scholarly journals Impact of COVID-19 pandemic on assessment of companies activity within international standards of financial reporting

2021 ◽  
Vol 11/3 (-) ◽  
pp. 32-36
Author(s):  
Raisa TSYHAN ◽  
Oksana ONYSHCHENKO ◽  
Denys SOLODKOV
Keyword(s):  
Financial Reporting ◽  
Default Risk ◽  
Traditional Approach ◽  
Cash Flows ◽  
International Standards ◽  
Global Pandemic ◽  
Net Profit ◽  
Net Assets ◽  
Credit Losses ◽  
A Company

Introduction. During crises like the current one, induced by a global pandemic of the COVID-19, the most relevant aspects for the majority of businesses are a continuity of their operating, assessment for impairment and assessment of expected credit losses. These factors impact accounting and financial reporting which, in turn, impact decision-making. A business survival in such conditions is highly dependent on how efficiently managers assess these aspects. The purpose of the paper is to determine particular actions management should undertake in order to prevent business bankruptcy as a result of the pandemic and the pandemic-related restrictions. Results. It terms of assessment of continuity of business operating, the main issue is the fact that the budgets approved in 2019 for the year 2020 turned to be irrelevant in the context of expected prices, sales volumes, total net profit, working capital and the effects of exchange difference, whereas the key solution is an estimation of a company’s liquidity to be able to cover liabilities within the deadlines. In terms of assessment for impairment, there two indicators of the impairment: external changes with significant impact on a company or its environment and a situation when a book value of net assets exceeds company’s market capitalization whereas a solution is to determine amount of expected compensation either with a traditional approach or with an approach based on expected cash flows. In terms of credit losses assessment, among the factors that should be accounted there are, for instance, additional economic scenarios that address high uncertainty, an impact on particular groups of clients, industries or regions and actions taken by governments and central banks whereas among the targets of the assessment there are, for instance, an ability to include changes of a default risk into evaluation of default probability in time. Conclusions. COVID-19 pandemic and the risks related to it caused a significant impact on accounting and financial reporting, regardless of a company’s industry, size and region where it is located which is expressed in the dynamic of the Global SEMs bankruptcy index and PMI.

GASB No. 34's Governmental Financial Reporting Model: Evidence on Its Information Relevance

2007 ◽  
Vol 82 (1) ◽  
pp. 205-240 ◽  
Author(s):  
Elizabeth Plummer ◽  
Paul D. Hutchison ◽  
Terry K. Patton
Keyword(s):  
School Districts ◽  
Financial Reporting ◽  
Default Risk ◽  
Balance Sheet ◽  
Cash Flows ◽  
Working Capital ◽  
Information Relevance ◽  
Net Assets ◽  
Accrual Basis ◽  
The Government

This study uses a sample of 530 Texas school districts to investigate the information relevance of governmental financial statements published under Governmental Accounting Standards Board Statement No. 34 (GASB No. 34). Specifically, we examine whether the new government-wide statements provide information relevant for assessing a government's default risk, and if this information is incremental to that provided by the governmental funds statements. GASB No. 34 requires governments to publish governmental funds statements prepared on a modified accrual basis, and government-wide statements prepared on an accrual basis. We find that GASB No. 34's Statement of Net Assets (similar to a corporation's balance sheet) provides information relevant for assessing default risk, and this information is incremental to that provided by the governmental funds statements. However, GASB No. 34's Statement of Activities (similar to a corporation's income statement) does not provide information relevant for assessing default risk. The accrual “earnings” measure is not more informative than the modified-accrual “earnings” measure. A government's modified accrual earnings measure can be thought of as a type of measure of changes in working capital. Therefore, our results are consistent with research on corporate entities that attributes the superiority of earnings over cash flows primarily to working capital accruals and not long-term accruals. For our sample of school districts, evidence suggests that total net assets from the government-wide Statement of Net Assets, along with a measure of modified-accrual “earnings” from the governmental funds statement, provide the best information for explaining default risk.

Do Global Audit Firm Networks Apply Consistent Audit Methodologies across Jurisdictions? Evidence from Financial Reporting Comparability

2019 ◽  
Vol 95 (6) ◽  
pp. 151-179 ◽  
Author(s):  
Matthew S. Ege ◽  
Young Hoon Kim ◽  
Dechun Wang
Keyword(s):  
Financial Reporting ◽  
Cash Flows ◽  
International Standards ◽  
Global Network ◽  
Global Networks ◽  
Audit Firm ◽  
Operating Cash Flows ◽  
Audit Firms ◽  
Financial Reporting Comparability

ABSTRACT Brand name audit firms are global networks of local audit firms. These networks claim to enforce consistent audit methodologies across their member firms, which, if true, should systematically affect client financial reporting. We find that clients from different countries have more (less) comparable accruals when they are audited by local audit firms from the same global network (different global networks). Furthermore, inferences are similar when we examine client accrual comparability around audit firm switches induced by the failure of Andersen, which serves as a shock that helps improve identification. In falsification tests, having auditors from the same global network is not associated with differences in operating cash flows. Results also suggest that the role of global network methodologies in global financial reporting comparability is more pronounced across stronger investor protection jurisdictions and across jurisdictions that have adopted International Standards on Auditing. JEL Classifications: M41; M42.

scholarly journals KREATIVNO FINANSIJSKO IZVEŠTAVANJE O NOVČANIM TOKOVIMA

2017 ◽  
pp. 163
Author(s):  
Aleksandra Arsenijević ◽  
Tadija Đukić
Keyword(s):  
Cash Flow ◽  
Financial Reporting ◽  
Market Value ◽  
Financial Statements ◽  
Cash Flows ◽  
Financial Position ◽  
A Company ◽  
Operating Activities

Financial statements should realistically show financial position, performance, and cash flows of a company. Creative financial reporting represents a deliberate manipulation of information in financial statements in order to create misperceptions on company operations. Creative financial statements are primarily intended for investors, in order to encourage them to purchase company shares and thus increase its market value. Creativity in compiling cash flow statements lies in presentation of operating activities as investing and financing activities, and vice versa.

Convergence Problems of the Cash Flows Statement Preparation Methods Under the Russian and International Financial Reporting Standards

Auditor ◽  
2018 ◽  
Vol 4 (6) ◽  
pp. 51-55
Author(s):  
Ольга Калачева ◽  
Olga Kalacheva ◽  
С. Смелова ◽  
S. Smelova
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Cash Flows ◽  
Economic Life ◽  
International Standards ◽  
Preparation Methods ◽  
World Community ◽  
Financial Reporting Standards ◽  
The Russian Federation ◽  
Convergence Problems

The problem of convergence of the disclosure order in accounting (financial) reporting of information on cash flows by Russian and international standards is disclosed in the article. The authors emphasize that the integration of the Russian Federation into the world community requires from Russian organizations the provision of fi nancial statements according IFRS. However, most Russian companies are legally required to provide both IFRS fi nancial statements and RAS financial statements. In this regard, the Cash Flow Statement, as one of the obligatory statement of companies, is represented in this article as a tool for eff ectively assessing the organization’s ability to attract and use cash in the economic life.

scholarly journals Liquidity Analysis of Selected Public-Listed Companies in Malaysia

2015 ◽  
Vol 1 (1) ◽  
pp. 1 ◽  
Author(s):  
Carl B. McGowan ◽  
N. M. Baki Billah ◽  
Noor Azuddin Yakob
Keyword(s):  
Correlation Analysis ◽  
Cash Flow ◽  
Financial Reporting ◽  
Cash Flows ◽  
Consumer Products ◽  
Coverage Ratio ◽  
Empirical Results ◽  
Significant Difference ◽  
Statement Of Cash Flows ◽  
A Company

<p>The Statement of Cash Flows is a crucial part of financial reporting. Thus, cash flow ratios have drawn the attention of practitioners and academic researchers to use to evaluate the performance of a company. This study examines, over the three years (2010-2012) period, the liquidity position of selected companies from three prominent sectors (Consumer products, Industrial products and Trading/Services) of the Malaysian economy using cash flow statement ratios and traditional liquidity ratios suggested by various researchers. Traditional ratios were obtained from the Osiris database and cash flow ratios were calculated by using financial statements of selected companies. Traditional ratios examined were - current ratio, quick ratio, total asset to total liabilities ratio, and interest coverage ratio. Similarly, cash flow ratios examined were–operating cash flow ratio, critical needs cash coverage ratio, cash flow to total debt ratio, and cash interest coverage ratio. Correlation analysis was performed to investigate the strength of the relationship between traditional ratios and cash flow ratios. The empirical results of the correlation analysis show a statistically significant positive relationship between traditional ratios and cash flow ratios. Finally, pair t-tests results show that there is statistically significant difference between traditional ratios and cash flow ratios. The implication of the above empirical results suggests that traditional liquidity ratios should not be used solely for measuring liquidity since a company can have serious cash flow problems with positive liquidity ratios and increasing profits. Liquidity ratios developed using the statement of cash flows provide additional information or sometimes better insight on the financial strength or weakness of a company.</p>

Relevance of GASB No. 34 to Financial Reporting by Municipal Governments

2012 ◽  
Vol 27 (2) ◽  
pp. 175-204 ◽  
Author(s):  
Annette K. Pridgen ◽  
W. Mark Wilder
Keyword(s):  
Financial Reporting ◽  
Default Risk ◽  
Data Availability ◽  
Financial Indicators ◽  
Municipal Governments ◽  
Indicator Variable ◽  
Governmental Accounting ◽  
Fund Balances ◽  
Net Assets ◽  
The Government

SYNOPSIS The Governmental Accounting Standards Board issued Statement No. 34, creating a new accrual-based financial reporting model. This study examines whether information from this model is associated with the default risk (a proxy for fiscal distress) of municipal governments and whether this information is incremental to that provided by the fund-based, modified-accrual reporting model. Ordered logistic regressions are used to analyze financial data from 2005 for a sample of 409 municipalities that participated in the Government Finance Officers Association award program. This study extends the work of Plummer et al. (2007) to municipal governments. In addition to the financial position indicator variable (total net assets/total revenues) examined by Plummer et al. (2007), this study provides evidence of the relevance of three other financial indicators (change in net assets/total net assets; total liabilities/total assets; and current assets/current liabilities). We also find that these accrual-based indicators provide information incremental to the fund-based model and that one fund-based measure (total fund balances/total fund revenues) also provides information incremental to the accrual indicator. These results are consistent with perceptions of regulators and others who expect accrual accounting to be a better measure of the economic costs of running a government than the traditional fund-based model. Data Availability: Contact the authors.

Assessing the materiality threshold and scope of auditing procedures: The sector-specific approach

2020 ◽  
Vol 23 (6) ◽  
pp. 683-700
Author(s):  
M.F. Safonova ◽  
K.G. Korovina
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Theory And Practice ◽  
International Standards ◽  
Degree Programs ◽  
Assessment Technique ◽  
Structural Correlation ◽  
Resultant Data ◽  
The Given ◽  
A Company

Subject. As part of any audit engagement, the auditor needs to obtain reasonable assurance that financial statements are free from material misstatements. For this, they assess the tolerable threshold of errors for financial statements, which, if exceeded, will influence the correctness of users' conclusions and adequacy of their subsequent decisions. International Standards on Auditing guide the assessment of the materiality threshold. However, the approach they stipulate fails to accommodate for the sectoral specifics and distinctions of some audited entities. Objectives. We assess the stable structural correlation of key financial reporting indicators through a sample of 130 agricultural entities operating in the Krasnodar Krai. The study presents a technique for assessing the materiality by variance from the average values of the sector as the size of a company may be. Methods. We apply general and special methods, such as induction, deduction, analysis, synthesis, computational graphics, monographs, algorithms. Results. In some cases, the resultant data appeared to significantly diverge at the estimated materiality level. Having analyzed the causes, we proved the reasonableness of the computations done by out technique. As a conclusion, we sum up strengths and weaknesses of the materiality assessment technique. Conclusions and Relevance. The enhanced materiality assessment technique accommodates for the sectoral specifics of agricultural entities. Assessing the materiality level, we revealed the structural correlation of various assets and liabilities. The technique is based on actual data and adaptable, if needed, to the given algorithm. It is more precise for non-standard entities. The findings can be used in the auditing theory and practice, serve for setting the accounting process and financial reporting in various entities. It will also be useful for the Master's Degree Programs in Economics.

scholarly journals Documenting the Results of Audit of the Information Disclosed in the Notes to the Financial Reporting Compiled by International Standards

2020 ◽  
Vol 89 (2-3) ◽  
pp. 127-147
Author(s):  
О. Е. Lubenchenko
Keyword(s):  
Financial Reporting ◽  
Information Disclosure ◽  
International Standards ◽  
International Accounting ◽  
Reporting Standards ◽  
Financial Reports ◽  
Ifrs 8 ◽  
And Performance ◽  
Strategy Building ◽  
A Company

Financial reporting releases the information requiring disclosure in accordance with national or international accounting and reporting standards. This information is usually released in the notes to the financial reporting, intended for a broader range of users. The notes are the most informative document, by which a user of the reporting can assess the company’s solvency, financial viability or business activity, can be informed about the terms of transactions with related parties, can make assumptions and receive data on management accounting, which are laid as the basis for the management strategy building. The released information is subject to obligatory disclosure, as its content is to be analyzed by national and international regulators and auditors in a way similar to the principal forms of financial reporting. An auditor assesses the received audit evidence in view of its sufficiency and reliability. Results of audit procedures can be summarized and documented. Because the International Standards on Auditing do not provide examples of documenting, the working document “The auditor’s testing of disclosure of the information attached to the financial reporting compiled by IFRS” has been formed, to support the process of documenting audit procedures with respect to the information given in the notes to the financial reporting. Using this working document, an auditor is able to obtain detailed information about a company and indicators of its financial reports, about its items and transactions that, not being subject to recognition in the reporting, are important for the management, about the accounting foundations and the opinions of management on which a company relied in compiling the reports. Depending on the operation specifics of a company, the working document can be supplemented by the following sections: IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, IFRS 8 “Operational Segments”, IAS 19 “Employee Benefits”, IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, IAS 40 “Investment Property” etc. The test, which is a unified working document, can be used by any audit firm. The auditor’s opinion on the information disclosure in the notes to the financial reporting is vitally important bearing in mind that not all the users of financial reports have deep knowledge of the International Accounting and Reporting Standards, but all of them need unbiased and complete data about the company status and performance.    

IFRS 9: Estimation of expected credit losses and their recognition in financial reporting

2019 ◽  
Vol 22 (4) ◽  
pp. 364-378
Author(s):  
T.B. Kuvaldina ◽  
◽  
E.V. Lobachev ◽  
Keyword(s):  
Financial Reporting ◽  
Ifrs 9 ◽  
Credit Losses

IFRS IMPLEMENTATION AS ONE OF THE FACTORS FOR IMPROVING THE INVESTMENT CLIMATE IN UKRAINE

2017 ◽  
Author(s):  
Kateryna Sova ◽  
◽  
Natalia Yatsenko ◽  
Denys Zagirniak ◽  
◽  
...  
Keyword(s):  
Financial Reporting ◽  
Direct Investment ◽  
Financial Statements ◽  
International Standards ◽  
Investment Climate ◽  
The European Union ◽  
Economic Activities ◽  
Financial Reporting Standards ◽  
Almost All ◽  
The Impact

The article is devoted to the study of the impact of the introduction of International Financial Reporting Standards (IFRS) on changes in the investment climate in Ukraine. The relevance of the topic is that improving the practice of applying IFRS as a tool for exchanging financial information is one of the key conditions for improving the investment climate in Ukraine. The authors have created the generalized scheme that illustrates the chronological list of enterprises that are required by law to prepare financial statements in accordance with IFRS. It was noted that in 2018, in accordance with Part 2 of Article 12 of the law on accounting and financial reporting in Ukraine and resolution of the Cabinet of Ministers of Ukraine No. 547 from 11.07.2018, the criteria of enterprises that are required to prepare financial statements in accordance with IFRS were updated. This step significantly increased the level of application of international standards due to the adoption of such a decision at the legislative level. The dynamics of the number of IFRS enterprises in Ukraine was analyzed. The analysis showed that over the past three years, the number of almost all enterprises that must apply international standards has been growing. The advantages of using IFRS for different users of financial statements were determined. It was determined that the priority users of IFRS financial statements are investors. At the same time, it was noted that the main advantage for other users of financial statements prepared in accordance with international standards is the improvement of the investment climate. The dynamics of the Investment Attractiveness Index of Ukraine based on the Likert scale in the period from 2016 to 2020 was analyzed. The direct investment receipts to Ukraine from the European Union countries were studied. The dynamics of direct investment in the Ukrainian economy was analyzed for two types of economic activities that should form financial statements in accordance with IFRS, namely, the extractive industry and quarrying, as well as financial and insurance activities.

Sign in / Sign up

Export Citation Format

Share Document