Management Going Concern Disclosure, Mitigation Plan, and Failure Prediction - Implications from ASU 2014-15

2021 ◽  
Author(s):  
Jingjing Wang
Keyword(s):  
Textual Analysis ◽  
Market Reaction ◽  
Failure Prediction ◽  
Financial Statements ◽  
Annual Reports ◽  
Debt Restructuring ◽  
Going Concern ◽  
Future Viability

The going concern (GC) assumption forms the basis for preparing financial statements unless liquidation becomes imminent. ASU 2014-15 requires management to evaluate GC uncertainties quarterly and provide disclosures in the notes. I compare management GC disclosures between the pre-standard and post-standard regimes. I find that the market reacts negatively to substantial doubt in GC only after ASU 2014-15. Next, I find the effect of ASU 2014-15 for quarterly reports, but not annual reports. More importantly, by employing detailed textual analysis to extract and categorize mitigation-plan discussions, I show that certain types of management mitigation plans are interpreted more positively by investors after ASU 2014-15, thereby alleviating the negative market reaction. These plans include issuing debt, debt restructuring, increasing revenue, and selling assets. Finally, I demonstrate that management GC conclusions are more indicative of corporate failures after ASU 2014-15 and that mitigation-plan discussions are associated with firms' future viability.

Disclosure of interim review reports: Do interim going concern conclusions have information content?

2021 ◽  
Author(s):  
Matthew Grosse ◽  
Tom Scott
Keyword(s):  
Information Content ◽  
Annual Report ◽  
Market Reaction ◽  
Financial Statements ◽  
Relevant Information ◽  
Audit Opinion ◽  
Going Concern ◽  
Significant Difference ◽  
Incremental Information ◽  
Review Reports

This paper examines the information content of interim review assurance in the Australian mandatory disclosure setting. First, we find a strong negative market reaction to interim going concern conclusions (IGCC) contained in the review of interim financial statements. Second, we find no significant difference between the market reaction to IGCCs and annual going concern opinions (AGCO) received at the annual report audit. Finally, we show IGCCs are significant predictors of subsequent AGCOs, and provide incremental information from the previous annual report audit opinion. Overall, these results contribute to the literature on the benefits of mandatory interim assurance by showing that going concern conclusions contained in interim financial statements provide investors with new and relevant information.

scholarly journals Translating Terminology in Business Annual Reports (English-Arabic)

2018 ◽  
pp. 161
Author(s):  
Khalfan S. Al Obaidani
Keyword(s):  
Qualitative Methods ◽  
Textual Analysis ◽  
Financial Analysts ◽  
Translation Studies ◽  
Financial Statements ◽  
Annual Reports ◽  
Annual Business ◽  
Information Requirements ◽  
Asset Impairment ◽  
Insight Into

Business annual reports are financial statements that contain key information about a company’s activities. The reports are distributed to interested parties (e.g. stockholders, creditors, financial analysts and customers) to satisfy their information requirements. In Oman, annual business reports are produced in English and translated into Arabic in order to provide Arab readers with vital information about the companies’ operations and their financial positions. This article analyzes lexical variations, i.e. financial and business terminologies in both English and Arabic versions of the annual reports. A comparison between the English and Arabic profiles of the reports found that the business terms, e.g. ‘currents assets’, ‘asset impairment’ and ‘changes in equity’ showed less variation than others that occurred more dominantly in earlier Arabic translations. This article contributes to the discipline of Translation Studies (TS) by investigating lexical variations of business terms within sociocultural and ideological contexts in Oman. It attempts to answer the following question, ‘with respect to business and financial terms, do the Arabic versions of the annual reports reflect the notion of standardization over the course of time in specific industrial domains?’ Qualitative methods are applied to compare, describe, and analyze the textual profiles of the two versions of the reports. It concludes that the Arabic business and financial terms have become more widely established over the course of time, thus reflecting the notion of standardization. Finally, this article suggests to integrate textual analysis with sociological input to have more insight into translation agents.

scholarly journals EFFECT OF KAP SUBSTITUTION AND ANNUAL REPORT DISCLOSURE ON MARKET REACTIONS

2019 ◽  
Vol 2 (2) ◽  
pp. 149
Author(s):  
Nita Nurul Fajar ◽  
Listiya Ike Purnomo
Keyword(s):  
Sampling Method ◽  
Annual Report ◽  
Market Reaction ◽  
Stock Exchange ◽  
Financial Statements ◽  
Total Sample ◽  
Annual Reports ◽  
Manufacturing Companies ◽  
Market Reactions ◽  
Analysis Techniques

The purpose of this study is to find out how much the market reaction is influenced  by the substitution of KAP and disclosure of annual reports in a given period. Abnormal Return is used as a measurement for market reactions while the variables used in this study are Substitution of KAP and mandatory disclosures used to measure disclosure of annual reports. The data use form of audited financial statements by an independent auditor obtained from the official IDX website www.IDX.com using a purposive sampling method based on certain criteria. Samples in this study were 16 manufacturing companies listed on the Indonesia Stock Exchange in 2012-2016. So that the total sample obtained is 80 company data. Hypothesis testing is done by using multiple linear regression data analysis techniques. Data is collected, then processed and analyzed using the SPSS 22.0 for Windows application program. The results of this study are Substitution of KAP had a significant effect while the disclosure of the annual report had no effect, but the two variables simultaneously had an effect on the market reaction. 

Effects of the Covid-19 Pandemic Estimated in the Financial Statements and the Auditor`s Report

2021 ◽  
Vol 19 (161) ◽  
pp. 105-118
Author(s):  
Andreea Claudia CRUCEAN ◽  
◽  
Camelia-Daniela HATEGAN ◽  
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Financial Statements ◽  
Point Of View ◽  
Annual Reports ◽  
Statistical Point ◽  
Going Concern ◽  
Business Interest ◽  
Available Resources

The COVID-19 pandemic had a significant impact on all aspects of life, but also on the financial reporting of companies and on the activity of auditors. The paper aims to highlight the importance of reporting in the financial statements the subsequent events caused by the COVID-19 pandemic, but also of the aspects that can significantly influence the going concern of companies' activities, respectively how these effects can cause changes in the quality of audit services. The study was conducted on a sample of 60 companies listed on the Bucharest Stock Exchange, analyzing the components of the annual reports for the financial year 2019, namely the financial statements, the administrator's report and the independent auditor's report. The results showed that the effects generated by the COVID-19 pandemic had a significant impact in most of the industries studied, affecting both companies to carry out activities by closing borders, reducing or even closing certain activities, stopping travel and hindering communication with suppliers, customers or investors, reduced sales, deferred payments or the need to optimally manage costs and available resources, as well as at the level of employees by performing work at home, technical unemployment or salary reductions, but also at the level of the client-auditor relationship, by limiting travel in business interest. Most of the estimated effects of the pandemic were presented in the administrator's report, some of the effects being mentioned in the explanatory notes to the financial statements. From a statistical point of view, the companies' declaration of the effects of the pandemic was correlated with the size of the auditor, the opinion issued by him and the average number of employees. The study showed that certain auditors assessed the risks posed by subsequent events reported by companies, presenting insignificant uncertainties in some cases, but also significant uncertainties regarding the going concern of the activity of some companies.

Reporting Significant Transactions with Affiliated Parties of Listed Companies on Stock Exchange

2021 ◽  
Vol 19 (162) ◽  
pp. 359-372
Author(s):  
Lioara-Veronica PASC ◽  
◽  
Camelia-Daniela HATEGAN ◽  
Keyword(s):  
Stock Exchange ◽  
Financial Statements ◽  
Mandatory Reporting ◽  
Annual Reports ◽  
Legal Requirements ◽  
Corporate Transparency ◽  
Reporting Requirements ◽  
Energy Companies ◽  
Majority Shareholder ◽  
Over Time

The complexity of related party transactions may lead to subjective interpretations of their reporting requirements. The objective of the paper is to examine the nature of significant transactions with related parties, how they were reported in accordance with legal requirements, and how the reported issues are correlated with the information in the annual financial statements. The study includes a synthesis of the evolution of specific regulations in Romania, as well as a centralization of the information highlighted in current reports published by entities and annual reports for 2017-2019, in order to identify issues to consider in the process reporting and publishing, in the case of companies carrying out such transactions. The sample consists of energy companies listed on the Bucharest Stock Exchange, included in the BET index, in which the state is the majority shareholder. The results of the study showed that reporting requirements have changed over time, both in terms of defining transactions and mandatory reporting ceilings. The analysis found different interpretations of companies on reporting obligations which can lead to difficulties in correlating and comparing data in the context of corporate transparency. The conclusion is that additional factors arise when reporting these types of transactions, which must be taken into account so that there is no impact on their completeness and accuracy, without affecting the auditor's opinion.

The Relationship between Fair Value Accounting and Presence of Manipulation in Financial Statements

2014 ◽  
Vol 4 (1) ◽  
pp. 221
Author(s):  
Laith Abdullah Alaryan ◽  
Ayman Ahmad Abu Haija ◽  
Ali Mahmoud Alrabei
Keyword(s):  
Business Ethics ◽  
Financial Statements ◽  
Fair Value ◽  
Policy Implications ◽  
Annual Reports ◽  
Fair Value Accounting ◽  
Before And After ◽  
The Face ◽  
The Relationship ◽  
Number Of Firms

The application of fair value has started early in Jordan, which was a bone of contention among supporters and opponents. This study came to provide empirical evidence on the relationship between fair value and financial manipulation. The study extracted data from 45 companies’ annual reports during a ten-year period (1997- 2006) five years before and after the application of fair value to examine the relationship among the application of fair value accounting and the presence of manipulation in financial statements. The result indicates that the number of firms that manipulated information in the financial statements had increased after applying fair value accounting. The results have policy implications, one of which is that the Jordanian government should either enact new regulations or modify the current regulations in the face of an increasing number of manipulations by firms after the application of fair value accounting. These regulations are needed to increase both the managements’ and accountants’ responsibility towards the firms and to enhance the business ethics of the organization.

Sign in / Sign up

Export Citation Format

Share Document