Acquisition premiums and the recognition of identifiable intangible assets in business combinations pre- and post-IFRS adoption

2018 ◽  
Vol 31 (2) ◽  
pp. 135-156 ◽  
Author(s):  
Wun Hong Su ◽  
Peter Wells
Keyword(s):  
Financial Reporting ◽  
Intangible Assets ◽  
Business Combinations ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Before And After ◽  
Alternative Sources ◽  
And Performance ◽  
Using Data ◽  
Asset Impairments

PurposeThis paper aims to evaluate the relation between acquisition premiums and amounts recognised as identifiable intangible assets (IIAs) in business combination, in periods before and after transition to International Financial Reporting Standards (IFRS).Design/methodology/approachThis is an empirical archival research using data from business acquisitions.FindingsIn the pre-IFRS period, there is evidence of firms recognising IIAs in business combinations having higher acquisition premiums. This association of acquisition premiums and IIAs ceased with transition to IFRS, notwithstanding the relative latitude provided in accounting standards for the recognition of IIAs.Research limitations/implicationsThis paper complements the study by Su and Wells (2015) which founds little association between IIAs and performance subsequent to business acquisitions prior to transition to IFRS. The results here suggest that it is attributable to overpayment. Problematically, the incentives for opportunism remain and an issue requiring address is whether alternative sources of accounting flexibility in relation to business combinations exist, such as goodwill which is no longer subject to mandatory amortisation.Practical implicationsThe results are consistent with accounting opportunism and suggest “overpayment” and accounting flexibility having an economic consequence. This would be expected to result in asset impairments in subsequent periods; however, there is little evidence of this occurring.Social implicationsThese results have relevance for regulators concerned with the operation of regulation relating to business acquisitions (AASB 3) and intangible assets (AASB 138).Originality/valueThis paper complements a number of papers concerned with the recognition of IIAs in business combinations and confirms what many researchers in the area typically assume (triangulation).

scholarly journals The extent of compliance with FRS 101 standard: Malaysian evidence

2017 ◽  
Vol 18 (1) ◽  
pp. 87-115 ◽  
Author(s):  
Azhar Abdul Rahman ◽  
Mohd Diah Hamdan
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Content Type ◽  
Corporate Compliance ◽  
Financial Reporting Standards ◽  
Compliance Level ◽  
Using Data ◽  
Analysis Models ◽  
The Impact

Purpose The purpose of this paper is to investigate Malaysian companies’ compliance with mandatory accounting standards. Specifically, this study examines the efficacy of agency-related mechanisms on the degree of compliance with Financial Reporting Standards (FRS) 101, Presentation of Financial Statements. It so proceeds by focussing on corporate governance parameters (board characteristics and ownership structure) and other firm characteristics. Design/methodology/approach Using data drawn from a sample of 105 Malaysian companies listed on the ACE market in 2009, the authors employ multiple regression analysis models to establish whether selected corporate governance and company-specific characteristics (proxying for agency-related mechanisms) are related to the degree of disclosure compliance. Findings The results indicate that the overall disclosure compliance is high (92.5 per cent). Furthermore, only firm size is positively associated with the degree of compliance. The other variables, those consisting of board independence, audit committee independence, CEO duality, the extent of outside blockholders’ ownership and leverage, do not show any significant relationship with the degree of compliance. Research limitations/implications This study focusses on only one accounting standard (FRS 101) that is mandatory in Malaysia. FRS 101 is both structured and rigid, leaving no room for companies to conceal any particular information. The sample of Malaysian companies selected is restricted to those listed only on the ACE market. As such, the results cannot be generalised to every company in Malaysia. Practical implications These results have important implications for policy makers because they suggest that whilst agency-related mechanisms may motivate compliance with mandatory standards, full compliance may be unattainable without regulations. Originality/value This is the only study in Malaysia to investigate the impact of regulatory requirements on corporate compliance level by companies listed on the new ACE market, which was introduced by the Bursa Malaysia in August 2009. This study contributes to the literature by examining the effects of both company-specific characteristics (such as company size, company age, liquidity, etc.) and corporate governance parameters on the degree of corporate compliance with mandatory disclosure, simultaneously, in contrast with prior studies which have examined them in isolation.

Sharia accounting standard for sukuk (Islamic bond) accounting in Indonesia

2018 ◽  
Vol 9 (3) ◽  
pp. 434-447 ◽  
Author(s):  
Dodik Siswantoro
Keyword(s):  
Interest Rate ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Islamic Banks ◽  
Accounting Standard ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Islamic Bank ◽  
Before And After ◽  
Suitable Standard

PurposeThis paper aims to analyze the need of Islamic banks for specific Statement of Financial Accounting Standards (SFAS) No. 110 for sukuk accounting in Indonesia. In fact, some Islamic banks have already prepared International Financial Reporting Standards (IFRS), and accordingly, a suitable standard is needed for this case. Design/methodology/approachThe research methodology involved interview with a senior accounting manager of an Islamic bank focusing on relevant topics in sukuk to sharpen the analysis. Equally important, research reviewed and compared financial statements on sukuk accounting among Islamic banks, before and after adoption of sukuk accounting standard. FindingsIFRS require market valuation based on interest rate. As interest rate is unlawful in Islamic teaching, IFRS may not accordingly be suitable. Therefore, SFAS No. 110 was issued by the Indonesian Institute of Accountants (Ikatan Akuntan Indonesia). Considering the fact that this standard did not explicitly adopt the IFRS paradigm, there have been consequent conflicts in Islamic bank management because of preference of global recognition to IFRS. Adopting IFRS would be more compatible with other countries’ general accounting standards. In addition, significant differences are found in sukuk accounting treatments by Islamic banks before and after the standard adoption. Research limitations/implicationsThis research only focuses on such question of why specific accounting standard for sukuk accounting is needed by Islamic banks in Indonesia, while only few Indonesian Islamic banks were initially aware of the issue. Originality/valueThis paper may be the first paper discussing the response to and need for sukuk accounting in Indonesian Islamic banks.

Earnings relevance changes post the Egyptian revolution crisis

2019 ◽  
Vol 17 (1) ◽  
pp. 60-79
Author(s):  
Sara Abdallah
Keyword(s):  
Financial Crisis ◽  
Financial Reporting ◽  
Value Relevance ◽  
Discretionary Accruals ◽  
Ordinary Least Squares ◽  
Information Value ◽  
Egyptian Revolution ◽  
Content Type ◽  
Before And After ◽  
Using Data

Purpose This paper aims to investigate whether the value relevance of accounting information has been affected by the occurrence of the Egyptian revolution financial crisis. More specifically, this paper examines the value relevance changes of three key accounting constructs: operating cash flow, normal non-discretionary accruals and discretionary accruals before and after the Egyptian revolution crisis. Design/methodology/approach Ordinary Least Squares (OLS) regression is used to examine the changes in earnings value relevance across before and after the Egyptian revolution crisis. The performance matched Jones model (Kothari et al., 2005) is used to estimate the discretionary accruals. Findings After the Egyptian revolution financial crisis, the discretionary accruals (DAC) information value has significantly improved. However, the non-discretionary earnings components (OCF and NDAC) have minimal changes. The evidence of further analysis indicates that managers are using the discretionary accruals to signal the future adding value investments that respond optimally to changes in discount rates. Research limitations/implications The paper extends the literature debate about earnings management over a financial crisis; the findings provide implications for regulatory bodies that could learn how the common incentives of firms to attract potential investors during a crisis could lead them to provide a high-quality financial reporting. Originality/value Using data from the Egyptian market, the paper fills a research gap by examining the value relevance of earnings and tests whether the revolution crisis has influenced earnings reporting and firms’ values from a relatively developing country with special institutional and enforcement backgrounds.

scholarly journals IFRS adoption, value relevance and conditional conservatism: evidence from China

2019 ◽  
Vol 27 (4) ◽  
pp. 529-546 ◽  
Author(s):  
Cyrus Isaboke ◽  
Yan Chen
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Financial Information ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Conditional Conservatism ◽  
Before And After ◽  
The Relationship ◽  
A Company

Purpose This study sought to evaluate the relationship between value relevance of financial information and conditional conservatism of non-financial companies listed in China. Design/methodology/approach Using panel data comprising of 28,723 firm years, the authors determine the value relevance of financial information before and after mandatory International Financial Reporting Standards (IFRS) adoption while incorporating the relationship with conditional conservatism. The authors further examined how this relationship varies between state and non-state owned companies. Findings Conditional conservatism is positively (negatively) related to value relevance prior (post) to mandatory IFRS adoption while it makes no difference as to whether a company is state or non-state owned, as IFRS has a positive and significant effect on value relevance. Conservatism, on the other hand, has a negative and insignificant relationship with market value of both state and non-state owned firms during the pre- and post-IFRS period. Originality/value By exploring an emerging economy, the authors provide evidence on the variations in value relevance amongst state and non-state owned firms. In particular, the authors establish the positive effect of IFRS on the value relevance of non-state firms as compared to state-owned institutions.

scholarly journals Value Relevance of Intangible Assets Before and After FRS 138 Adoptions: Evidence From Malaysia

2019 ◽  
Vol 10 (3) ◽  
pp. 267
Author(s):  
Nik Azmiah Binti Nik Azin ◽  
Norhayati Bt Alias
Keyword(s):  
Financial Reporting ◽  
Intangible Assets ◽  
Value Relevance ◽  
Economic Consequences ◽  
High Tech ◽  
Intangible Asset ◽  
Financial Reporting Standards ◽  
Tangible Assets ◽  
Before And After ◽  
The Impact

The economic environment has changed from the era of agriculture, industrial and now to an information era. In this information era, intangible assets dominate the environment compared to during industrial era that was mainly dominated by tangible assets. Intangible asset plays an important role in today’s economy with the shift from being an industrialised economy to a high-tech and service-oriented. In Malaysian capital market, there is an upward trend of intangible assets development. Hence, the question of whether the value relevance of intangible assets is properly reflected in financial statements arises. The objective of this study is to examine the value relevance of intangible assets in Malaysia before and after the adoption of FRS 138. This study used a sample of 113 public listed companies from four main sectors namely Industrial Product, Trading services, Consumer Product and Technology. The period under study was divided into two, that is, pre adoption period (2002-2005) and post adoption period (2008-2011) to observe if there were any improvements on the value relevance of intangible assets after the adoption of International Financial Reporting Standards (IFRS). The data was analysed to examine the value relevance of intangible assets in Malaysia before and after the adoption of FRS 138. The finding of this study suggests that intangible assets are value relevant in the pre adoption period but are not value relevant in the post adoption period. This study may contribute to the existing literature on the economic consequences of adopting IFRS and also preliminary indication of the impact of FRS 138 adoption.

The value relevance and reliability of intangible assets

2014 ◽  
Vol 22 (3) ◽  
pp. 182-216 ◽  
Author(s):  
Xu-Dong Ji ◽  
Wei Lu
Keyword(s):  
Financial Reporting ◽  
Intangible Assets ◽  
Value Relevance ◽  
Relevant Information ◽  
Accounting Standard ◽  
Content Type ◽  
Listed Firms ◽  
Financial Reporting Standards ◽  
The Relationship ◽  
Relevance And Reliability

Purpose – The purpose of this paper is to examine the value relevance of intangible assets, including goodwill and other types of intangibles in the pre- and post-adoption periods of International Financial Reporting Standards (IFRS). Most importantly, this paper investigates whether the value relevance of reported intangible assets is associated with their value reliability. Furthermore, this paper reports whether the adoption of IFRS improves the value relevance of intangible assets and alters the relationship between value relevance and reliability. Design/methodology/approach – Both price and return models based on Ohlosn theory (1995) are employed to test the value relevance and value reliability of intangibles. Australian-listed firms with capitalised intangibles from 2001 to 2009 are selected in this study. The sample includes 6,650 firm-year observations. Findings – The main result shows that capitalised intangible assets are value relevant in Australia, in both the pre- and post-adoption of IFRS periods. Value relevance is higher in firms with more reliable information on intangible assets. This study finds that the value relevance of intangibles has declined in the post-adoption period of IFRS. However, the positive relationship between the value relevance and the reliability of intangibles has remained unchanged in the post-adoption period. Originality/value – The paper contributes a new measurement of value reliability of accounting information about intangibles. This paper is one of few studies on the relationship between value relevance and reliability of intangible assets. The results show that value relevance is positively associated with value reliability. This suggests that, when accounting standard setters assess whether the existing IFRS of intangibles should be improved in the future, they need to think not only in terms of whether the standard can provide more relevant information of intangibles to investors but also whether the standard can make the information of intangibles more reliable.

Drivers of mandatory disclosure in GCC region firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ismail Ufuk Misirlioglu ◽  
Jon Tucker ◽  
Helmi Abdulhameed Boshnak
Keyword(s):  
Financial Reporting ◽  
Voluntary Disclosure ◽  
State Ownership ◽  
International Accounting Standards ◽  
Mandatory Disclosure ◽  
Firm Level ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Key Drivers ◽  
Using Data

Purpose This paper aims to investigate firm-level variations in the extent of mandatory disclosures and address the drivers of mandatory disclosure using data from the Gulf Co-operation Council (GCC) region. Design/methodology/approach The extent of mandatory disclosure is examined using a disclosure index created with reference to 24 International Financial Reporting Standards (IFRSs). Findings The authors find that the extent of mandatory disclosure required by applicable IFRSs/International Accounting Standards increases with international presence, group firms, the level of voluntary disclosure, firm age and the education level of company financial controllers. It decreases with firm size and the proportion of institutional share ownership. The degree of board independence is positively related to the level of mandatory disclosure in firms with no state ownership. Profitability positively affects the level of mandatory disclosure to a greater extent in more liquid GCC firms. The results confirm that there is a greater sensitivity of mandatory disclosure to loss than to profit. Loss increases, whilst profit decreases, the extent of mandatory disclosure. Research limitations/implications The results promote further understanding of international financial reporting differences in an emerging country setting. Practical implications The findings provide a detailed insight to investors, financial analysts, practitioners and academics. Originality/value The authors develop a highly granular mandatory disclosure index in a developing country setting and identify key drivers of such disclosure.

scholarly journals Financial reporting of intangible assets in Islamic finance

2017 ◽  
Vol 9 (2) ◽  
pp. 190-195
Author(s):  
Syed Musa Alhabshi ◽  
Hafiz Majdi Ab Rashid ◽  
Sharifah Khadijah Syed Agil ◽  
Mezbah Uddin Ahmed
Keyword(s):  
Financial Reporting ◽  
Intangible Assets ◽  
Relevant Literature ◽  
Specific Reference ◽  
Financial Assets ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Tangible Assets ◽  
Depth Analysis ◽  
Regulatory Bodies

Purpose This paper aims to address the financial reporting dimensions of intangible assets with specific reference to International Accounting Standards (IAS) 38 as well as relevant International Financial Reporting Standards (IAS 38 exclusion) that are embedded within intangible assets. These have implications for Islamic financial assets with identifiable and measurable intangible components. Design/methodology/approach The study uses the qualitative research method by way of interviews followed by focus group discussions with professional accountants/accounting academics and Sharīʿah scholars/advisors from academia, the industry and regulatory bodies. Analysis of relevant literature is made to understand the subject matter and Sharīʿah-related issues. Findings The study observes that the accounting dimensions of tangible assets are generally consistent with Sharīʿah requirements. However, significant variation arises when the dimensions of intangible assets are represented in financial assets. Research limitations/implications The paper presents an exploratory in-depth analysis within the context of intangible assets as specified in IAS 38. Originality/value The paper elucidates the comparative accounting dimensions and Sharīʿah requirements in reporting financial assets.

Do globalisation and adoption of IFRS by banks in Africa lead to less earnings management?

2019 ◽  
Vol 17 (2) ◽  
pp. 222-248 ◽  
Author(s):  
Mohammed Amidu ◽  
Haruna Issahaku
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Information Quality ◽  
Accounting Information ◽  
Financial Statements ◽  
International Standards ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Accounting Information Quality ◽  
National Economies

Purpose This paper aims to analyse the implications of globalisation and the adoption of international standards (International Financial Reporting Standards [IFRS]) for accounting information quality. Design/methodology/approach This paper uses a sample of 329 banks across 29 countries leading up to and beyond the implementation of IFRS to test for related hypotheses. Findings First, banks’ financial statements are prepared on the basis of international standards as national economies are integrated when social norms are diffused. Building on these results, the second test suggests that the relatively high-quality earnings among banks in Africa during the period is attributable to the adoption of and interaction of IFRS with globalisation and the strategy of banks to diversify within and across interest and non-interest income. Originality/value The authors investigate how globalisation and the adoption of IFRS affect accounting information quality.

scholarly journals Reliability of Financial Information from the Perspective of Benford’s Law

Entropy ◽  
2021 ◽  
Vol 23 (5) ◽  
pp. 557
Author(s):  
Ionel Jianu ◽  
Iulia Jianu
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Financial Statements ◽  
Financial Information ◽  
Benford’S Law ◽  
Professional Judgment ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Benford's Law ◽  
Before And After

This study investigates the conformity to Benford’s Law of the information disclosed in financial statements. Using the first digit test of Benford’s Law, the study analyses the reliability of financial information provided by listed companies on an emerging capital market before and after the implementation of International Financial Reporting Standards (IFRS). The results of the study confirm the increase of reliability on the information disclosed in the financial statements after IFRS implementation. The study contributes to the existing literature by bringing new insights into the types of financial information that do not comply with Benford’s Law such as the amounts determined by estimates or by applying professional judgment.

Sign in / Sign up

Export Citation Format

Share Document