The Debate over Subsequent Accounting for Goodwill

Accounting Horizons ◽

10.2308/horizons-19-054 ◽

2020 ◽

Author(s):

Thomas J. Linsmeier ◽

Erika Wheeler

Keyword(s):

Faithful Representation ◽

Financial Statement ◽

Alternative Methods ◽

Current Debate ◽

Accounting Numbers

This paper evaluates whether alternative methods of subsequent accounting for goodwill result in accounting numbers that are significantly different from previous methods prescribed by standard setters. Financial statement users have identified significant flaws in both the amortization-and-impairment and impairment-only methods of subsequent accounting for goodwill. In this paper, we (1) summarize the current debate over subsequent accounting for goodwill, (2) empirically examine the decline in goodwill value under the amortization-and-impairment and impairment-only regimes, and (3) empirically investigate whether there are alternative methods that result in significantly different rates and patterns of decline in the value of goodwill (and thus have the potential to address the identified weaknesses of each method). We conclude that the proposed alternative methods provide markedly different patterns and periods over which goodwill is written off and, therefore, have the potential to provide a more faithful representation of the economics of goodwill.

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Business Modeling to Improve Auditor Risk Assessment: An Investigation of Alternative Representations

Journal of Information Systems ◽

10.2308/isys-50809 ◽

2014 ◽

Vol 28 (2) ◽

pp. 231-256 ◽

Cited By ~ 6

Author(s):

J. Efrim Boritz ◽

Carla Carnaghan ◽

Paulo S. Alencar

Keyword(s):

Risk Assessment ◽

Business Model ◽

Business Models ◽

Financial Statement ◽

Alternative Methods ◽

Audit Risk ◽

Strategic Goals ◽

Diagrammatic Representations ◽

Model Components ◽

The Relationship

ABSTRACT This study investigates the effects of alternative methods for documenting business models on audit risk assessment behavior. We consider tabular versus diagrammatic representations of the relationship between business model components such as environmental factors, strategic goals, internal processes and resources, and financial statement accounts. Multiple scenarios based on a real company were constructed and 24 participants, including audit partners, managers, and novice auditors performed a risk assessment for each scenario, presented in either a diagrammatic or a tabular format. The participants' verbal discussions as they performed the risk assessments were tape recorded, transcribed, and coded. A content analysis of the participants' coded verbal behavior indicates that the tabular presentation appears to elicit more frequent mention of accounts by the participants, while the diagram format leads to more mentions of other business model components. There is also some evidence of expertise effects. This study indicates that a tabular presentation can possess many of the benefits often associated with a diagrammatic representation. However, in our study, obtaining such benefits involved the deliberate structuring of the tabular presentation to organize the components of the business model and the links between them and financial statement accounts.

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Financial Statement Analysis: Evidence from Chinese Firms

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091518500273 ◽

2018 ◽

Vol 21 (04) ◽

pp. 1850027 ◽

Cited By ~ 1

Author(s):

Li Li Eng ◽

Xi Tian ◽

T. Robert Yu

Keyword(s):

Financial Statements ◽

The Other ◽

Financial Statement ◽

Stock Exchanges ◽

Fundamental Analysis ◽

Excess Returns ◽

Chinese Firms ◽

Benchmark Model ◽

Negatively Associated ◽

Accounting Numbers

This paper conducts a fundamental analysis of Chinese firms based on accounting numbers in their financial statements. The sample consists of 2,164 Chinese firms listed on Shanghai and Shenzhen Stock Exchanges during the period 2001 to 2013. We use nine fundamental signals and specify a benchmark model and an augmented model. We regress future excess returns on the signals and find that they are associated with excess returns; five of the signals are negatively associated with excess returns, while the other four are positively associated with excess returns. Further analysis suggests that our finding is mainly driven by state-owned firms.

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The Accounting Entity, Relevance, and Faithful Representation: Linking Financial Statement Notes to the FASB and IASB Conceptual Frameworks

Issues in Accounting Education ◽

10.2308/iace-50522 ◽

2013 ◽

Vol 28 (4) ◽

pp. 1009-1025 ◽

Cited By ~ 3

Author(s):

Jack M. Ruhl ◽

Ola M. Smith

Keyword(s):

Conceptual Framework ◽

Financial Statements ◽

Roman Catholic ◽

Faithful Representation ◽

Financial Statement ◽

Conceptual Frameworks ◽

Consolidated Financial Statements ◽

Holy See ◽

Class Time ◽

Accounting Courses

ABSTRACT Although notes are an integral part of the financial statements, users lacking a technical accounting background often overlook them or consider them to be too difficult (Kieso et al. 2010). The authors observe that faculty generally devote little or no class time to the discussion or drafting of notes. Intermediate accounting textbooks relegate the presentation of notes to the end of the second intermediate accounting course. Nonetheless, notes are extremely important to financial statement users. In this case, students examine selected notes of the Consolidated Financial Statements of the Holy See (the financial entity associated with the Roman Catholic Papacy) for the year 2007. The Holy See's financial statement notes are ideal for discussion purposes, because students find “surprises.” Upon completion of the Discussion Questions, students have a new appreciation for financial statement notes, along with insights into how certain aspects of the FASB and IASB Conceptual Frameworks are linked to the notes. A case that attempted to include discussion of all the notes or the entire Conceptual Framework would become unwieldy. Therefore, in this case, we limit our focus to the accounting entity concept, relevance, and faithful representation. The case may be used with students enrolled in accounting courses from the principles level to the graduate level.

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Conservatism in Accounting Part II: Evidence and Research Opportunities

Accounting Horizons ◽

10.2308/acch.2003.17.4.287 ◽

2003 ◽

Vol 17 (4) ◽

pp. 287-301 ◽

Cited By ~ 502

Author(s):

Ross L. Watts

Keyword(s):

Earnings Management ◽

Financial Reporting ◽

Financial Statement ◽

Empirical Literature ◽

Future Research ◽

Managerial Behavior ◽

Cross Sectional ◽

Accounting Regulation ◽

Accounting Numbers ◽

Net Assets

This paper is Part II in a two-part series on conservatism in accounting. Part I examined alternative explanations for conservatism in accounting and their implications for accounting regulators (SEC and FASB). Part II summarizes the empirical evidence on the existence of conservatism, conservatism's increase over time, and conservatism's alternative explanations. It also discusses opportunities for future research on conservatism. The empirical literature uses a variety of conservatism measures in time-series and cross-sectional tests of contracting, shareholder litigation, taxation, and accounting regulation explanations for conservatism. The tests' results suggest the importance of all four explanations. Two non-conservatism explanations—earnings management and the abandonment option—cannot individually or jointly explain the observed systematic understatement of net assets that is the hallmark of conservatism. Researchers should note that accounting's effects on managerial behavior play a central role in the evolution of both accounting and financial reporting. Assessing the relevance of an accounting method to financial statement users' decisions requires assessing managers' abilities to use that method to manipulate accounting numbers and commit fraud. The evidence on conservatism suggests asymmetric verifiability is critical to constraining manipulation and fraud.

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A firm-level analysis of development banks in Europe

Vierteljahrshefte zur Wirtschaftsforschung ◽

10.3790/vjh.89.3.61 ◽

2020 ◽

Vol 89 (3) ◽

pp. 61-77

Author(s):

Marco Frigerio ◽

Daniela Vandone

Keyword(s):

Quantitative Information ◽

Financial Statement ◽

Current Debate ◽

Firm Level ◽

Policy Makers ◽

Financial Strength ◽

Financial Profile ◽

External Sources ◽

Development Banks ◽

Level Analysis

Summary: We perform a cross-country firm-level analysis of all development banks headquartered in Europe. The goal is to investigate their financial profile and efficiency characteristics and to shed light on some crucial issues, which may underline their capacity to raise external sources of finance in addition to capital contributions from shareholder governments (e. g. their capital generation and cost efficiency, the quality of their loan portfolio, the composition of their sources of finance). A financial statement analysis of their accounting features is cogent in the light of the relevance attributed by European policy makers to the economic and financial sustainability of development banks, given the key role they have been called to play in the European economy since the 2008 crises. Indeed, although development banks have goals that go beyond profitability, they need to combine their socio-economic goals with conditions of efficiency and profitability, in order to “stand on their own feet” and secure a reasonable level of financial strength and stability. We first map all development banks headquartered in Europe. We then collect financial information within the reference period 2008 – 2018 for the whole population of development banks. We also split the sample according to size, in order to assess their dimensional heterogeneity. This study provides policymakers with quantitative information on the economic and financial profile of contemporary promotional financial institutions, which may be valuable in the current debate on their role and relevance in Europe.

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Students' Uses of and Reactions to Alternative Methods of Preparing for the SAT

Measurement and Evaluation in Guidance ◽

10.1080/00256307.1981.12022262 ◽

1981 ◽

Vol 14 (3) ◽

pp. 118-126 ◽

Cited By ~ 6

Author(s):

Donald E. Powers

Keyword(s):

Alternative Methods

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Suicidal Ideation and Self-Determination in Institutionalized Elderly

Crisis ◽

10.1027//0227-5910.22.1.15 ◽

2001 ◽

Vol 22 (1) ◽

pp. 15-19 ◽

Cited By ~ 9

Author(s):

Andrée Fortin ◽

Sylvie Lapierre ◽

Jacques Baillargeon ◽

Réal Labelle ◽

Micheline Dubé ◽

...

Keyword(s):

Self Determination ◽

Current Debate ◽

Elderly Persons ◽

Rational Suicide ◽

Institutionalized Elderly ◽

Significant Difference ◽

Social Subscale ◽

Civil Status ◽

The Right ◽

Taking Action

The right to self-determination is central to the current debate on rational suicide in old age. The goal of this exploratory study was to assess the presence of self-determination in suicidal institutionalized elderly persons. Eleven elderly persons with serious suicidal ideations were matched according to age, sex, and civil status with 11 nonsuicidal persons. The results indicated that suicidal persons did not differ from nonsuicidal persons in level of self-determination. There was, however, a significant difference between groups on the social subscale. Suicidal elderly persons did not seem to take others into account when making a decision or taking action. The results are discussed from a suicide-prevention perspective.

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