International GAAP Differences: The Impact on Foreign Analysts

2008 ◽  
Vol 83 (3) ◽  
pp. 593-628 ◽  
Author(s):  
Kee-Hong Bae ◽  
Hongping Tan ◽  
Michael Welker
Keyword(s):  
Financial Analysts ◽  
Forecast Accuracy ◽  
Accounting Standards ◽  
Economic Costs ◽  
Analyst Following ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
The World ◽  
Two Measures ◽  
The Impact

This paper investigates the relation between differences in accounting standards across countries and foreign analyst following and forecast accuracy. We develop two measures of differences in generally accepted accounting principles (GAAP) for 1,176 country-pairs. We then examine the impact of these measures of accounting differences on foreign analysts. In so doing, we utilize a unique database that identifies the location of financial analysts around the world, creating a sample that covers 6,888 foreign analysts making a total of 43,968 forecasts for 6,169 firms from 49 countries during 1998–2004. We find that the extent to which GAAP differs between two countries is negatively related to both foreign analyst following and forecast accuracy. Our results suggest that GAAP differences are associated with economic costs for financial analysts.

Analyst Following and Forecast Accuracy After Eliminating the 20-F Reconciliation Between IFRS and U.S. GAAP

2020 ◽  
pp. 0148558X2094464
Author(s):  
Wen Li ◽  
Huai Zhang
Keyword(s):  
Financial Reporting ◽  
Financial Analysts ◽  
Forecast Accuracy ◽  
Financial Statements ◽  
Securities And Exchange Commission ◽  
Analyst Following ◽  
Analyst Coverage ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Accounting Principles

In 2007, the U.S. Securities and Exchange Commission (SEC) decided to allow foreign private issuers to file financial statements prepared according to International Financial Reporting Standards (IFRS) without reconciliation to U.S. Generally Accepted Accounting Principles (GAAP). Using a sample of foreign private issuers from 35 countries/regions during the period of 2005 to 2008, this article investigates how the elimination of the 20-F reconciliation affects financial analysts. We find that it significantly reduces analyst coverage but has no impact on forecast accuracy. We show that analysts who are greatly affected are more likely to terminate their coverage of IFRS firms after the SEC’s rule than other analysts. In addition, we hypothesize and find that eliminating the 20-F reconciliation has a greater impact on firms whose 20-F reconciliation is more useful to analysts. For these firms, the elimination of the 20-F reconciliation significantly reduces both analyst coverage and forecast accuracy. Overall, our results suggest that the elimination of the 20-F reconciliation imposes costs on financial analysts.

scholarly journals Continued Impact of International Financial Reporting Standards on U.S. Generally Accepted Accounting Principles

2020 ◽  
pp. 1-12
Author(s):  
Sylwia Gornik-Tomaszewski ◽  
Victoria Shoaf
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Accounting Principles ◽  
Value Measurement ◽  
The Impact

The milestone outcomes of over a decade of close cooperation between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on the convergence of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) have been highly publicized in the professional media. Great attention has been paid to such joint FASB and IASB projects as accounting for business combinations, fair value measurement, and revenue recognition. The impact of U.S. GAAP on IFRS has also been discussed and highlighted in many professional and academic resources. It should come as no surprise since FASB is considered a world leader in creating high-quality standards through an exemplary standard-setting process. In this paper, we look at the least noticed outcome of the convergence process: the impact of IFRS on U.S. GAAP. We reviewed all of the Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification®, from the first issued in June 2009 to 2016, and listed instances where U.S. GAAP was significantly modified to reflect international solutions. These examples of U.S. GAAP modifications indicate that the impact of IFRS on U.S. GAAP continued well after the bilateral cooperation between FASB and IASB effectively ended in 2014. Furthermore, look at the most recent FASB pronouncement let us conclude that the FASB continues to be engaged in seeking comparable global accounting solutions.

An Exploratory Study of the Valuation Properties of Cross-Listed Firms' IAS and U.S. GAAP Earnings and Book Values

2002 ◽  
Vol 77 (1) ◽  
pp. 107-126 ◽  
Author(s):  
Hollis Ashbaugh ◽  
Per Olsson
Keyword(s):  
Exploratory Study ◽  
Accounting Standards ◽  
Equity Market ◽  
Residual Income ◽  
International Accounting Standards ◽  
Generally Accepted Accounting Principles ◽  
Listed Firms ◽  
Valuation Model ◽  
Accounting Principles ◽  
Book Values

Despite the increasing integration of global capital markets, there is little evidence on the valuation properties of cross-listed, non-U.S. firms' accounting variables. We use the relative performance of the earnings capitalization, the book value, and the residual income valuation models to explore the valuation properties of International Accounting Standards and U.S. Generally Accepted Accounting Principles earnings and book values reported by non-U.S., cross-listed firms trading in a common equity market. Using non-U.S./non-U.K. firms whose shares trade on the International Stock Exchange Automated Quotation system in London, we find that the earnings capitalization model is the dominant accounting-based valuation model when crosslisted firms report under International Accounting Standards. In contrast, we find that when cross-listed firms report under U.S. Generally Accepted Accounting Principles, the residual income model is the dominant accountingbased valuation model. Our exploratory study provides insights into the valuation implications of allowing a dual reporting system for foreign registrants trading in a common equity market.

scholarly journals Impact of Changes in Accounting Standards on Earnings Management

2020 ◽  
Vol 2 (2) ◽  
pp. 166-175
Author(s):  
Kawa W. Muhamad ◽  
Subhi M. Saleh ◽  
Kees van Paridon
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Quality Standards ◽  
Financial Reporting Quality ◽  
High Quality ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Accounting Principles

This study considers the question whether the changes in Accounting Standards has led to companies making less use of earnings management. The paper is an attempt to investigate whether the application of high quality standards like International Financial Reporting Standards (IFRS) is related to high financial reporting quality. This study addresses this issue empirically. Furthermore, this research examines whether German companies that have applied IFRS have less earnings management compared to German companies that report according to the German Generally Accepted Accounting Principles (GGAAP). The sample, consisting of two equally large listed companies in Germany (Südzucker Group and Henkel Group) from 2003-2014. The study suggests that IFRS-adopters show different earnings management performance compared to companies reporting under German GAAP. This finding contributes to the discussion on whether high quality standards are appropriate and operational in countries with weak investor protection rights. The result shows that adopters of IFRS in Germany can be related with less use of earnings management as a result of changes in accounting standards. This result is contradictory with previous research that was done by Van Tendeloo and Vanstraelen, (2005), and consistent with the previous research conducted by Ball et al. (2003).

scholarly journals Corporate Revenue Miscalculations & The Impact On Stakeholders

2014 ◽  
Vol 12 (2) ◽  
pp. 77
Author(s):  
Karen T. Cascini ◽  
Alan DelFavero ◽  
Ryan Bezner
Keyword(s):  
Multinational Corporations ◽  
Financial Reporting ◽  
Multinational Firms ◽  
Accounting Standards ◽  
Shareholder Wealth ◽  
Net Income ◽  
Accounting Systems ◽  
Generally Accepted Accounting Principles ◽  
Earnings Restatements ◽  
The Impact

Corporate earnings restatements are regarded as one of the most significant issues in accounting today. While there are various factors that can influence profitability, revenue is the key contributor to a business net income. During the 2000s, a multitude of domestic and multinational corporations faced significant issues with their revenue recognition practices. Although the investing public might regard any revenue restatement as laden with possible fraud, this is not always the case. Multinational firms face dual accounting systems, such as U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Currently, similarities and differences between the accounting systems exist. However, key differences between GAAP and IFRS may cease to exist in upcoming years due to the Financial Accounting Standards Boards (FASBs) and the International Accounting Standards Boards (IASBs) joint effort to converge the two systems. Throughout this paper, examples of revenue miscalculations will be presented as well any penalties levied by the U.S. Securities & Exchange Commission against implicated corporations. Accordingly, the impact that revenue blunders have on shareholder wealth will be examined. Finally, the authors will present recommendations for mitigating revenue errors in the future.

scholarly journals On Narrowing The Credibility GAAP: Has The Financial Accounting Standards Board (FASB) Enhanced The Credibility Of Generally Accepted Accounting Principles (GAAP)?

2011 ◽  
Vol 9 (2) ◽  
pp. 76 ◽  
Author(s):  
Douglas K. Schneider ◽  
Gordon S. May ◽  
David R. Shaffer
Keyword(s):  
Accounting Standards ◽  
Psychological Research ◽  
Financial Accounting ◽  
Future Research ◽  
Financial Accounting Standards Board ◽  
Financial Reports ◽  
Generally Accepted Accounting Principles ◽  
Perceived Credibility ◽  
Accounting Principles ◽  
Social Psychological Research

The purpose of this study was to apply social-psychological research methods to address an issue of widespread concern in the accounting profession. One of the primary motives underlying the creation of the Financial Accounting Standards Board (FASB) was to increase the credibility of Generally Accepted Accounting Principles (GAAP). Our main objective was to assess any differences in the perceived credibility of FASB GAAP and pre-FASB GAAP, as indicated by three groups of FASB constituents familiar with these procedures: corporate preparers of financial statements (preparers), CPAs who audit financial reports to ensure their adherence to GAAP (auditors), and accountants who use financial reports to make lending and investment decisions (users). The results indicated that (a) the credibility of accounting principles can be assessed, (b) not all dimensions that have been touted as contributors to the credibility of accounting practices predict accountants perceptions of credibility, and (c) examples of FASB GAAP were perceived as less credible than corresponding examples of pre-FASB GAAP by each of the above three groups of FASB constituents. Some implications of these results and suggestions for future research are discussed.

scholarly journals US GAAP Conversion To IFRS: A Case Study Of The Balance Sheet

2013 ◽  
Vol 9 (2) ◽  
pp. 133-140
Author(s):  
Peter Harris ◽  
Liz Washington Arnold
Keyword(s):  
Financial Market ◽  
Financial Analysis ◽  
Balance Sheet ◽  
The United States ◽  
Generally Accepted Accounting Principles ◽  
International Reporting ◽  
Accounting Principles ◽  
The World ◽  
Us Gaap

International Reporting Standards (IFRS) has become the required framework for most of the world financial market economies. In the United States, US Generally Accepted Accounting Principles (GAAP) is still required. However, plans are presently in place by the SEC to abandon US GAAP and to adhere to IFRS requirements by as early as the period ending December 31, 2014. This case study requires the student to transform a US GAAP presented Balance Sheet to IFRS and is most suitable for an Intermediary Accounting 11 and a Financial Analysis class at the graduate level.

Comments on Canadian Accounting Standards Board Exposure Draft on Generally Accepted Accounting Principles for Private Enterprises

2009 ◽  
Author(s):  
Karim Jamal ◽  
Robert J. Bloomfield ◽  
Theodore E. Christensen ◽  
Robert H. Colson ◽  
Stephen R. Moehrle ◽  
...  
Keyword(s):  
Accounting Standards ◽  
Private Enterprises ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles

The effect of financial analysts on the economic implications of disclosed lease information – a note

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Su-Jane Hsieh ◽  
Yuli Su
Keyword(s):  
Stock Returns ◽  
Cash Flow ◽  
Stock Prices ◽  
Predictive Value ◽  
Financial Analysts ◽  
Financial Analyst ◽  
Analyst Following ◽  
Analyst Coverage ◽  
Content Type ◽  
The Impact

PurposeThe purpose of this paper is to investigate whether financial analyst coverage affects the dissemination of disclosed operating lease information into cash flow predictions and stock prices.Design/methodology/approachThe difference in lease expense between capital/finance lease and operating lease reporting is estimated based on the approach in Hsieh and Su (2015). This difference is referred to as the earnings impact from operating lease capitalization and is only available from footnotes. The authors then include the level of financial analyst following in a cash flow model to study its impact on the cash flow predictive value of the earnings impact. Similarly, the level of financial analyst following is inserted in an earnings-return model to assess the effect of analyst coverage on the association between contemporaneous stock returns and earnings impact.FindingsThe authors find that the cash flow predictive value of the earnings impact shifts to the interaction between analyst coverage and the earnings impact, suggesting that the decision-usefulness of the earnings impact is conditioned on the level of analyst following. Nevertheless, the authors find that the earnings impact continues to have explanatory value for the contemporaneous stock returns, while the interaction between analyst coverage and the earnings impact does not. This finding suggests that the earnings impact is already fully reflected in stock prices regardless of analyst following.Research limitations/implicationsSince the estimation of the earnings impact from reporting operating leases as capital leases is based on the method developed by Imhoff et al. (1991), the results and inferences are thus constrained by the validity of the method.Practical implicationsThe authors find that financial analyst activities accelerate the incorporation of the earnings impact from operating lease capitalization in cash flow predictions, but it does not promote the impounding of the earnings impact into stock prices. This finding suggests that financial analysts' influence on the dissemination of the earnings impact hinges on the type of economic activity, and failing to consider the financial analyst following in studying the cash flow predictive value of the earnings impact would obscure the findings.Originality/valueThe authors extend the findings of prior research that financial analysts' activities promote the incorporation of firm-specific information into stock prices by investigating the impact of financial analysts on the dissemination of disclosed operating lease information.

Super Electronics, Inc.: Financial Reporting of Sales Incentives and Vendor Allowances Using FASB Codification

2012 ◽  
Vol 27 (2) ◽  
pp. 461-474 ◽  
Author(s):  
Mahendra R. Gujarathi
Keyword(s):  
Financial Reporting ◽  
Real World ◽  
Accounting Standards ◽  
Financial Statement ◽  
Professional Judgment ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
Real World Setting ◽  
Sales Incentives

ABSTRACT Super Electronics, Inc., a specialty retailer, has recently initiated several sales incentives and has entered into a long-term purchase arrangement with a major vendor that entitles it to sliding discounts based on its level of purchases. Using FASB Accounting Standards Codification, you are to determine whether the Company's existing policies comply with Generally Accepted Accounting Principles (GAAP). You are also required to evaluate the soundness of the proposals that SE's management has made during the process of annual audit and explore plausible motivations behind them. The case provides an opportunity to examine several technical and conceptual accounting issues in a real-world setting, strengthen accounting research capabilities, understand implications of the choice of an accounting policy for performance measurement and financial statement analysis, and develop advanced critical thinking and professional judgment skills.

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