The Influence Of Long-Term Tangıble Asset’s Valuatıon On Fınancıal Indıcators: The Attıtude Of Shareholders And Credıtors

This study examines the impact of hypothesized factors on the value-relevance of SFAS No. 107 fair value disclosures.  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’s financial statement audit.  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.   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.  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.  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.  Finally, firm financial condition and the quality of a firm’s audit were found to have a statistically significant impact on the fair value disclosure for net loans.  The results of this study are descriptive of the behavior of financial statement users with respect to these fair value disclosures.  The implications of this study’s findings are useful for both accounting standard-setters and preparers of financial statements.  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.  Specifically, it appears to look to other factors that may impact the relevance and/or reliability of these disclosures.

Download Full-text

Analysis of sensitivity of a company's financial sustainability to random factors

E3S Web of Conferences ◽

10.1051/e3sconf/202021013002 ◽

2020 ◽

Vol 210 ◽

pp. 13002

Author(s):

Ilona Avlasenko ◽

Lyudmila Avlasenko ◽

Isa Peshkhoev ◽

Yuri Podkolzin ◽

Oksana Savelyeva

Keyword(s):

Financial Stability ◽

Unstable State ◽

Financial Indicators ◽

Financial Condition ◽

Distribution Parameters ◽

Normal Stability ◽

Normal Law ◽

The Impact ◽

Enterprise Activity

In this article the problem of influence of accidental changes of financial indicators of enterprise activity (equity, long-term/short-term borrowed capital, reserves and costs, etc.) caused by uncertainty of market conditions on values of indicators of financial stability is considered. The study is conducted on the basis of the assumption that the studied financial indicators of the enterprise are random values with a normal law of distribution. To estimate the distribution parameters of these random values, statistical data on the values of the financial indicators of the enterprise for previous years are used. Following estimates of probabilities of financial stability levels were built: absolute stability, normal stability, unstable state and crisis financial state. With the help of statistical modeling, numerical experiments were conducted in order to determine the level of financial condition and conclusions were formulated on the impact on the financial condition of the enterprise of the parameters of the distribution of probabilities of random variables - indicators of the financial and economic activity of the enterprise.

Download Full-text

The Foundations for a General Theory of General Purpose Financial Reporting for Business

10.26686/wgtn.16967464 ◽

2021 ◽

Author(s):

◽

David Sutton

Keyword(s):

General Theory ◽

Financial Reporting ◽

Central Element ◽

Accounting Standards ◽

Fair Value ◽

General Purpose ◽

Historical Cost ◽

Legitimate User ◽

Valuation Method ◽

Value Measurement

Accounting standards setters have progressively moved towards decision-useful, investor-focused fair value accounting standards for general purpose financial reporting (GPFR). With some qualification, the case is made that this development is positive for accounting as a discipline. This paper develops a referent theory of accounting to contextualize standards setters' implicit direction, derived from existing research and literature. A central element in the development of this theory is the case made for 'investor-as-GPFR user'. Against this, stakeholder theory and positive accounting theory will be identified as confounding influences on the development of a general theory of accounting. The argument is for the investor, both current and potential, as the sole legitimate user of GPFR. The practical implications of the theory are considered against the prevailing debate over optimal accounting valuation method; the debate between fair value measurement and historical cost. The case is made that a number of ostensible dichotomies in accounting thought, such as between relevance and accountability, are substantially reconcilable. The mutual exclusivity often implied of accounting information relevance and accountability-cum-reliability is rejected. The development of a general theory of accounting is timely as such a referent theory is necessary to legitimize standards setting and secure accounting's place in an increasingly diverse financial information market. Inferentially, trends in the evolution of fair value standards reflect the dominant concern to meet threats to the discipline as a whole; this standard setting trend qualified in speed and degree by the narrow interests of 'constituents'.

Download Full-text

Fiscal Decentralization and Financial Condition

State and Local Government Review ◽

10.1177/0160323x18794014 ◽

2018 ◽

Vol 50 (2) ◽

pp. 119-131 ◽

Cited By ~ 2

Author(s):

Akheil Singla ◽

Samuel B. Stone

Keyword(s):

Fiscal Decentralization ◽

Curvilinear Relationship ◽

State Governments ◽

Financial Indicators ◽

Financial Health ◽

Fiscal Health ◽

Financial Condition ◽

State And Local ◽

Benefits And Costs

Although there are strong theoretical arguments about both the benefits and costs of decentralization in the federalism literature, there is little on how second-order fiscal decentralization effects the financial health of state governments. This study examines this question and adds to the understanding of state-and-local fiscal relations. Using financial indicators that measure several dimensions of financial condition, the research estimates the effect of revenue and expenditure decentralization on state fiscal health. It finds that while state financial condition is unaffected by revenue decentralization, there is a curvilinear relationship between expenditure decentralization and long-term state financial condition.

Download Full-text

Fair Value Accounting on the Housing Crisis

Business and Management Studies ◽

10.11114/bms.v2i3.1755 ◽

2016 ◽

Vol 2 (3) ◽

pp. 1

Author(s):

Phillip Neely Jr ◽

Ray Muhammad

Keyword(s):

Fair Value ◽

Housing Crisis ◽

Asset Valuation ◽

Fair Value Accounting ◽

Effect Analysis ◽

Holding Companies ◽

Historical Cost ◽

Valuation Method ◽

Alternate Model ◽

Research Findings

The circumstances which led to the development of each of these methods of accounting will be examined to better understand the context in which each technique was to be incorporated and its effect. Analysis will be performed on whether the use of these accounting practices changed since their inception and if so, for what purpose. The researcher will discuss how and if these accounting procedures become instrumental in relation to the valuation of housing assets, particularly in America. As a result of the financial crisis, some experts have expressed the opinion that Fair Value Accounting as opposed to the historical cost approach exacerbated the housing crisis while others have developed opinions that Fair Value Accounting had no negative affect on the crisis and in fact allowed for greater transparency in disclosure. The finding will analyze the effect of Fair Value Accounting on the housing crisis and whether the historical cost valuation method would be more effective and less subject to risk in home asset valuation by bank holding companies. Research findings will determine which method is most effective and whether an alternate model of valuation would provide a more reliable accounting practice for the housing market.

Download Full-text

The Foundations for a General Theory of General Purpose Financial Reporting for Business

10.26686/wgtn.16967464.v1 ◽

2021 ◽

Author(s):

◽

David Sutton

Keyword(s):

General Theory ◽

Financial Reporting ◽

Central Element ◽

Accounting Standards ◽

Fair Value ◽

General Purpose ◽

Historical Cost ◽

Legitimate User ◽

Valuation Method ◽

Value Measurement

Accounting standards setters have progressively moved towards decision-useful, investor-focused fair value accounting standards for general purpose financial reporting (GPFR). With some qualification, the case is made that this development is positive for accounting as a discipline. This paper develops a referent theory of accounting to contextualize standards setters' implicit direction, derived from existing research and literature. A central element in the development of this theory is the case made for 'investor-as-GPFR user'. Against this, stakeholder theory and positive accounting theory will be identified as confounding influences on the development of a general theory of accounting. The argument is for the investor, both current and potential, as the sole legitimate user of GPFR. The practical implications of the theory are considered against the prevailing debate over optimal accounting valuation method; the debate between fair value measurement and historical cost. The case is made that a number of ostensible dichotomies in accounting thought, such as between relevance and accountability, are substantially reconcilable. The mutual exclusivity often implied of accounting information relevance and accountability-cum-reliability is rejected. The development of a general theory of accounting is timely as such a referent theory is necessary to legitimize standards setting and secure accounting's place in an increasingly diverse financial information market. Inferentially, trends in the evolution of fair value standards reflect the dominant concern to meet threats to the discipline as a whole; this standard setting trend qualified in speed and degree by the narrow interests of 'constituents'.

Download Full-text

The effect of accounting methods on financial reporting quality

International Journal of Law and Management ◽

10.1108/ijlma-03-2017-0022 ◽

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.

Download Full-text

Mixing fair-value and historical-cost accounting: predictable other-comprehensive-income and mispricing of bank stocks

Review of Accounting Studies ◽

10.1007/s11142-017-9423-1 ◽

2017 ◽

Vol 22 (4) ◽

pp. 1732-1760 ◽

Cited By ~ 5

Author(s):

Peter Easton ◽

Xiao-Jun Zhang

Keyword(s):

Cost Accounting ◽

Fair Value ◽

Historical Cost ◽

Comprehensive Income ◽

Other Comprehensive Income ◽

Historical Cost Accounting

Download Full-text

THE EFFECTIVENESS OF ENSURING THE FINANCIAL STABILITY OF THE RESTAURANT BUSINESS IN THE CRISIS COVID-19

Anti-Crisis Management: State, Region, Enterprise ◽

10.30525/978-9934-26-020-9-11 ◽

2020 ◽

Author(s):

Liudmyla Batchenko ◽

◽

Liliia Honchar ◽

Andrii Beliak ◽

◽

...

Keyword(s):

Financial Management ◽

Financial Stability ◽

Hospitality Industry ◽

Business Environment ◽

Financial Indicators ◽

Financial Condition ◽

The Matrix ◽

A Chain ◽

Key Indicators ◽

Enterprise Policy

The study identifies and systematizes key indicators and criteria for ensuring the financial stability of the restaurant business. The complex and thorough analysis of features of maintenance of financial stability of the enterprises of restaurant business on an example of one of restaurants of a chain of the Japanese kitchen of LLC «Sushiya» is carried out. After analyzing the key indicators of financial and economic activity of the restaurant, using the method of complex calculation of the rating of the financial condition of enterprises in the hospitality industry, the level of financial stability of the studied enterprise is determined. Based on the results of practice-oriented analysis, the ranking of financial management goals by the degree of impact on the financial stability of the enterprise. The mechanism of ensuring financial stability of restaurant business enterprises is modeled. The developed and substantiated mechanism is based on a unique methodology, which, unlike existing ones, is adapted to the field of hospitality, is carried out by specific tactical and strategic tools of financial management, based on the chosen type of enterprise policy; takes into account the dynamics of the main financial indicators of the enterprise, which is planned to implement the mechanism and the possible impact of factors of the external changing business environment. With the help of the matrix of financial strategies of J. Franchon and I. Romane, the position of the restaurant «Sushiya-Lavina» is determined and the methodological tools for improving the efficiency of its financial stability are substantiated.

Download Full-text

Financial indicators of the sustainability of pastoral farms and their relationship with environmental sustainability

Proceedings of the New Zealand Grassland Association ◽

10.33584/jnzg.1997.59.2242 ◽

1997 ◽

pp. 199-204

Author(s):

Nicola M. Shadbolt ◽

Stuart D. Morriss ◽

Terry C. Kelly

Keyword(s):

Environmental Sustainability ◽

National Level ◽

Environmental Indicators ◽

Financial Indicators ◽

Financial Health ◽

Financial Measures ◽

Preliminary Examination ◽

Biophysical Indicators ◽

The Relationship

Agri-environmental indicators developed in New Zealand to date have focused more on environmental and biophysical indicators than on social and financial measures. However, the latter are increasingly seen as pre-requisites to achieving long-term financial and social viability in agriculture. At present environmental costs are internalised in the financial performance of farm businesses because environmental protection in agriculture is funded almost entirely by farmers. This paper presents a preliminary examination of the perceptions of farmers on the relationship between farm financial resources and the environmental effects of farming. It aims to identify pragmatic and reliable financial indicators of sustainable agriculture at both the farm and the regional or national level. The paper will introduce a range of indicators used to measure the financial health of a business and will evaluate them for their ability to measure the economic sustainability of farm businesses over time. Farmer perceptions of the existence of links between the financial and environmental indicators will be explored through analysis of interview responses. Keywords: financial health, sustainability indicators, environmental indicators, financial indicators

Download Full-text