Rating Agency Adjustments to GAAP Financial Statements and Their Effect on Ratings and Credit Spreads

2014 ◽  
Vol 90 (2) ◽  
pp. 641-674 ◽  
Author(s):  
Pepa Kraft
Keyword(s):  
Default Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Balance Sheet ◽  
Financial Statements ◽  
Financial Statement ◽  
Credit Spread ◽  
Credit Spreads ◽  
Term Structures ◽  
Interest Expense

ABSTRACT I examine a dataset of both quantitative (hard) adjustments to firms' reported U.S. GAAP financial statement numbers and qualitative (soft) adjustments to firms' credit ratings that Moody's develops and uses in its credit rating process. I first document differences between firms' reported and Moody's adjusted numbers that are both large and frequent across firms. For example, primarily because of upward adjustments to interest expense and debt attributable to firms' off-balance sheet debt, on average, adjusted coverage (cash flow-to-debt) ratios are 27 percent (8 percent) lower and adjusted leverage ratios are 70 percent higher than the corresponding U.S. GAAP ratios. I then find that Moody's hard and soft rating adjustments are associated with significantly higher credit spreads and flatter credit spread term structures. Overall, the results indicate that Moody's quantitative adjustments to financial statement numbers and qualitative adjustments to credit ratings enable it to better capture default risk, consistent with it effectively processing both hard and soft information.

scholarly journals IPTEKS PENGUKURAN KINERJA KEUANGAN PADA PT. PLN (PERSERO) WILAYAH SULUTTENGGO

2018 ◽  
Vol 2 (02) ◽  
Author(s):  
Regina F. Pinontoan ◽  
Natalia Y. T. Gerungai
Keyword(s):  
Financial Performance ◽  
Balance Sheet ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Ratios ◽  
Ratio Analysis ◽  
Financial Ratio ◽  
Leverage Ratio ◽  
Financial Ratio Analysis ◽  
A Company

The measurement of financial performance based solely on balance sheet financial statements and profit and loss is able to provide information on the feasibility of a company on the obligations of external parties and also assets owned by the company. From the results of financial statement analysis using financial ratio analysis of PT. PLN (Persero)Region  Sulutttenggo can evaluate the financial performance of companies that show unfavorable conditions where the value of the liquidity ratio is less stable and even decreases. Whereas the results of the calculation of leverage ratio and profitability ratio show fairly good conditions. Thus, the writer suggest that the management always evaluate in improving the company's financial performance.Keywords : financial statement, financial performance, financial ratios

scholarly journals IMPLEMENTASI SAK SYARIAH DALAM LAPORAN KEUANGAN KOPERASI PENGKREDITAN RAKYAT SYARIAH (KPRS)

2020 ◽  
Vol 11 (2) ◽  
pp. 123-132
Author(s):  
Nimatul Ula ◽  
Nawirah Nawirah
Keyword(s):  
Qualitative Research ◽  
Balance Sheet ◽  
Accounting Standards ◽  
Financial Statements ◽  
Financial Accounting ◽  
Financial Statement ◽  
Online Data ◽  
Financial Reports ◽  
Financial Report ◽  
Financial Position

The purpose of this study is to determine the suitability of the presentation of the An-Nahl Pandaan KPRS financial statements to Syaria FAS. This research uses descriptive qualitative research in which the purpose is to describe and illustrate the application of Sharia Financial Accounting Standards in terms of the financial statements prepared by KPRS An-Nahl Pandaan. The techniques used in data collection are through observation, interviews, documentation, and online data search techniques. The results of the analysis and discussion of this study indicate that most of the financial statement presentations in KPRS An-Nahl are in accordance with Sharia FAS even though only the entity only reports the financial position (Balance Sheet). From the An-Nahl KPRS financial report that looks very prominent the discrepancy is that An-Nahl KPRS does not make the six other financial report components listed in the Sharia FAS because the KPRS An-Nahl management itself does not yet understand how to prepare financial reports in accordance with applicable standards.

scholarly journals THE VALUE OF RESTATEMENT TO FRAUD PREDICTION

2019 ◽  
Vol 20 (6) ◽  
pp. 1210-1237
Author(s):  
Shi Qiu ◽  
Hong-Qu He ◽  
Yuan-sheng Luo
Keyword(s):  
Balance Sheet ◽  
Financial Statements ◽  
Primary Objective ◽  
Financial Statement ◽  
Financial Statement Fraud ◽  
Financial Reports ◽  
Financial Report ◽  
Financial Restatements ◽  
Fraud Prediction ◽  
Different Characteristics

A financial report restatement reflects errors in the previous financial statement, and thus it increases investors’ doubt about the credibility of the financial statement. The primary objective of this paper is to examine whether restatement announcements imply increased fraud risks in Chinese firms in the context that up to one quarter of listed companies have restated their financial reports in China, and explore the implications of the content, severity and reasons for restatements with respect to fraud. In this paper, firms with financial restatements prove to be more likely to be labeled as fraudulent by regulators in China. Second, the following results also are revealed: (1) financial statements, except balance sheet restatements, provide insights into the revelation of fraudulent behaviors, (2) the severity of restatements is positively correlated with future fraud disclosures, and (3) restatements due to negligence are positively correlated with future fraud occurrences. These results imply that restatement announcements and their different characteristics provide important information for detecting financial statement fraud.

The Effectiveness of Credit Rating Agency Monitoring: Evidence from Asset Securitizations

2015 ◽  
Vol 90 (5) ◽  
pp. 1779-1810 ◽  
Author(s):  
Samuel Bonsall ◽  
Kevin Koharki ◽  
Monica Neamtiu
Keyword(s):  
Default Risk ◽  
Credit Rating ◽  
Balance Sheet ◽  
Rating Agencies ◽  
Credit Rating Agency ◽  
Rating Accuracy ◽  
Rating Agency ◽  
Debt Issuance ◽  
Current Exposure

ABSTRACT This study investigates how differences between the rating agencies' initial (at the date of debt issuance) and subsequent (post-issuance) monitoring incentives affect securitizing banks' rating accuracy. We hypothesize that the agencies have stronger incentives to monitor issuers when providing initial versus post-issuance ratings. We document that initial ratings are positively associated with off-balance sheet securitized assets and incrementally associated with on-balance sheet retained securities. However, subsequent ratings fail to capture current exposure to off-balance sheet securitizations. We also find that subsequent ratings reflect default risk less accurately than initial ratings. The subsequent ratings' responsiveness to default risk is worse when a bank has more off-balance sheet securitized assets. Collectively, our findings are consistent with lax post-issuance monitoring. They raise questions about the effectiveness of using ratings as an ongoing contracting mechanism and suggest that conclusions about rating accuracy could differ depending on whether researchers focus on initial versus post-issuance ratings.

Horse Vet, LLC: Transaction Analysis and Statement of Cash Flows Preparation (Option 1)

2017 ◽  
pp. 1-12
Author(s):  
Mark E. Haskins
Keyword(s):  
Financial Reporting ◽  
Balance Sheet ◽  
Financial Statements ◽  
Cash Flows ◽  
Financial Statement ◽  
Balance Sheets ◽  
Income Statement ◽  
Transaction Analysis ◽  
Business Events ◽  
Statement Of Cash Flows

This case pertains to the foundational underpinnings of the accounting process and the statement of cash flows. In Part I, students are presented with 23 business events that they must evaluate for recording in the financial records. Part II requires students to prepare a 2012 statement of cash flows using the information presented in the company's 2011 and 2012 year-end balance sheets along with its 2012 income statement. In Part III, students must rely on a 2011 balance sheet and a 2011 statement of cash flows to work backward to derive the 2010 year-end balance sheet. There are two versions of this case: Option 1 and Option 2. The Option 2 case is a bit more challenging than the Option 1 case. Instructors should use Option 2 if they feel students are well grounded in their understanding of financial statement relationships and the customary financial reporting of a typical set of business events. Both cases reinforce students' learning related to the accounting process and the connectivity between the financial statements. Please note that only one version of the case should be used due to the existence of some overlap between the two.

Are Transfer-Dependent Governments More Creditworthy? Reassessing the Fiscal Federal Foundations of Subnational Default Risk

2018 ◽  
Vol 50 (4) ◽  
pp. 1381-1403 ◽  
Author(s):  
Kyle Hanniman
Keyword(s):  
Default Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Statistical Analyses ◽  
Credit Rating Agencies ◽  
Fiscal Discipline ◽  
Rating Agencies ◽  
International Credit ◽  
Fiscal Distress ◽  
Cross National

AbstractMany fiscal federal scholars argue, often implicitly, that transfer dependence generally bolsters subnational creditworthiness by signalling a higher likelihood of national bailouts for distressed governments. This article argues that dependence fails to bestow general benefits on local borrowers because it suggests an inability to generate additional revenues in the event of fiscal distress, and because this inability does not, contrary to the expectations of many, necessarily translate into higher bailout expectations. Ultimately it is the nature, not the level, of transfers that affects local creditworthiness, whether through bailout or non-bailout channels. Stable and predictable payments, including robust equalization systems, support local creditworthiness, while volatile and unpredictable transfers do not. The article supports these arguments with a review of documents issued by the major international credit rating agencies and cross-national statistical analyses of bailout probabilities and standalone credit ratings issued by Moody’s Investors Service. It also discusses the implications of the findings for work on the fiscal discipline of subnational governments.

Misrepresentation of financial statements

2014 ◽  
Vol 21 (2) ◽  
pp. 215-225 ◽  
Author(s):  
Cenap Ilter
Keyword(s):  
Design Methodology ◽  
Financial Analysis ◽  
Balance Sheet ◽  
Financial Statements ◽  
Financial Statement ◽  
Accounting Fraud ◽  
Financial Statement Fraud ◽  
Content Type ◽  
The Public ◽  
Fraud Theory

Purpose – The purpose of this paper is to show the public, in general, and auditors, in particular, that in the absence of control there is always a risk of fraud. Fraud can be done in various forms. Larceny may be the most obvious case of fraud, but fraud may be done in many other ways too. Balance sheet fraud or financial statements fraud is a broader issue; it is far-fetched than a few hundred dollars of a larceny case. In financial statement fraud, the deep down effect may be millions or billions of dollars. Design/methodology/approach – The paper has been designed based on a fraud theory. The author has observed the implications of a possible fraud in a real audit case. The fraud theory has been tested through financial analysis and audit tests. The theory has then been revised and the existence of a financial statement fraud has been proven. Findings – The paper explores that banks and group companies controlled by unreliable owners can lead to misuse of public's funds in accordance with the directives of the owner. Public's money can be transferred to other group companies in an illegal manner – in excessive amounts – and never returned to the bank by means of applying different accounting fraud techniques. Research limitations/implications – Auditors, who may audit group companies that include a bank or banks with deposit receiving and lending rights, should pay attention to the transactions between the group's bank and the other group companies. The lending may be excessive in amount and/or never paid back and the financial statements would be misrepresented covering various fraud schemes. Originality/value – The case that the paper deals with reflects the author's own audit experiences. The names of the companies have been changed but not the essence of the events. From this perspective, it sheds light onto the path of an auditor who happens to be in a similar situation.

scholarly journals The relationship between key audit matters in the new auditor's report and the risks reported in the management report and the estimates and judgments in the notes to the financial statements

2016 ◽  
Vol 90 (12) ◽  
pp. 580-613 ◽  
Author(s):  
Arjan Brouwer ◽  
Peter Eimers ◽  
Henk Langendijk
Keyword(s):  
The Netherlands ◽  
Information Needs ◽  
Balance Sheet ◽  
Financial Statements ◽  
Internal Controls ◽  
Financial Statement ◽  
It Systems ◽  
Strong Focus ◽  
The Relationship ◽  
Management Report

For decades, auditors have communicated their opinion on financial statements with standard wordings in the auditor’s report. However, stakeholders expect more information from the auditor. The limited transparency regarding an auditor’s actual activities, has contributed to the dissatisfaction concerning the functioning of auditors. The new (extended) auditor’s report is an answer to the information needs of stakeholders. The key audit matters reported by the auditor provide new insights to financial statement users with respect to significant estimates and risks reported in the financial statements. It may be expected from the auditor that he pays extra attention to the most significant estimates and risks. This article contains an examination of the degree to which reported key audit matters match with the significant risks presented in the directors’ reports, and with the significant accounting policies and estimates in the notes. We have studied management reports, financial statements and auditor’s reports of 50 companies listed in the Netherlands (at the AEX and Midkap index) in 2015. Our study shows that the key audit matters in the new auditor’s report often correspond with the significant accounting policies and estimates as they are reported by management in the notes. However, only in ten percent of the cases, the risks presented in the directors’ reports are mentioned as key audit matters in the new auditor’s report. Auditors have a strong focus on balance sheet items as key audit matters. Many companies recognize the riskiness of issues like reliability and continuity of IT systems and complying with regulation, but these are hardly mentioned as key audit matters. This is also a general finding of our study for issues related to the internal controls of the audited companies.

scholarly journals PENERAPAN STANDAR AKUNTANSI KEUANGAN ATAS AKTIVA LANCAR PADA LAPORAN KEUANGAN KOPERASI PRIMA KARYA SEJAHTERA

2017 ◽  
Vol 2 (01) ◽  
Author(s):  
Sri Wahyu Ipahsari ◽  
Achmad Maqsudi
Keyword(s):  
Qualitative Research ◽  
Cash Flow ◽  
Descriptive Analysis ◽  
Balance Sheet ◽  
Accounting Standards ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Reports ◽  
Current Accounting ◽  
Business Results

ABSTRACTThe financial statements of cooperatives are said to be in accordance with applicable standards, namely SAK ETAP if they include the preparation of Calculation of Operating Results, Statement of Changes in Equity, Balance Sheet, Cash Flow Report and Notes to Financial Statements. This study aims to determine how the application of accounting standards used by the Prima Karya Sejahtera Cooperative, whether it is in accordance with SAK ETAP. This study is a qualitative research with a descriptive analysis approach that aims to provide an overview of the state of objects based on facts that appear to use financial statement documentation. The results showed that the financial statements prepared by Koperasi Prima Karya Sejahtera up to now are in the form of Business Results Calculation Report, Changes in Equity and Balance Sheet. Koperasi Prima Karya Sejahtera has not yet presented the Cash Flow Report and Notes to Financial Statements to assess the financial performance of the cooperative, other than that the financial reports that have been presented by Koperasi Prima Karya Sejahtera are not Completely in accordance with the current accounting standards, namely SAK ETAP. Keywords: Financial Statements, Cooperatives and SAK ETAP

scholarly journals PELATIHAN AKUNTANSI DAN PENYUSUNAN LAPORAN KEUANGAN BAGI MANAJER DAN STAF KEUANGAN KOPERASI USAHA PENANAMAN DAN PENGOLAHAN KOPI DI KABUPETEN ACEH TENGAH DAN BENER MERIAH

2018 ◽  
Vol 3 (2) ◽  
pp. 116
Author(s):  
Fazli Syam BZ ◽  
Iskandarsyah Iskandarsyah ◽  
Evayani Evayani ◽  
Cut Afrianandra
Keyword(s):  
Financial Reporting ◽  
Financial Management ◽  
Balance Sheet ◽  
Financial Statements ◽  
Training Needs ◽  
Financial Statement ◽  
Mutual Cooperation ◽  
Preliminary Information ◽  
Financial Management System ◽  
Cooperative Governance

<p><strong><em>Abstract.</em></strong><em> The accounting and financial reporting training aims to provide knowledge (methods / techniques) and accounting practices that start from the accounting cycle in preparing financial statements for cooperative managers and finance staff towards transparent, accountable, accountable, self-sustaining and transparent cooperative governance justice. The cooperative must have a reliable and valid financial management system so that cooperative management that is familial and mutual cooperation requires the active participation and participation of all stakeholders.The training was conducted at the Coffe and Coffeemaking Cooperative in Central Aceh and Bener Meriah Regency involving 45 participants from 13 cooperatives consisting of Managers and Finance Staff. The training was conducted for 3 (three) dated March 17 - 19, 2017. In the initial phase, training needs analysis has been done to obtain preliminary information about understanding and accounting practices in the targeted cooperatives.The final outcomes of training for cooperatives are the preparation of the Preliminary Balance Sheet and the Financial Statements of Cooperatives for the period of December 31, 2016 and the continuing recording of transactions for the period of 2017 until the preparation of the Financial Statements of December 31, 2017.</em></p><p><strong><em>Keywords: Accounting, Financial Statement, Cooperative, Governance</em></strong></p><p><strong> </strong></p><p><strong> </strong></p><p><strong>Abstrak</strong>.Pelatihan akuntansi dan penyusunan laporan keuangan ini bertujuan untuk memberikan pengetahuan (metode/teknik) dan praktik akuntansi yang dimulai dari siklus akuntansi dalam menyusun laporan keuangan bagi para manajer dan staf keuangan koperasi guna menuju tata kelola koperasi yang transparan, akuntabel, bertanggungjawab, mandiri, dan berkeadilan. Koperasi harus memiliki sistem manajemen keuangan yang handal dan valid sehingga tata kelola koperasi yang bersifat kekeluargaan dan gotong royong menuntut peran dan partisipasi aktif dari seluruh anggota <em>(stakeholder</em>). Pelatihan ini dilakukan pada Koperasi Usaha Penamanan dan Pengolahan Kopi di Kabupaten Aceh Tengah dan Bener Meriah yang melibatkan 45 orang peserta dari 13 Koperasi yang terdiri dari Manajer dan Staf Keuangan. Pelatihan dilakukan selama 3 (tiga)  tanggal 17 – 19 Maret 2017. Pada tahap awal telah dilakukan analisis kebutuhan pelatihan guna mendapatkan informasi awal tentang pemahaman dan praktik akuntansi pada koperasi yang disasar.Dampak akhir (outcome) dari pelatihan bagi koperasi adalah tersusunnya Neraca Awal dan Laporan Keuangan Koperasi untuk periode 31 Desember 2016 dan berlanjutnya pencatatan transaksi periode tahun 2017 sampai tersusunan Laporan Keuangan 31 Desember 2017.</p><p><strong>Kata Kunci: Akuntansi, Laporan Keuangan, Koperasi, Tata Kelola</strong></p>

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