since 1998–2007, and (3) summarizes conclusions about HPC results from the 13 ten-year periods (1989–1998 to 2002–2011) in this stream of research.

(1) Companies that sustain high performance over periods of financial stress clearly excel in asset turnover performance driver and on the performance measures of growth in revenues, profit margin, return on equity and return on assets. Sustaining HPC had less debt than other companies and consistent cash flow yields. Operating turnover ratios became less important in recent years as an indicator of high performance. (2) Although exiting companies maintained profitability, financial risk and liquidity, the key factor in their dropping out of HPC status is their failure to grow revenues. (3) Entering companies did not exhibit the superior performance in all categories.

The results provide strategic direction for management of companies that aspire to HPC status and to maintain HPC status once gained, particularly in times of global financial stress.

The purpose of this paper is to examine how capitalising operating leases under IFRS 16/AASB 16 affects the financial statements and value relevance of financial information. In doing so, limitations of exiting methods are highlighted and improved upon.

Imhoff et al.’s (1991) constructive method for capitalising operating leases is improved upon and used to restate the financial statements of 165 S&P/ASX200 companies. The financial position, key ratios and value relevance are tested for significant differences.

The results provide evidence that capitalising operating leases affects financial statements and value relevance.

Imhoff et al.’s (1991) constructive method has been refined, providing an improved method for capitalising operating leases than the one that has been used in the past. From a practical perspective, this research provides evidence supporting the “right-of-use” method proposed by the IASB which will see previous off-balance-sheet leases recognised.

The purpose of this paper is to consider the operating performance of real estate investment trust initial public offerings (REIT IPOs) as a measure to find additional evidence of market timing in this sector.

A sample of REIT IPOs is analyzed to determine the relationship between IPO clustering and several measures of REIT operating performance.

The results suggest that timing the market by marginal firms in the REIT sector would be difficult, due to the transparent nature of REITs, leading to lower level of informational asymmetry between REIT managers and investors. Consistent with results found for non‐REIT firms in industry clusters, no evidence was found of a significant difference between the operating performance of REITs which are part of an IPO cluster and those that went public outside of the identified cluster periods.

This study shows that REIT market is efficient and would not allow REIT managers to time the market.

Using stringent measures of identifying REIT IPO clusters and operating performance as a measure to gauge market timing, this study differs from previous studies and provides additional and robust evidence of transparent nature of REITs that leads to reduced information asymmetry between managers and investors. This result supports the theory that REITs are more transparent and thus less likely to be over‐invested during IPO cluster periods.

The paper sets out to examine the use of accounting as part of the privatization process of a national railway in Canada. The argument is that proponents of the privatization used accounting strategically to justify and sustain the privatization. Major societal events, such as the privatization of national assets, merit close scrutiny so that an accounting world thus constructed should not be permitted to pass unchallenged.

The paper explores the way in which accounting language, concepts and information were deployed in the prospectus issued in support of the initial public offering of shares by the Canadian government.

Evidence is found suggesting that the vagaries of accounting language were marshalled to sustain a self‐fulfilling prophecy of success.

Case studies possess both the strength of specific instance detail and interpretation, and the ostensible weakness of interpretation of a sample of one. But such research may provide for reframing conceptual perspectives and contribute to stimulating additional efforts at interrogating accounting language's roles in major social change events.

The paper strongly endorses a critical analytical perspective by all those affected by major social change, such as privatization, in which accounting language often plays a persuasive but subtle role.

Individuals, groups, employees, managers, customers, and others, including the public‐at‐large, who are potentially impacted by privatizations, are reminded that accounting is not an innocent bystander in the political maneuverings associated with a privatization. Accounting does not axiomatically provide an objective measure of some underlying financial truth, but is part of an arsenal of rhetoric to achieve political ends.