scholarly journals The Influence Of Firm’s Fair Value System On Earnings Quality Under IFRS

2018 ◽  
Vol 34 (3) ◽  
pp. 427-436 ◽  
Author(s):  
Chang Seop Rhee ◽  
Eun Sil Choi ◽  
Ji Yeon Ryu
Keyword(s):  
Evaluation System ◽  
Value Relevance ◽  
Earnings Quality ◽  
Fair Value ◽  
Net Income ◽  
Value System ◽  
Book Value ◽  
Value Evaluation ◽  
Ifrs Adoption ◽  
The Difference

This paper analyzes the influence of firms’ fair value system on earnings quality under IFRS. Korean firms are required to adopt IFRS in 2011. IFRS adoption was expected to increase value relevance of book value of equity and benefit information users’ decision making. However, prior Korean studies report that value relevance of book value of equity is indifferent between under K-GAAP and IFRS. We consider that the indifference in value relevance of book value of equity after IFRS adoption is due to different level of fair value system among firms. We investigate whether the different level of fair value system among firms lead to the difference in earnings quality. Furthermore, we examine how each firm’s fair value system affect earnings quality under IFRS.  This study finds following results. First, firms with weak fair value system smooth income more frequently. Second, firms with weak fair value system experience small amount of positive profit and slight increase in net income compared to prior period more frequently. Third, firms with weak fair value system make less timely loss recognition. Lastly, book value of equity and goodwill has low relative value relevance for weak fair value systemic firms, while both book value of equity and goodwill have incremental value relevance for firms with strong fair value evaluation system.

scholarly journals Heterogeneity in earnings quality between different classes of companies after IFRS adoption: evidence from Brazil

2017 ◽  
Vol 28 (73) ◽  
pp. 113-131
Author(s):  
Roberto Black ◽  
Sílvio Hiroshi Nakao
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Earnings Quality ◽  
Economic Incentives ◽  
Net Income ◽  
Accounting Earnings ◽  
Ifrs Adoption ◽  
Before And After

ABSTRACT This paper aims to investigate the existence of heterogeneity in earnings quality between different classes of companies after the adoption of the International Financial Reporting Standards (IFRS). IFRS adoption is generally associated with an increase in the quality of financial statements. However, companies within the same country are likely to have different economic incentives regarding the disclosure of information. Thus, treating companies equally, without considering the related economic incentives, could contaminate earnings quality investigations. The case of Brazil is analyzed, which is a country classified as code-law, in which tax laws determined accounting practice and in which IFRS adoption is mandatory. First, Brazilian companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) were separated into two classes: companies issuing American Depositary Receipts (ADRs) before IFRS adoption and companies that did not issue ADRs until the adoption of IFRS. Then, this second class of companies was grouped, using cluster analysis, into two different subclasses according to economic incentives. Based on the groups identified, the quality of accounting earnings is tested for each class of the companies before and after IFRS adoption. This paper uses timely recognition of economic events, value relevance of net income, and earnings management as proxies for the quality of accounting earnings. The results indicate that a particular class of companies began showing conditional conservatism, value relevance of net income, and lower earnings management after IFRS adoption. On the other hand, these results were not found for the two other classes of companies.

DİĞER KAPSAMLI GELİR KALEMLERİ İLE İŞLETMENİN PİYASA DEĞERİ ARASINDAKİ İLİŞKİ

2014 ◽  
Vol 1 (3) ◽  
pp. 269
Author(s):  
Serhan Gürkan ◽  
Yasemin Köse
Keyword(s):  
Financial Performance ◽  
Value Relevance ◽  
Net Income ◽  
Comprehensive Income ◽  
Income Statement ◽  
Other Comprehensive Income ◽  
The Difference ◽  
Gains And Losses

Other comprehensive income is the difference between net income as in the Income Statement and comprehensive income, and represents the certain gains and losses of the enterprise not recognized in the Profit or Loss Account. Value relevance of other comprehensive income is under discussion and considering other comprehensive income items all together might be misleading for financial performance. In the view of such information, discussing the value relevance of each other comprehensive income item, judgements are made.

IFRS Adoption and Audit Delay: The Role of Shareholders in the Audit Committee

2018 ◽  
Vol 8 (1) ◽  
pp. 325
Author(s):  
Ishaq Ahmed Mohammed ◽  
Ayoib Che-Ahmad ◽  
Mazrah Malek
Keyword(s):  
Audit Committee ◽  
Unobserved Heterogeneity ◽  
Value Relevance ◽  
Stock Exchange ◽  
Delay Model ◽  
Corporate Reporting ◽  
Ifrs Adoption ◽  
The Difference ◽  
The Relationship

This study examined the relationship between audit delay after IFRS adoption and the role of shareholders in the audit committee as well as testing the difference of pre-and post IFRS adoption periods. A sample of 101 firms with 505 firm-year observations over five year period for firms listed on the Nigeria Stock Exchange was employed for the study, utilizing data from the annual report and accounts of the sample firms. Generalized Methods of Moment (GMM) estimation was used to check the effects of unobserved heterogeneity in audit delay model, while the test of difference in R2 value for pre-and post-adoption periods was determined using Cramer’s Z-statistics. Findings indicate that audit report lag is faster with shareholders in the audit committee. The study proved that brand named auditors such as Big4 can significantly perform faster audit task than non-Big4 firms in IFRS regime. The importance of the study’s findings demonstrates statistical inference on value relevance increase based on the unique IFRS adoption in Nigeria. Thus, regulators should consider increasing the tenure of shareholders in the audit committee to enable them to become more familiar with the corporate reporting under IFRS regime.

scholarly journals Value relevance of accounting data and financial crisis in Europe: an empirical analysis

2012 ◽  
Vol 2 (2) ◽  
pp. 201 ◽  
Author(s):  
Alain Devalle
Keyword(s):  
Financial Crisis ◽  
Positive Impact ◽  
Value Relevance ◽  
Net Income ◽  
Accounting Data ◽  
Book Value ◽  
Crisis Period ◽  
Comprehensive Income ◽  
The Impact ◽  
The Relationship

This paper aims at verifying the relationship between book value and  market value for a four years period (2006-2009) in Europe, under IFRS. In particular, I used value relevance approach to measure whether net income or comprehensive income are more useful to understand the relationship between market data and financial data. Moreover, the paper analyzes the impact of financial crisis on the value relevance of accounting data. The examination period runs from a pre-crisis period (2006-2007) to an in-crisis period (2008-2009). Results shows that comprehensive income is more value relevant than net income. Furthermore, the financial crisis has a positive impact on value relevance.  

scholarly journals An Analysis Of Factors Impacting The Value-Relevance Of SFAS No. 107 Fair Value Disclosures

2011 ◽  
Vol 1 (4) ◽  
Author(s):  
Daniel R. Brickner
Keyword(s):  
Value Relevance ◽  
Fair Value ◽  
Relative Magnitude ◽  
Financial Statement ◽  
Font Size ◽  
Historical Cost ◽  
Financial Condition ◽  
The Difference

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">This study examines the impact of hypothesized factors on the value-relevance of SFAS No. 107 fair value disclosures.<span style="mso-spacerun: yes;">&nbsp; </span>These factors include firm size, the relative magnitude of the difference between the fair value and the historical cost measurements for each financial instrument, firm financial condition, and the quality of a firm&rsquo;s financial statement audit.<span style="mso-spacerun: yes;">&nbsp; </span>A pooled valuation model is employed on the sample of 867 firm years for banks and bank holding companies during the period of 1996 and 1997.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">&nbsp;</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The results indicate that the SFAS No. 107 fair value disclosures for investment securities, net loans, and long-term debt are value-relevant in explaining the market value of common equity for the sample banks.<span style="mso-spacerun: yes;">&nbsp; </span>With respect to the hypothesized factors, firm size was found to have a statistically significant impact on the value-relevance of the disclosures for net loans and long-term debt.<span style="mso-spacerun: yes;">&nbsp; </span>Additionally, the relative magnitude of the difference between the fair value and historical cost had a statistically significant effect on the value-relevance of the disclosure for investment securities and long-term debt.<span style="mso-spacerun: yes;">&nbsp; </span>Finally, firm financial condition and the quality of a firm&rsquo;s audit were found to have a statistically significant impact on the fair value disclosure for net loans. </span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">&nbsp;</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The results of this study are descriptive of the behavior of financial statement users with respect to these fair value disclosures.<span style="mso-spacerun: yes;">&nbsp; </span>The implications of this study&rsquo;s findings are useful for both accounting standard-setters and preparers of financial statements.<span style="mso-spacerun: yes;">&nbsp; </span>Taken together, these findings suggest that the market does not respond to the SFAS No. 107 fair value disclosures at their face value alone or without considering their context.<span style="mso-spacerun: yes;">&nbsp; </span>Specifically, it appears to look to other factors that may impact the relevance and/or reliability of these disclosures.</span></span></p>

Value relevance and market valuation of assets measured using IFRS and US GAAP in the US equity market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Michael Cipriano ◽  
Elizabeth T. Cole ◽  
John Briggs
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
The United States ◽  
Market Valuation ◽  
International Studies ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Book Value ◽  
The Difference ◽  
Us Gaap

Purpose Studies show firms reporting using Generally Accepted Accounting Principles in the United States (US GAAP) and International Financial Reporting Standards (IFRS) are similarly valued in the market, however, these studies are limited due to the noise present in international studies from regulatory differences. This study aims to eliminate much of this noise by using a cleaner sample of all listings with the Securities Exchange Commission (SEC). This paper also looks at more detailed book value figures. Design/methodology/approach There have been previous studies on the differences in market valuation of firms reporting using IFRS vs US GAAP. Most of this research is confounded with difficulties due to different regulatory environments and volatile time periods. The study uses cleaner data following the SEC’s acceptance of IFRS financials without a 20-F Reconciliation. The authors use a large sample of non-US firms trading on US exchanges choosing to use either US GAAP or IFRS for SEC reporting purposes. The sample period starts two years after the SEC’s acceptance of IFRS financials without a 20-F reconciliation and is larger than earlier samples. Findings The authors show that there is no difference between IFRS and US GAAP firms’ overall value relevance, however, earnings are more value relevant when measured using IFRS and book value is more value relevant when measured using US GAAP. The authors find that the difference between US GAAP and IFRS can be explained, at least in part, by greater market multiples being placed on inventories and goodwill using US GAAP. This is offset in part by greater multiples being placed on other assets under IFRS. Originality/value The authors replicate earlier studies but also extend with a better sample and more detailed finings.

Do non-staggered board elections matter to earnings quality and the value relevance of earnings and book value?

2017 ◽  
Vol 16 (1) ◽  
pp. 46-66 ◽  
Author(s):  
Shuling Chiang ◽  
Gary Kleinman ◽  
Picheng Lee
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Stock Prices ◽  
Positive Relationship ◽  
Value Relevance ◽  
Earnings Quality ◽  
Discretionary Accruals ◽  
Content Type ◽  
Book Value ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of non-staggered voting for members of the board of directors on earnings quality and the value relevance of earnings and book value. Design/methodology/approach The authors used a sample of Taiwanese firms whose board was elected as a whole every three years from 2003 to 2013. The authors used multiple regression analysis to test whether board of directors elections and corporate governance affected earnings quality and the value relevance of earnings and book value. Findings The authors found that elections led to lower earnings quality, but better corporate governance led to greater earnings quality. In the presence of board elections, earnings have reduced value relevance but book value had increased value relevance. Finally, given board elections, the relative value relevance of earnings and book value on stock price was not fully moderated by strong corporate governance. Research limitations/implications The results presented here indicate the importance of better corporate governance in diffusing suspicions of management occasioned by the use of discretionary accruals in years in which board elections take place. Better corporate governance regimes led to a more positive relationship of discretionary accruals to earnings persistence, even in the presence of directorial elections. Similarly, better corporate governance regimes led to a more positive relationship between earnings per share and stock prices. Limitations include the restriction of the testing locale to Taiwan. That said, many companies around the globe use non-staggered board elections. Accordingly, these results suggest issues of importance to corporate governance advocates beyond Taiwan as well. Originality/value This study deepens the field’s understanding of the impact of corporate governance arrangements and schedules for electing board of directors’ members on issues of interest to stockholders.

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