Evolution of financial reporting of life insurers

2017 ◽  
Vol 25 (1) ◽  
pp. 56-72
Author(s):  
Rudolph A. Jacob ◽  
Samir El-Gazzar ◽  
Scott McGregor
Keyword(s):  
Financial Reporting ◽  
Financial Analysts ◽  
Accounting Standards ◽  
Fair Value ◽  
Foreign Firms ◽  
Empirical Literature ◽  
Content Type ◽  
Domestic Markets ◽  
Life Insurers ◽  
The Usa

Purpose This paper aims to examine the capital market effects and predominance of unregulated embedded value (EV) financial reporting in the life insurance industry in foreign domestic markets, and US markets for foreign firms that cross-list in the USA. Design/methodology/approach Recent empirical archival data are analyzed and evaluated to determine the incremental and relative value relevance of an unregulated valuation metric that is disclosed by life insurers. Findings The findings support the proposition that EV is valuable supplemental information in foreign domestic markets, and in US markets for foreign life insurers that cross-list in the USA. Given that International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are engaged in projects to improve accounting standard for insurance companies, and have faced criticism with the existing drafts on this issue, the two institutions ought to consider the valuation relevance of EV disclosures. Moreover, this analysis strongly suggests that financial analysts in the USA should consider EV in valuing life insurers’ stocks. Practical implications The findings discussed in this paper are of special interest to financial reporting policy makers, financial analysts, firm compensation committees and managers, and academics. Originality/value This paper contributes to the extant literature by providing recent evidence that suggests that EV, an unregulated fair value market-driven metric, is more value-relevant than traditional earnings metrics such as earnings and book value. It is the only study that we are cognizant of that critically examines the recent empirical literature on this evolving issue.

Cautiousness on convergence of accounting standards across countries

2016 ◽  
Vol 21 (2) ◽  
pp. 246-267 ◽  
Author(s):  
Silvia Angeloni
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Empirical Literature ◽  
Corporate Disclosure ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Financial Communication ◽  
Convergence Process ◽  
The Usa

Purpose – The purpose of this paper is to provide an updated picture of the convergence process between International Financial Reporting Standards (IFRS) and United States Generally Accepted Accounting Principles (US GAAP), with IFRS clearly emerging as a global financial reporting benchmark. This study is aimed at evaluating the main benefits but also some significant issues arising from the adoption of a single set of accounting standards. Design/methodology/approach – The main examples of theoretical and empirical literature for and against IFRS implementation are reviewed. Findings – Since markets became increasingly global, the comparability of financial statements is required to enable better corporate communication and transparency to the advantage of all stakeholders. The main difficulties of IFRS adoption by the USA are explored. Practical implications – The study’s implications are to emphasize the practical obstacles to resolving the issues of financial communication through a uniform set of standards, by highlighting the importance of taking into account other dynamics in improving the corporate disclosure domestically and globally. Originality/value – The key contribution of this study is to reflect on the best ways to reach global communication without sacrificing the effectiveness and affordability of financial reporting.

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.

Effect of eliminating mandatory reconciliation requirements for foreign issuers in the U.S.

2019 ◽  
Vol 17 (2) ◽  
pp. 271-291
Author(s):  
Gaurav Kumar ◽  
Jagjit S. Saini
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Standards ◽  
Discretionary Accruals ◽  
Accrual Quality ◽  
Content Type ◽  
The Usa ◽  
Reported Earnings ◽  
Book Values

Purpose The purpose of this paper is to examine the effect of choice of accounting standards on the value relevance and accrual quality of reported earnings and book values under International Financial Reporting Standards (IFRS) versus US Generally Accepted Accounting Principles (GAAP). Design/methodology/approach The authors examine the effect of choice of accounting standards on the value relevance and accrual quality of reported earnings and book values under IFRS versus US GAAP using 404 firms from 37 countries listed in the USA. They use the modified Jones (1991) model to measure accruals. Findings The authors find that value relevance of the book value of equity is increasing (significantly) when the sample firms use IFRS to prepare their financial statements. They also find some evidence in support of the mediating effect of the choice of accounting standards on the accrual quality of the sample firms. The results of this paper indicate that sample firms with lower accrual quality (larger discretionary accruals) experience higher returns during the fiscal year. However, the authors also find that the positive association between size of discretionary accruals and returns is decreasing in the use of IFRS by the sample firms. Originality/value This paper adds to prior literature on the harmonization of accounting standards and emphasizes the role of accounting standards in the quality of financial reporting. By using the financial data of all foreign registrants listed in the USA, the authors are able to provide deeper and more representative evidence.

Fair value accounting implementation challenges in South Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anuradha Pandya ◽  
Wayne van Zijl ◽  
Warren Maroun
Keyword(s):  
South Africa ◽  
South African ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
Perceived Usefulness ◽  
Developing Economy ◽  
Fair Value Accounting ◽  
Extensive Experience ◽  
Content Type

PurposeThe objective of this research is to explore the challenges being encountered when applying and implementing fair value accounting requirements, focusing specifically on the determination of fair value per International Financial Reporting Standards (IFRS) 13: Fair value measurement (IFRS 13) in the South African capital market.Design/methodology/approachData are collected from 20 detailed interviews, primarily with preparers and interpretively analysed to identify how individuals internalise the requirements of IFRS 13 and the challenges associated with its application. The researchers focus specifically on South Africa because of its status as a developing economy and, at the same time, its extensive experience in applying IFRS.FindingsSouth African preparers appear reluctant to change from a conventional cost-based measurement approach to one grounded in fair value. Primary concerns include the perceived usefulness of fair value accounting and its conceptual appropriateness, given its perceived de-emphasis of the traditional stewardship role of financial reporting. Related challenges to the application of IFRS 13 include concerns about the cost of determining fair value; the inherent subjectivity of fair value measures and the practical difficulty of calculating fair values when markets are not efficient or where business environments are complex and dynamic where Level 1 inputs are not widely available for all assets and liabilities. These challenges encourage preparers to choose accounting policies, which minimise the use of fair value or apply the provisions of IFRS 13 legalistically.Research limitations/implicationsData are collected from a group of respondents from a single developing economy. Additional research on the application of IFRS 13 in other developing markets will be required to conclude on the relevance of economic, cultural and social factors for the understanding and implementation of new accounting standards by practitioners.Practical implicationsStandard setters and regulators cannot assume that new accounting standards will be interpreted and applied as intended. Even when compliance with IFRS is mandatory, preparers have considerable discretion when it comes to operationalising accounting prescriptions. Unless the challenges raised by preparers are addressed, misapplication of IFRS is likely to continue.Originality/valueThe research makes an important empirical and practical contribution by providing primary evidence on the operationalisation of IFRS 13 in a novel setting. It complements earlier research which has focused primarily on the conceptual/theoretical dimension and on American and European perspectives.

Compliance costs and comparability benefits of cross-listing

2019 ◽  
Vol 27 (4) ◽  
pp. 563-594
Author(s):  
Shiheng Wang ◽  
Serena Wu
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Foreign Firms ◽  
Host Countries ◽  
Accounting Standard ◽  
Compliance Costs ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Cross Listing ◽  
Depositary Receipts

Purpose The purpose of this paper is to examine two channels through which accounting standard differences could affect cross-listing: compliance costs and/or comparability benefits. Design/methodology/approach The authors use two settings to disentangle the two channels. First, financial reporting requirements are more stringent for cross-listings via direct listings than cross-listings via depositary receipts; as a result, the effect of compliance costs (if any) would be manifested differently in the two venues of cross-listings. Second, some host countries allow foreign firms to report under International Financial Reporting Standards (IFRS) without mandating IFRS for domestic firms; compared to host countries that mandate IFRS for both domestic and foreign firms, these IFRS-permitting countries provide a setting to test the importance of comparability benefits while holding constant compliance costs. Findings The authors find that prior to IFRS adoption, direct listings decrease with accounting standards differences between two countries while depositary receipts increase with such differences, consistent with the costs of complying with host country’s accounting standards affecting firms’ cross-listing decisions. After the harmonization of accounting standards, the authors find that IFRS-mandating host countries gain cross-listings from other IFRS-mandating jurisdictions, while IFRS-permitting countries do not experience such gains. These combined results suggest that accounting related compliance costs and comparability benefits both influence cross-listing decisions. Originality/value The paper employs unique settings that enable an in-depth examination of the role of compliance costs vs that of comparability benefits on cross-listing decisions. The settings employed by the authors allow them to disentangle the two channels and provide an important insight that accounting standard-related compliance costs and comparability benefits both affect cross-listing decisions.

Accounting for the Bitcoin: accountability, neoliberalism and a correspondence analysis

2016 ◽  
Vol 24 (1) ◽  
pp. 2-35 ◽  
Author(s):  
Asheer Ram ◽  
Warren Maroun ◽  
Robert Garnett
Keyword(s):  
Correspondence Analysis ◽  
Financial Reporting ◽  
Relevant Literature ◽  
Accounting Standards ◽  
Principal Component ◽  
Fair Value ◽  
Structured Interviews ◽  
Conceptual Approach ◽  
Content Type ◽  
Accounting Policy

Purpose Given its innovative characteristics and increasing popularity, the Bitcoin, and other virtual currencies, are expected to become mainstream, leading to the need for a generally accepted accounting treatment. Currently, however, there are no accounting standards which offer guidance on the recognition and measurement of these virtual currencies. To this end, the purpose of this paper is to determine a conceptual approach for accounting for the Bitcoin, grounded in the theories of neoliberalism and stewardship. Design/methodology/approach The research adopts an interpretive mixed-method approach. The relevant literature is analysed to identify key characteristics of the Bitcoin. These, as well as the elements of accounting policies inspired by neoliberalism and stewardship, form row and column headings in a correspondence matrix completed by 40 financial reporting experts. The correlations between rows and columns (developed using principal component analysis) are used to identify possible recognition and measurement requirements for the Bitcoin. Semi-structured interviews are used to complement the correspondence analysis. Findings The correspondence analysis and interviews reveal an emphasis on cost and fair value proposed by models grounded in stewardship and neoliberalism, respectively. The primary factor at work is the need to account for the underlying economics of the unit of account, something which is informed heavily by an organisation’s business model. Cost and fair value may be conceptual opposites, but in the eyes of respondents, these need to be used to achieve the single goal of communicating the economic rationale for holding the Bitcoin. Research limitations/implications The study is based on a purposefully selected sample of experts and lacks the exploratory potential of purely qualitative research. Nevertheless, it makes novel use of a correspondence analysis to provide an initial frame of reference for developing an accounting policy for unusual transactions and balances. Originality/value The paper is the first to provide a normative perspective on the accounting for this poorly understood “currency”. It also adds to the limited body of interpretive accounting research which dispenses with traditional finance paradigms and positivist models to provide practical recommendations. Finally, the paper offers an innovative approach, using a correspondence analysis and detailed interviews, for developing an accounting policy for transactions not specifically within the scope of existing accounting standards.

An analysis of SEC comment letters and IFRS

2017 ◽  
Vol 15 (2) ◽  
pp. 226-244 ◽  
Author(s):  
Cheryl L. Linthicum ◽  
Andrew J. McLelland ◽  
Michael A. Schuldt
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
Annual Reports ◽  
Financial Accounting Standards Board ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
The Usa ◽  
Comment Letters

Purpose This study investigates the influence of the Securities and Exchange Commission (SEC) on the interpretation and application of International Financial Reporting Standards (IFRS) by examining a group of SEC-selected foreign private issuers filing 2005 annual reports in the USA and reporting using IFRS for the first time. Design/methodology/approach This paper uses hand-collected information from SEC comment letters to analyze IFRS topics and documents the ultimate resolution of each SEC comment (no change to filing, current change to filing or prospective change to future filing). The authors use descriptive statistical analyses, as well as a logistic regression model involving the resolution of each SEC comment, to examine the SEC’s influence on the interpretation of IFRS. Findings The study finds both higher comment totals, and higher numbers of required filing modifications, for those IFRS pronouncements which were identified as needing improvement during the 2006-2008 convergence efforts by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB). Additionally, the study documents a decreasing likelihood of a filing modification when US generally accepted accounting principles (US GAAP) guidance is referenced in comment letter correspondence involving IFRS topics. Originality/value The study extends the IFRS literature and the SEC comment letter literature by focusing on the resolution of comments directed at IFRS disclosures, as well as exploring the factors which influence whether a comment ultimately requires a filing modification.

Development of accounting standards in selected Middle Eastern countries in comparison to the United States of America

2016 ◽  
Vol 26 (1) ◽  
pp. 69-87 ◽  
Author(s):  
Peter A Aghimien
Keyword(s):  
Financial Reporting ◽  
Middle Eastern ◽  
Accounting Standards ◽  
The United States ◽  
Future Research ◽  
Developed Country ◽  
Content Type ◽  
Financial Reporting Standards ◽  
The Usa ◽  
Almost All

Purpose – The purpose of this paper is to compare the development of accounting standards in five diverse Middle Eastern countries with those of the USA. Design/methodology/approach – A comparative analysis of each country with what is obtained in the USA. Findings – While there are some similarities that influence the development of accounting standards in each country, there also exist a variety of differences, particularly in the areas of taxation, use of International Financial Reporting Standards (IFRS), religion, population and so on. Research limitations/implications – The findings are limited to the five countries analyzed. Future research may want to expand the number of Middle Eastern countries included in the population studied. Originality/value – The study is original particularly due to the diversity of the countries selected. While the USA is an economically and technologically developed country, almost all of the other countries could be classified as developing. Additionally, the USA is the only country with its own uniquely developed standards, which are universally respected, but different from the single set of high-quality standards commonly referred to as the IFRS, which more than 100 countries have adopted.

The changing IFRS debate in the USA: a rejoinder

2017 ◽  
Vol 13 (1) ◽  
pp. 65-84 ◽  
Author(s):  
Minga Negash ◽  
Andrew Holt ◽  
John Hathorn
Keyword(s):  
Undergraduate Students ◽  
Financial Reporting ◽  
Political Process ◽  
Accounting Standards ◽  
Adoption Process ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
The Us ◽  
The Usa

Purpose The debate on whether global accounting standards are appropriate for use within the US regulatory environment has not yet ended. Nearly four years after the release of the Securities and Exchange Commission’s (SEC’s) much awaited report on the issue, the position of the regulator is still unclear, and the US accounting community is uncertain about the potential for accounting change. This paper aims to examine the documented reasons for the absence of direction and clarity on this issue. Design/methodology/approach Using the theoretical and empirical contributions of prior research on International Financial Reporting Standards (IFRS), this study explores the potential for US adoption of IFRS by examining the main arguments forwarded by the Office of the Chief Accountant of the SEC and the International Accounting Standards Board’s response to the issues raised and by capturing the opinions of 22 graduate and 32 undergraduate students as surrogates for future practicing accountants. The student data were collected from homework submissions to an essay on US accounting convergence with IFRS. Findings From the analysis, the authors make four observations. First, the deliberations over IFRS adoption in the USA are not sufficiently grounded on principles of recognition, measurement and disclosure. Second, the evidence does not support the notion that IFRS is of inferior quality to current US generally accepted accounting principles. Third, the problem areas stem from the apparent divergence of the objectives ascribed to financial statements, the independence and public accountability of the global standard setter and standards that are connected with the regulation of the finance and insurance industries. The final observation is the political process of managing change in the standard setting/adoption process in the USA. Originality/value This paper provides a comprehensive appraisal and a change management perspective to the ongoing IFRS debate in the USA by soliciting and documenting the opinions of future practicing accountants.

Accounting Concepts in Company Law

2021 ◽  
Vol 18 (3) ◽  
pp. 398-427
Author(s):  
Jesper Seehausen
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
Company Law ◽  
International Accounting Standards ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Eu Legislation ◽  
Starting Point ◽  
Pros And Cons

Abstract Taking as a starting point Peter Hommelhoff’s argumentation that accounting law is, in many respects, linked to company law, the purpose of this article is to discuss one perspective of the links between accounting law and company law: accounting concepts in company law. After a brief outline of the existing EU legislation on accounting and a discussion on whether accounting law is part of company law, some examples of accounting concepts in company law – i. e. examples of accounting concepts that have been ‘implemented’ in company law – are discussed, drawing on the Consolidated Company Law Directive (CCLD) and the Shareholder Rights Directive (SRD 2) as well as the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS). These examples are related party transactions, consideration other than in cash and fair value, serious loss of the subscribed capital as well as a few other examples. It is also discussed whether accounting concepts in company law are a ‘good’ or a ‘bad’ thing. Balancing the pros and cons, in the author’s opinion, it is mostly positive that accounting concepts are used in company law in areas where this makes sense – and hence, in the author’s opinion, accounting concepts in company law are mainly a ‘good’ thing.

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