Revenue-expense versus asset-liability model

2020 ◽  
Vol 28 (2) ◽  
pp. 277-310
Author(s):  
Nicola Moscariello ◽  
Fabio La Rosa ◽  
Francesca Bernini ◽  
Pietro Fera
Keyword(s):  
Financial Reporting ◽  
Private Firms ◽  
Earnings Persistence ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Earnings Attributes ◽  
Country Analysis ◽  
Accounting Model ◽  
The Impact

Purpose The purpose of this study is to analyse the impact of two different financial reporting models (revenue-expense vs asset-liability) on several earnings attributes. Design/methodology/approach The analysis compares the earnings attributes of non-financial private firms using the Italian generally accepted accounting principles (Italian GAAP, based on a revenue-expense model) with those of the Italian non-financial private firms voluntarily adopting the international financial reporting standards (IFRS, based on the asset-liability model). To address major methodological concerns, the research design is based on a single-country analysis and on three different samples as follows: firms voluntarily adopting IFRS; a matched sample of Italian GAAP firms; Italian GAAP firms belonging to the Elite programme, and therefore, comparable to the IFRS adopters in terms of incentives towards financial reporting transparency. Findings The results show that firms reporting under a revenue-expense model are characterized by a stronger revenue-expense matching degree, along with higher earnings’ persistence, earnings’ predictability and conditional conservatism than firms adopting an asset-liability model. In addition, contrary to the expectations, Italian GAAP firms do not present smoother earnings and do not report greater abnormal accruals than IFRS adopters do. Overall, the findings suggest that the switch from a revenue-expense model to an asset-liability model negatively affects several earnings attributes of non-financial private companies, shedding new light on the drawbacks associated with the adoption of the IFRS accounting model. Originality/value This study addresses a theme characterized by sparse research efforts, adding new insights to the debate on the decline in the quality of earnings and on the drawbacks associated with the adoption of the IFRS accounting model.

Consequences and determinants of IFRS convergence in India

2020 ◽  
Vol 28 (2) ◽  
pp. 303-322
Author(s):  
Vincent Tawiah ◽  
Pran Boolaky
Keyword(s):  
Capital Structure ◽  
Financial Reporting ◽  
Rational Analysis ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Family Control ◽  
Financial Reporting Standards ◽  
Significant Difference ◽  
The Impact

Purpose The purpose of this paper is to provide evidence of how convergence to International Financial Reporting Standards (IFRS) impacts accounting values and the determinants of variation in equity adjustments among Indian companies. Design/methodology/approach Using a sample of 323 listed companies, the authors empirically test whether there is a significant difference between converged IFRS (Ind.AS) and Indian Generally Accepted Accounting Principles (GAAP) (AS) reported figures and ratios and why companies adjust differently. Findings This paper reveals that fair valuation under Ind.AS causes a significant decrease in goodwill. A substantial decrease in both current and long-term liabilities because of non-recognition of proposed dividend, discounting of long-term provision per Ind.AS was also found. The variations in equity adjustment were significantly influenced by capital structure, level of family control and auditor type. Practical implications This paper provides insights to users who are interested in historical data, that Ind.AS brings significant changes in the accounting values and ratios and the impact differs among companies based on capital structure, ownership and auditor type. Originality/value This paper contributes to the literature of IFRS convergence in India by providing rational analysis of the differences between IFRS, Indian converged GAAP and Indian local GAAP among companies and its impact on accounting values.

scholarly journals The importance of information upon applying IFRS in financial entities that trade at the Colombian stock market

2019 ◽  
Vol 21 (34) ◽  
pp. 137-152
Author(s):  
Miguel Angel Laverde Sarmiento ◽  
Jorge Fernando Garcia Carrillo ◽  
Juan Carlos Lezama Palomino ◽  
Alejandra Patiño Jacinto
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Stock Exchange ◽  
Regulatory Framework ◽  
General Level ◽  
Market Exchange ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Before And After ◽  
The Impact

The aim of this research is to determine whether the implementation of the International Financial Reporting Standards (IFRS) in the companies of the financial sector listed on the Colombian Stock Exchange has greater relevance compared to the previous accounting regulatory framework known as Generally Accepted Accounting Principles (GAAP) in Colombia, for the years 2009 to 2016. Taking into account the concept of valorative relevance that indicates that the accounting information is relevant if it affects the stock price reflected in the capital market exchange. To determine this relationship, an adaptation of the model proposed by Ohlson (1995) is used, because it is the most frequently used to measure relevance. The modifications made to the model were to include accounting variables of financial instruments of assets and liabilities to better measure the impact of the IFRS. On a general level, the conclusion is reached that the valorative relevance of financial companies listed on the stock exchange between 2009 and 2016, does not change due to the application of the IFRS. The results are because the regulation that financial companies that are listed on the stock exchange of Colombia are subject to has contributed to the relevance being maintained before and after the application of the new regulatory framework. however, when carrying out the study of the information taking into account only the variables and taking into account the regulations under the IFRS, they present a greater degree of significance.

Barriers to institutionalization of an IFRS-based model: perceptions of Portuguese auditors

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Alexandra Soares Fontes ◽  
Lúcia Lima Rodrigues ◽  
Carla Marques ◽  
Ana Paula Silva
Keyword(s):  
Financial Reporting ◽  
National Level ◽  
Local Context ◽  
Institutional Research ◽  
Accounting Systems ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Accounting Model ◽  
Barriers To Implementation ◽  
High Level

Purpose In 2010, Portugal’s newly implemented Accounting Standardization System (SNC - Sistema de Normalização Contabilística) aligned Portuguese accounting standards for unlisted companies with International Financial Reporting Standards (IFRS). The purpose of this paper is to explore the influence of the local context and the role of auditors in the institutionalization of this IFRS-based model in Portugal. Design/methodology/approach Drawing from an institutional theory framework, the authors interviewed 16 Portuguese auditors in 2017 (seven years after formal implementation of the SNC) to determine their perceptions on whether barriers to the IFRS-based model persisted. Findings The authors reveal that the code-law institutional logic embedded in the Portuguese context is hindering full institutionalization of the new accounting model. Some persisting barriers to implementation reflected a decoupling between formal requirements and actual practices. Despite these barriers, there has been an encouraging institutionalization of SNC. The authors reveal a high level of commitment of auditors. They draw attention to the engagement of auditors in the institutional work that is intended to assist in SNC implementation, and their role as promoters of a power-knowledge discourse in propagating IFRS institutional logics at the national level, namely, through the justification and rationalization of the reported institutional contradictions. Practical implications The highlighting the authors provide of problems related to accounting change should assist international regulators, the Portuguese standard-setter and professional accounting associations to devise appropriate strategies to promote IFRS-based accounting systems implementation. Originality/value The authors contribute to the skimpy literature on micro institutional analysis and encourage further exploration of the dynamics between the micro and macro levels of analysis in institutional research.

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.

Factors influencing adoption of the international financial reporting standards (IFRS) in accounting education

2016 ◽  
Vol 9 (1) ◽  
pp. 2-16 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Financial Reporting ◽  
Teaching Practice ◽  
Teaching Experience ◽  
Accounting Education ◽  
Reporting Standards ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Departmental Support ◽  
Type Of Institution ◽  
The Impact

Purpose This paper aims to explore the challenges faced by accounting educators in their attempts to incorporate IFRS materials in their teaching and explores the impact of various factors (instructor’s attitude, size of accounting department, teaching load, type of institution, teaching experience and teaching materials) on the time spent on teaching IFRS materials in undergraduate accounting programmes. Design/methodology/approach A questionnaire survey was administered to faculty members working in Saudi Arabian universities, and interviews were held with a small number of such individuals in different universities in the Kingdom of Saudi Arabia. Findings The results indicate that the instructor’s attitude and availability of IFRS materials exert the most influence upon the time spent by teachers on the IFRS. They further find that departmental support, familiarity with IFRS, training and teaching experience in IFRS are positively associated with the time spent on teaching the IFRS. Originality/value The important implication is that accounting educators must adapt their teaching practice in light of the increasing adoption of the global financial reporting standards.

Fair value accounting choice

2015 ◽  
Vol 8 (2) ◽  
pp. 130-152 ◽  
Author(s):  
Inês Pinto ◽  
Manuel Caldeira Pais
Keyword(s):  
Financial Reporting ◽  
Fair Value ◽  
Accounting Conservatism ◽  
Accounting Choice ◽  
Fair Value Accounting ◽  
Content Type ◽  
Fund Managers ◽  
Asset Value ◽  
Accounting Model ◽  
The Impact

Purpose – Profiting from a unique research opportunity in the Portuguese REIFs market, this paper aims to investigate the impact of fund managers ' accounting choice on funds ' returns distribution and analyses the relationship between fair value accounting choice and conditional accounting conservatism. Design/methodology/approach – According to Portuguese securities market regulation, fund managers of REIFs can fix the value of the fund properties between the acquisition cost and the average of the appraisal values assigned periodically by two independent appraisers. Therefore, through the analysis of fund managers’ actual choice to value REIF net asset value in comparison with a mandatory adoption of a pure fair value method (appraisers’ valuations), the paper investigates the impact of accounting choice on funds’ return series. On the other hand, an analysis at fund level is also conducted to determine the consequences of fair value accounting choice on the ability of fund managers in delaying the recognition of asset value decreases (bad news). Findings – Results indicate that in the period of financial crisis, significant differences in REIF returns according to the accounting method used to value properties are observed. There is also evidence that fund managers of open-end funds that are subject to greater market pressure to meet financial reporting objectives are more likely to smooth book value returns. Additionally, findings support the hypothesis that REIFs that use a more historical cost accounting model exhibit a lower degree of conditional accounting conservatism, suggesting that the use of fair value may be useful to reduce fund manager discretion in delaying the recognition of losses. Originality/value – This paper provides an empirical evidence of one possible positive effect of the use of fair value on the quality of financial reporting, evidencing how a more fair value accounting model may limit fund managers’ discretion.

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.

The Impact of Eliminating the 20-F Reconciliation Requirement for IFRS Filers on Earnings Persistence and Information Uncertainty

2012 ◽  
Vol 26 (4) ◽  
pp. 741-765 ◽  
Author(s):  
Tony Kang ◽  
Gopal V. Krishnan ◽  
Michael C. Wolfe ◽  
Han S. Yi
Keyword(s):  
Financial Reporting ◽  
Investor Protection ◽  
Securities And Exchange Commission ◽  
Earnings Persistence ◽  
Information Uncertainty ◽  
Disclosure Quality ◽  
Forecast Dispersion ◽  
Financial Reporting Standards ◽  
Reporting Environment ◽  
The Impact

SYNOPSIS: On November 15, 2007, the U.S. Securities and Exchange Commission (SEC) eliminated the requirement that foreign private issuers reporting under International Financial Reporting Standards (IFRS) include a reconciliation to U.S. GAAP in their 20-F filing. To the extent that the reconciliations had information content, it is possible that the information environment of IFRS filers deteriorated in the post-reconciliation period, unless they voluntarily improved disclosure quality. Using difference-in-differences tests, we examine whether there was any change in the persistence of earnings and analyst forecast dispersion after the new regulation. We find that earnings persistence increased (did not increase) and analyst uncertainty measured by the forecast dispersion did not increase (increased) for firms domiciled in weaker (stronger) investor protection countries. These results suggest that firms from a weaker investor protection environment had a greater incentive to “signal” the quality by voluntarily improving the disclosure quality in the post-reconciliation period to compensate for any possible information loss from no longer providing the reconciliation. Our findings also suggest that the elimination of the reconciliation requirement did not have a uniform effect on IFRS filers and that the effect varies with the firm's home country reporting environment. JEL Classifications: M41

The Impact of Mandatory IFRS Adoption on Accounting Quality: Evidence from Australia

2012 ◽  
Vol 11 (1) ◽  
pp. 119-146 ◽  
Author(s):  
Yi Lin Chua ◽  
Chee Seng Cheong ◽  
Graeme Gould
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Quality ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Financial Firms ◽  
Wide Range ◽  
Mandatory Adoption ◽  
The Impact

ABSTRACT Following the mandatory implementation of International Financial Reporting Standards (IFRS) in Australia as of January 1, 2005, this study examines its impact on accounting quality by focusing on three perspectives: (1) earnings management, (2) timely loss recognition, and (3) value relevance. Using four years of adoption experience since the mandate was first made effective in Australia for a wide range of accounting-based metrics and market-based information, we find that the mandatory adoption of IFRS has resulted in better accounting quality than previously under Australian generally accepted accounting principles (GAAP). In particular, the findings indicate that the pervasiveness of earnings management by way of smoothing has reduced, while the timeliness of loss recognition has improved post-adoption. Additionally, the value relevance of financial statement information has improved, especially for non-financial firms. This is despite the fact that there is evidence to suggest that financial firms are engaged in managing earnings toward a small positive target after the mandatory adoption of IFRS in Australia.

Long-Lived Asset Impairments in the Shipping Industry and the Impact on Financial Statement Ratios: Comparing U.S. GAAP and IFRS Standards

2013 ◽  
Vol 3 (2) ◽  
pp. 76 ◽  
Author(s):  
James Penner ◽  
Jerry Kreuze ◽  
Sheldon Langsam
Keyword(s):  
Financial Reporting ◽  
Financial Statement ◽  
Shipping Industry ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Asset Impairment ◽  
The Difference ◽  
Asset Impairments ◽  
The Impact ◽  
Us Gaap

In this paper, we investigate asset impairment standards particularly as they relate to differences between United States generally accepted accounting principles (US GAAP) and international financial reporting standards (IFRS) for the impairment of long-lived assets in the shipping industry and the corresponding impact on financial statement analysis ratios.  Our study provides evidence that return on assets and asset turnover ratios diverge significantly as a result of the difference between US GAAP and IFRS on asset impairments within the shipping industry.  Reporting differences between US GAAP and IFRS can impede the comparability of financial reporting.  Asset impairment accounting differences can have significant differences for companies reporting under these two accounting standards.

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