Content and context: “fair” values in China

2017 ◽  
Vol 30 (2) ◽  
pp. 352-377 ◽  
Author(s):  
Ferdinand Balfoort ◽  
Rachel Francis Baskerville ◽  
Rolf Uwe Fülbier
Keyword(s):  
Financial Reporting ◽  
Fair Value ◽  
Governance Structure ◽  
Future Research ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Fair Value Measurement ◽  
Western Market ◽  
Value Measurement ◽  
The Impact

Purpose The evolution of International Financial Reporting Standards (IFRS) was nurtured by economists and accountants loyal to the philosophical basis of what is often referred to as “Western” market economies, being classical and neoclassical contracting theories. The purpose of this paper is to illustrate how a particular Asian cultural attribute (guānxì ) impacts on the efficacy of fair value measurement. Design/methodology/approach Using a literature review and research of studies of the adoption of IFRS in China, studies of both guānxì and fair value in Chinese accounting research, this study unbundles Williamson’s governance structure and contracting theory to examine how guānxì is positioned orthogonally to fair value (market-oriented valuation) principles for financial reporting. This is followed by a case study of the events surrounding the collapse of China Medical Technologies. Findings Guānxì is integral to Asian economies and economic transactions. Resulting conditions, characterised by relational contracting, may not meet the qualitative characteristics of neutrality and faithful representation in fair value measurement of assets and liabilities. The same may be true when insider or “trusted party transaction” values prevail for large ticket transactions among entities in any jurisdiction. Research limitations/implications Future research on the impact of guānxì may be constrained by its often hidden, and yet dynamic, character; and the varieties of its manifestations. Originality/value This study highlights how difficult it may be to achieve both comparability and relevance in the asset and liability recognition and measurement rules in Asian (and possibly also other) economies adopting accounting principles that are developed in a Western context.

The effect of accounting methods on financial reporting quality

2018 ◽  
Vol 60 (6) ◽  
pp. 1401-1411
Author(s):  
Andrain Hadiyanto ◽  
Evita Puspitasari ◽  
Erlane K. Ghani
Keyword(s):  
Financial Reporting ◽  
Palm Oil ◽  
Reporting Quality ◽  
Fair Value ◽  
Financial Information ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Historical Cost ◽  
Fair Value Measurement ◽  
Value Measurement

Purpose This study aims to examine the relationship between accounting measurement method of biological asset and financial reporting quality. Specifically, this study examines whether using fair value method or the historical cost method on biological asset provides different financial reporting quality. Design/methodology/approach This study uses data from 38 agricultural companies that are members of the Roundtable on Sustainable Palm Oil. The annual reports of 38 companies from the Palm Oil Growers over a five-year period starting from 2011 to 2014 are analysed. Findings This study shows that companies using historical cost measurement produce less reliable and less relevant information compared to the companies that are using fair value measurement. Research limitations/implications The results in this study imply that the use of fair value measurement improves the quality of financial information. Practical implications This study supports IASB’s justification of developing IAS 41 as the principle-based standard that better represents the financial information related to biological asset and subsequently lead to good accountability and harmonisation practices. Originality/value This study provides evidence on the best measurement to be used in agriculture activities using a larger sample size of few countries. In addition, this study contributes to the existing literature on the effect of accounting methods on financial reporting quality.

scholarly journals Continued Impact of International Financial Reporting Standards on U.S. Generally Accepted Accounting Principles

2020 ◽  
pp. 1-12
Author(s):  
Sylwia Gornik-Tomaszewski ◽  
Victoria Shoaf
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Accounting Principles ◽  
Value Measurement ◽  
The Impact

The milestone outcomes of over a decade of close cooperation between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on the convergence of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) have been highly publicized in the professional media. Great attention has been paid to such joint FASB and IASB projects as accounting for business combinations, fair value measurement, and revenue recognition. The impact of U.S. GAAP on IFRS has also been discussed and highlighted in many professional and academic resources. It should come as no surprise since FASB is considered a world leader in creating high-quality standards through an exemplary standard-setting process. In this paper, we look at the least noticed outcome of the convergence process: the impact of IFRS on U.S. GAAP. We reviewed all of the Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification®, from the first issued in June 2009 to 2016, and listed instances where U.S. GAAP was significantly modified to reflect international solutions. These examples of U.S. GAAP modifications indicate that the impact of IFRS on U.S. GAAP continued well after the bilateral cooperation between FASB and IASB effectively ended in 2014. Furthermore, look at the most recent FASB pronouncement let us conclude that the FASB continues to be engaged in seeking comparable global accounting solutions.

scholarly journals A Retrospective View Of The IFRS Conceptual Path And Treatment Of Fair Value Measurements In Financial Reporting

2011 ◽  
Vol 9 (3) ◽  
Author(s):  
Stephen B. Shanklin ◽  
Debra R. Hunter ◽  
Craig R. Ehlen
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
Theoretical Concept ◽  
International Standards ◽  
Financial Reporting Standards ◽  
Retrospective View ◽  
Fair Value Measurement ◽  
Value Reporting ◽  
Value Measurement

International Financial Reporting Standards (IFRS) require some assets, liabilities and equity instruments to be measured at fair value (IASB ED/2009/5). Thus begins the Fair Value Measurement IASB 2009 Exposure Draft. The IFRS requirement for fair value reporting has actually existed since 1975, due to the adoption of pronouncement IAS 2 (IASC/IAS 2 1975). This standard required that Inventory be valued at fair value less costs to sell for both reporting and disclosure purposes. But, as is the case in the history of many accounting standards and practice, the devil has always been in the details. This paper explores a brief historical path of fair value accounting within the venue of international accounting standards. Because of the impending plan of convergence and harmonization, plus potential global acceptance of standards of reporting and content, both the IASB and FASB have extensively explored the relevance and reliability of fair value reporting as compared with the more traditional costbased system. This exploration has been controversial because it goes to the very heart of the centuries-old cost-based foundation of financial accounting. In spite of the ongoing controversy of fair value versus historical cost accounting and the multiple uses and requirements of the fair value theoretical concept in IFRSs, there has been no definitive guidance on the various alternative calculations and appropriate uses of these differing representations of fair value. As the comment period closes on a second exposure draft directed at resolving Fair Value Measurement, this retrospective view of the international standards moves through the past standards and into the future methodology of reporting fair value. With FASBs latest exposure draft on fair value currently pending, the convergence opportunity of a more closely defined concept and its subsequent use in global practice is quite possibly at hand.

Challenges in auditing fair value measurement and accounting estimates

2020 ◽  
Vol 18 (1) ◽  
pp. 51-75
Author(s):  
Babajide Oyewo ◽  
Ebuka Emebinah ◽  
Romeo Savage
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Fair Value ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Content Type ◽  
Significant Difference ◽  
Accounting Estimates ◽  
Fair Value Measurement ◽  
Value Measurement

Purpose Following the issuance of International Financial Reporting Standard 13 on fair value measurement (which became operational from January 2013), this study aims to investigate post-implementation challenges in the audit of fair value measurement and accounting estimates in the Nigerian context. Design/methodology/approach Data-collection was through a structured-questionnaire administered on 400 auditors from diverse backgrounds in terms of audit firm size, international affiliation and global presence. Findings Empirical data obtained from 277 auditors were analysed using descriptive statistics, factor analysis, one-way ANOVA, cluster analysis, independent sample t-test and one-way multivariate analysis of co-variance. It was observed that the two highest-ranking and most-prevalent challenges of auditing fair value measurement and accounting estimates are the tendency for managers to manipulate earnings owing to the inability of auditor to effectively test fair value estimates; and the difficulty in testing unobservable inputs due to the application of assumptions and judgement in arriving at estimates by preparers of financial reports. Originality/value While there is no significant difference in the perception of auditors on the audit challenges associated with fair value measurement and accounting estimates, there is a significant difference in the magnitude of audit challenges faced in verifying fair value measurements and accounting estimates across industry sectors. Concerned stakeholders (including but not limited to accounting regulators, auditing standard setters, audit firms, researchers) are importuned to come up with robust and pragmatic measures to curtain these challenges, as the inability of auditors to rigorously verify fair value estimates may jeopardize the very essence of fair value measurement which is to elevate financial reporting quality.

The decision usefulness of reported changes in fair values and fair value measurement-related disclosure for debtholders: evidence from Australian real estate industry

2020 ◽  
Vol 33 (6) ◽  
pp. 729-747
Author(s):  
Pinprapa Sangchan ◽  
Haiyan Jiang ◽  
Md. Borhan Uddin Bhuiyan
Keyword(s):  
Real Estate ◽  
Financial Reporting ◽  
Fair Value ◽  
Cost Of Debt ◽  
Content Type ◽  
The Real ◽  
The Real Estate ◽  
Fair Value Measurement ◽  
The Cost ◽  
Value Measurement

Purpose This paper aims to examine the information content of changes in fair values of investment property reported under international accounting standards (IAS) 40 and International Financial Reporting Standards (IFRS) 13 to debtholders. This study further examines the effect of fair value hierarchy inputs, valuer types and the quality of fair value measurement-related disclosure on the information usefulness of changes in fair value. Design/methodology/approach This paper performs a panel regression on the cost of debt capital and changes in fair value of investment properties, and fair value measurement features using data covering periods 2007–2015 from Australian real estate companies. Findings The findings suggest that changes in fair value of investment property are informative about the real estate firm’s future cash flow to debtholders. Also, the findings show that the use of unobservable inputs in an active market (Level 3 inputs) and Level 2 has no different impacts on the cost of debts. Also, this paper documents that employing the directors solely in valuation may lead to a higher cost of debts. Furthermore, this paper reports that an extensive fair value disclosure appears no additional value in the debt decision. Originality/value Collectively, the findings indicate that although the use of unobservable inputs is common in the real estate sector, information on the changes of the fair value of investment properties are informative to debtholders. The findings have important implications for accounting standard setters to consider revisiting the IAS 40 and IFRS 13 on whether the independent valuation should be required and whether the extensive disclosure requirement is worthwhile.

Enforcement and accounting quality in the context of IFRS: is there a gap in the literature?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Adriana Silva ◽  
Susana Jorge ◽  
Lúcia Lima Rodrigues
Keyword(s):  
Financial Reporting ◽  
Future Research ◽  
Scientometric Analysis ◽  
Accounting Quality ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Research Gap ◽  
State Of Research ◽  
The Impact ◽  
The Relationship

Purpose Existing research has concluded that accounting quality is influenced not only by the quality of accounting standards, but also by enforcement systems. Therefore, enforcement is one of the key factors for ensuring International Financial Reporting Standards’ (IFRS) compliance and achieving accounting quality. However, one still does not know what has been studied about this relationship in scientific literature. Accordingly, the purpose of this paper is to identify, recap and evaluate the current state of research on the relationship between IFRS enforcement and accounting quality, to provide a critical overview of publications in this field and to identify future areas of interest. Design/methodology/approach Supported by a structured literature review, this paper fills in a research gap by conducting a scientometric analysis of papers on the relationship between IFRS enforcement and accounting quality construed in a broad sense. It reviews papers published between 2006 and 2019 selected from the Web of Science database, particularly analyzing main journals, authors, geographic areas of study, methods used, specific topics explored and future lines of research to be developed. Findings Main findings show a shortage of studies analyzing IFRS enforcement practices in individual countries and, in turn, the impact these practices may have on the accounting quality. This gap calls for further research to know the effectiveness of the IFRS-related enforcement mechanisms. Originality/value To the best of the authors’ knowledge, no previous scientometric studies focused on the enforcement of IFRS and accounting quality. This study fills this research gap and improves the understanding about what has been published on the topic, also proposing an agenda for future research that can help regulators to adjust policies for the implementation and enforcement of IFRS.

Audit committee effectiveness and financial reporting timeliness

2018 ◽  
Vol 9 (1) ◽  
pp. 34-55 ◽  
Author(s):  
Ahmed Atef Oussii ◽  
Neila Boulila Taktak
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Emerging Market ◽  
Listed Companies ◽  
Audit Committees ◽  
Future Research ◽  
Governance System ◽  
Content Type ◽  
Financial Expertise ◽  
The Impact

Purpose The purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian listed companies as proxied by external audit delay (AD). Analysis focuses on five audit committee characteristics: authority, financial expertise, independence, size and diligence. Design/methodology/approach Empirical tests address 162 firm-year observations drawn from Tunisian listed companies during 2011-2013. Findings Multivariate analyses indicate that audit committees with members who have financial expertise are significantly associated with shorter AD. Thus, the results suggest that audit committee financial expertise contributes to the improvement of financial statements’ timeliness. Research limitations/implications The audit committee attributes examined in this study were based on DeZoort et al. (2002) framework. There could be other aspects of audit committee effectiveness such as audit committee tenure and audit committee chair characteristics, which were not addressed in the present study. Thus, future research may consider and examine these other components of audit committee effectiveness. Practical implications Findings have managerial implications. Companies can re-look into how to further improve audit committee composition in order to enhance the timeliness of financial reporting. The issues of audit committee effectiveness and timely reporting also affect regulators and policy makers since they need to play a role in the establishment of effective audit committees and the improvement of financial reporting timeliness. Originality/value This study is one of few that have examined the impact of audit committee effectiveness on ADs in an emerging market country. Findings lend credence to the belief that audit committee members’ financial expertise enhances the quality of financial reporting by firms in a North African market criticized for the lack of maturity of its corporate governance system (Klibi, 2015; Fitch Ratings, 2009).

scholarly journals The (un)suitability of fair-value accounting in emerging economies: the case of Vietnam

2019 ◽  
Vol 15 (2) ◽  
pp. 170-197 ◽  
Author(s):  
Lisa-Uyen Nguyen
Keyword(s):  
Financial Reporting ◽  
Institutional Environment ◽  
Fair Value ◽  
Business Environment ◽  
Future Research ◽  
Critical Examination ◽  
Fair Value Accounting ◽  
Structured Interviews ◽  
Corporate Misconduct ◽  
Content Type

Purpose This study aims to explore the suitability and challenges of implementing fair value accounting (FVA) in Vietnam, an emerging/transitioning economy. While such implementation would enable convergence with International Financial Reporting Standards, standard setters and auditors have raised practical concerns about its adoption. Design/methodology/approach This qualitative study uses semi-structured interviews with regulators and auditors, together with an analysis of two fraud cases that illustrate the business environment in Vietnam. Public, private and capture theories guide the analysis. Findings The business and institutional environment in Vietnam creates several impediments to FVA being effectively implemented and transparently applied. Given the major challenges identified regarding the infrastructure necessary for this valuation system, the premature adoption of FVA may become a catalyst for corporate misconduct. Research limitations/implications The findings are derived from data aggregated from two fraud cases and interviews, and as such, the results may not be generalisable to other settings. However, these findings may inform future research, particularly after the Ministry of Finance provides further guidance on the use of FVA in Vietnam. Practical implications A timely and critical examination of the challenges of implementing FVA in a transitioning economy is provided, and the two fraud cases reveal the complexities of the business environment in Vietnam. Originality/value This research gives voice to the tensions that developing countries are confronting as they seek to balance external pressures with internal constraints. The introduction of an assemblage of three theoretical lenses enables insights into contemporary issues associated with applying FVA in such settings.

Using arguments and myths to lobby over controversial accounting issues: evidence from Japan

2020 ◽  
Vol 32 (3) ◽  
pp. 355-390
Author(s):  
Noriyuki Tsunogaya ◽  
Andreas Hellmann
Keyword(s):  
Financial Reporting ◽  
Financial Services ◽  
Accounting Standards ◽  
Fair Value ◽  
Network Effect ◽  
International Accounting Standards ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Stakeholder Groups

Purpose This study aims to examine the (overt) arguments and (covert) myths the Business Accounting Council (BAC) members have used to lobby over controversial accounting issues, such as the application of fair value accounting (FVA) and the adoption of International Financial Reporting Standards (IFRS) in Japan. Design/methodology/approach The authors used a content analysis to examine 85 statements included in multiperiod BAC meeting minutes and 68 articles prepared by International Accounting Standards Board (IASB) representatives from Japan. Findings The results reveal that together with the arguments, myths were created and amplified by opponents of FVA and the Financial Services Agency to hide the latter’s strong regulatory power. They created these myths, using covert stories of the importance of manufacturing activities and tax accounting (for small- and medium-sized enterprises [SMEs]), to oppose mandatory IFRS adoption in Japan and, thus, to maintain vested rights in preparing the Japanese generally accepted accounting principles and Japanese accounting standards for SMEs. Originality/value First, this study contributes to the lobbying literature by focusing on the coalition (network) effect of influential stakeholder groups. Second, although lobbying activities have been investigated mostly using comment letters, this study reviews multiperiod BAC meeting minutes and articles prepared by IASB representatives from Japan. Third, the study examines both overt arguments and covert myths, both of which are important in unmasking the fundamental structures of power within influential organizations, such as government agencies and standard-setters.

Sign in / Sign up

Export Citation Format

Share Document