Comment letters on annual reports: Evidence from an emerging market

2021 ◽  
Author(s):  
Shuo Yang
Keyword(s):  
Propensity Score ◽  
Financial Reporting ◽  
Emerging Market ◽  
Securities And Exchange Commission ◽  
Annual Reports ◽  
Matched Sample ◽  
Disclosure Quality ◽  
Weak Institutions ◽  
Comment Letters ◽  
The U.S

This paper examines comment letters on firms’ annual reports in an emerging market. The literature primarily focuses on comment letters issued by the U.S. Securities and Exchange Commission (SEC), although many other market regulators also use SEC-style comment letters. Comment letters can potentially be very impactful in emerging markets due to weak institutions and low disclosure quality in these markets. Using comment letters in China from 2015 to 2019, I find that the market response to the receipt of comment letters is significantly negative and associated with the severity of the comment letters. The receipt (severity) of comment letters is associated with adverse regulatory consequences, CEO turnover, corrective actions to remedy financial reporting, and poor future financial performance in the propensity score matched sample (recipient sample). Overall disclosure quality in the post-review year does not increase, but some comment letter topics prompt topic-specific financial reporting changes.

An analysis of SEC comment letters and IFRS

2017 ◽  
Vol 15 (2) ◽  
pp. 226-244 ◽  
Author(s):  
Cheryl L. Linthicum ◽  
Andrew J. McLelland ◽  
Michael A. Schuldt
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
Annual Reports ◽  
Financial Accounting Standards Board ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
The Usa ◽  
Comment Letters

Purpose This study investigates the influence of the Securities and Exchange Commission (SEC) on the interpretation and application of International Financial Reporting Standards (IFRS) by examining a group of SEC-selected foreign private issuers filing 2005 annual reports in the USA and reporting using IFRS for the first time. Design/methodology/approach This paper uses hand-collected information from SEC comment letters to analyze IFRS topics and documents the ultimate resolution of each SEC comment (no change to filing, current change to filing or prospective change to future filing). The authors use descriptive statistical analyses, as well as a logistic regression model involving the resolution of each SEC comment, to examine the SEC’s influence on the interpretation of IFRS. Findings The study finds both higher comment totals, and higher numbers of required filing modifications, for those IFRS pronouncements which were identified as needing improvement during the 2006-2008 convergence efforts by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB). Additionally, the study documents a decreasing likelihood of a filing modification when US generally accepted accounting principles (US GAAP) guidance is referenced in comment letter correspondence involving IFRS topics. Originality/value The study extends the IFRS literature and the SEC comment letter literature by focusing on the resolution of comments directed at IFRS disclosures, as well as exploring the factors which influence whether a comment ultimately requires a filing modification.

Adios! Airways: An Assignment on Mapping Financial Statements to the U.S. GAAP XBRL Taxonomy

2010 ◽  
Vol 25 (3) ◽  
pp. 465-488 ◽  
Author(s):  
Roger Debreceny ◽  
Stephanie Farewell
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Securities And Exchange Commission ◽  
Financial Statement ◽  
Annual Reports ◽  
Business Reporting ◽  
Instructional Resource ◽  
Mapping Process ◽  
Interactive Data ◽  
The U.S

ABSTRACT: XBRL, based on XML, is an Internet language for disclosure of business reporting language. XBRL is the technological foundation for the interactive data mandate by the Securities and Exchange Commission (SEC). The mandate requires corporate filers to disclose data in quarterly and annual reports in XBL. A key building block supporting the mandate is a substantial U.S. GAAP XBRL taxonomy that encapsulates most of the reporting concepts found in financial reporting. Filers must align their existing reports to the taxonomy. The accuracy of mapping financial statement line items to the U.S. GAAP taxonomy is of fundamental importance. Mapping errors may be as simple as mapping to an incorrect taxonomy concept, which should be discovered during review. Ineffective mapping may lead to unnecessary extensions, which hinders comparability. This instructional resource guides students through the steps in mapping financial statement line items to the taxonomy. While the case does not require students to create an extended taxonomy, it does require completion of a spreadsheet detailing the mapping process that is typical of practice. In addition, the resource provides a checklist that users can refer to during the mapping process.

The Impact of Eliminating the 20-F Reconciliation Requirement for IFRS Filers on Earnings Persistence and Information Uncertainty

2012 ◽  
Vol 26 (4) ◽  
pp. 741-765 ◽  
Author(s):  
Tony Kang ◽  
Gopal V. Krishnan ◽  
Michael C. Wolfe ◽  
Han S. Yi
Keyword(s):  
Financial Reporting ◽  
Investor Protection ◽  
Securities And Exchange Commission ◽  
Earnings Persistence ◽  
Information Uncertainty ◽  
Disclosure Quality ◽  
Forecast Dispersion ◽  
Financial Reporting Standards ◽  
Reporting Environment ◽  
The Impact

SYNOPSIS: On November 15, 2007, the U.S. Securities and Exchange Commission (SEC) eliminated the requirement that foreign private issuers reporting under International Financial Reporting Standards (IFRS) include a reconciliation to U.S. GAAP in their 20-F filing. To the extent that the reconciliations had information content, it is possible that the information environment of IFRS filers deteriorated in the post-reconciliation period, unless they voluntarily improved disclosure quality. Using difference-in-differences tests, we examine whether there was any change in the persistence of earnings and analyst forecast dispersion after the new regulation. We find that earnings persistence increased (did not increase) and analyst uncertainty measured by the forecast dispersion did not increase (increased) for firms domiciled in weaker (stronger) investor protection countries. These results suggest that firms from a weaker investor protection environment had a greater incentive to “signal” the quality by voluntarily improving the disclosure quality in the post-reconciliation period to compensate for any possible information loss from no longer providing the reconciliation. Our findings also suggest that the elimination of the reconciliation requirement did not have a uniform effect on IFRS filers and that the effect varies with the firm's home country reporting environment. JEL Classifications: M41

Liquidity and IFRS Adoption in Canada

2021 ◽  
Author(s):  
Shahid Ali Khan ◽  
Mark Anderson ◽  
Hussein A Warsame ◽  
Michael Wright
Keyword(s):  
Matched Sample ◽  
Sample Analysis ◽  
Disclosure Quality ◽  
Cross Sectional ◽  
Ifrs Adoption ◽  
Before And After ◽  
The U.S

We examine cross-sectional differences in changes in liquidity for Canadian firms between pre-IFRS and post-IFRS adoption based on their pre-IFRS disclosure quality. In a matched sample analysis, with U.S. firms acting as control firms, we find that liquidity improved after mandatory IFRS adoption for Canadian companies with high pre-IFRS disclosure quality but declined for Canadian companies with low pre-IFRS disclosure quality, in comparison to U.S. peers. We find similar results when we stratify the sample based on total assets - larger Canadian firms gained liquidity while smaller Canadian firms lost liquidity, relative to the U.S. control firms. Our results are sustained when we use firms listed in Canada that report under U.S. GAAP before and after IFRS adoption as control firms.

XBRL Mandate: Thousands of Filing Errors and So What?

2013 ◽  
Vol 27 (1) ◽  
pp. 61-78 ◽  
Author(s):  
Hui Du ◽  
Miklos A. Vasarhelyi ◽  
Xiaochuan Zheng
Keyword(s):  
Financial Reporting ◽  
Securities And Exchange Commission ◽  
Data Availability ◽  
Regulatory Body ◽  
Data Reporting ◽  
Interactive Data ◽  
Disclosure Requirement ◽  
A Company ◽  
The U.S

ABSTRACT Since the mandate by the U.S. Securities and Exchange Commission (SEC) to begin interactive data reporting in June 2009, according to XBRL Cloud, an XBRL product and service provider, more than 4,000 filing errors have been identified. We examine the overall changing pattern of the errors to understand whether the large number of errors may hamper the transition to interactive data reporting. Using a sample of 4,532 filings that contain 4,260 errors, we document a significant learning curve exhibited by the XBRL filers. Specifically, we find that the number of errors per filing is significantly decreasing when a company files more times, suggesting that the company filers or the filing agents many companies use learn from their experiences and therefore the future filings are improved. Our findings provide evidence to encourage the regulatory body, the filers, and the XBRL technology supporting community to embrace the new disclosure requirement in financial reporting. The significantly decreased error pattern also helps address the information users' concerns regarding the data quality of XBRL filings. Data Availability: Data are publicly available from the sources identified in the study.

scholarly journals Audit Committee Financial Expertise and Financial Reporting Timeliness in Emerging Market: Does Audit Committee Chair Matter?

2018 ◽  
Vol 10 (4) ◽  
pp. 63
Author(s):  
Saeed Rabea Baatwah ◽  
Norsiah Ahmad ◽  
Zalailah Salleh
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Emerging Market ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Committee Chair ◽  
Financial Expertise ◽  
Accounting Expertise

This study examines whether audit committee chair with financial expertise enhances the audit committee role in financial reporting quality in emerging market. We investigate this influence by employing the direct effect and moderating effect of audit committee chair with financial expertise on financial reporting timeliness. By using Omani data and the panel data method for two proxies for financial reporting timeliness, we find that audit committee chair with financial expertise enhances the timeliness of financial reporting through making the disclosure of annual reports timely. Further, we report evidence showing that both accounting and nonaccounting financial expertise on the audit committee have a positive and significant influence on the timeliness of financial reporting. We also document that the association between financial expertise and the timeliness of financial reporting is more pronounced when the chair of the audit committee has accounting expertise. This study is among the comprehensive evidence prove that audit committee chair with accounting expertise contributes to the quality of financial reporting in emerging market.

scholarly journals THE SPILLOVER OF THE COFFEE: MATERIAL MISSTATEMENTS AT (UN) LUCKIN COFFEE INC.

2021 ◽  
Vol 5 (2) ◽  
pp. 106-114
Author(s):  
Gagan Kukreja
Keyword(s):  
Stock Exchange ◽  
Jel Classification ◽  
Securities And Exchange Commission ◽  
Financial Data ◽  
Annual Reports ◽  
Ethical Standards ◽  
Foreign Companies ◽  
Chinese Company ◽  
Available Information ◽  
The U.S

The research investigates alleged material misstatements in the financials of Luckin Coffee, a Chinese company listed in NASDAQ. The research is exploratory and based on publicly available information. The financial data has been obtained from their quarterly and annual reports submitted to Securities and Exchange Commission. The research shows the alleged corruption by inflating sales and profits by C-suite executives of the company. Nevertheless, before doing so, what failures in corporate governance led to this crisis? The admission of such material misstatements resulted in a massive loss to the investors and shaken the investment community’s trust once again. The research tried to determine what kind of audit procedures should have been implemented to earlier detection of fraud? What should have been done to protect stakeholders? What extra measures should the U.S. stock exchange take into consideration before listing foreign companies? What kind of ethical standards must be taught to the students/future executives to avoid such material misstatements? How can accounting bodies address such material misstatements? How can audit procedures be improved? This research will facilitate the policymakers, accounting and auditing regulators, board and various other stakeholders to deter, detect and mitigate such financial material misstatements and offers recommendations. JEL Classification Codes: M41, M42, M48, M148.

scholarly journals The EU Has Accepted IAS For Listed Companies: Will The U. S. Follow?

2011 ◽  
Vol 7 (4) ◽  
Author(s):  
Karen Cascini ◽  
Anne Rich
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
International Accounting ◽  
International Accounting Standards ◽  
The European Union ◽  
Financial Accounting Standards Board ◽  
Financial Reporting Standards ◽  
The U.S ◽  
The Eu

International financial reporting standards (IFRS) issued by the International Accounting Standards Board (IASB), have become respected by many countries and regulatory agencies. The European Union (EU) has determined for most publicly held companies that IFRS promulgated by IASB meet the standards for cross-boarder listing. This paper will present a brief history of the development of international accounting standards and discuss the factors that led to the EUs acceptance of them. The paper will then consider the case of the U.S. By examining the changes in the accounting environment in the U.S. and specifically looking at the role of the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB), this paper will consider whether the U.S. will follow the EU and accept IFRS for cross-boarder listings.

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