Effects of other comprehensive income on audit fees and audit report lag in Egyptian firms: does board gender diversity matter?

PurposeThis paper aims to (1) investigate the effect of other comprehensive income (OCI) on audit fees (AF) and audit report lag (ARL) and (2) test the moderating effect of board gender diversity (BGD) on such relationships.Design/methodology/approachThis paper uses data extracted from the financial reports for a sample of Egyptian firms from 2013 to 2019, where the data are processed using the Panel Corrected Standards Errors (PCSE) and the Structure Equation Model (SEM).FindingsThe results reveal that (1) the OCI existence and OCI volume have a significant positive effect on AF and ARL, and (2) the presence of female directors on the board and the percentage of female representation affect the relationship between OCI and AF positively, but this effect on the relationship between OCI and ARL is insignificant.Research limitations/implicationsThis paper has some limitations, where the analysis uses a small sample of Egyptian listed firms, as well as, the measures that were used as proxies of the study variables, which do not necessarily express the most suitable ones.Practical implicationsThe results of this paper would (1) provide signals to the audit market, the professional bodies in Egypt and stakeholders about the determinants of AF and ARL, (2) provide guidelines that support the capital market authority to consider gender diversity in boards of companies taking into considerations its impact on AF and ARL, and (3) help the accounting setters in emerging economies as Egypt in drafting more suitable standards and guidelines regarding OCI.Originality/valueThis paper adds to the literature on OCI, where it investigates the effect of OCI on ARL, which was not yet studied in prior studies. Also, this paper complements and extends the literature by providing empirical evidence from one of the emerging markets as Egypt about the effect of BGD on the relationships between OCI, AF and ARL, as these relationships have not been examined before.

Are Level 3 Fair Value Remeasurements Useful? Evidence from FAS 157 Rollforward Disclosures

Exploiting detailed disclosures mandated by Accounting Standard Codification (ASC) 820, we provide evidence for the return relevance of Level 3 fair value remeasurements for a comprehensive sample of U.S. listed banks. We find that Level 3 remeasurements recognized in earnings are more return relevant than those recognized in other comprehensive income (OCI). Our results suggest that Level 3 remeasurements in OCI partially reflect transitory illiquidity discounts that are less relevant when banks have the ability to hold the underlying assets. The regulatory capital treatment of OCI also affects the return relevance of Level 3 remeasurements in OCI. Importantly, we find no differences in the return relevance of realized versus unrealized Level 3 remeasurements in earnings, allaying concerns that investors perceive unrealized Level 3 remeasurements of lesser quality. Overall, our findings support the usefulness of the segregated disclosures of Level 3 fair value remeasurements.

Does Accounting Influence Finance? The Case of IFRS 9 and Fuel Hedging

Finance does influence accounting, for example it is known that hedge accounting under International Accounting Standards Board (IASB) (2019), IFRS 9 has been more aligned to risk management practice. Although, as commonly held, accounting represents the substance of economic events without modifying them, opportunities offered by a new accounting standard may affect finance strategies. This paper studies how the IASB (2019), IFRS 9 hedge accounting requirements versus IASB (2014), IAS 39 have modified fuel hedging practice for a sample of IFRS airlines. Hedge accounting under the new standard results to have been adopted by a very large proportion of the sample. Its new features of risk component hedges, accounting for time value of option, forward points, or basis spread in other comprehensive income (hereafter, OCI), and simplified effectiveness assessment have been exploited by most of the sampled companies, although a definite explanation as an accounting strategy is only partially disclosed. In a context where fuel cost is one, if not the most significant caption of operating expenses of airlines, IASB (2019), IFRS 9 has provided an incentive to expand the use of fuel hedging, at least for accounting purpose.

Value Relevance of Earnings Component in the Financial Industry

PSAK No. 1 of 2009 is enforced from 2011 onwards. The presentation of the income statement changes to a comprehensive income statement consisting of operating income, non-operating income, net income, other comprehensive income (OCI). The purpose of this study was to test the value relevance of OCI and other components of earnings that were tested based on the relationship between OCI and stock prices in the financial industry. The population in this study are all companies listed on the Indonesia Stock Exchange which are included in the financial industry in 2016-2019. Based on the determination of the sample using the purposive sampling method, the research sample obtained was 335 firm years. The data is processed using OLS regression. This study indicates that OCI, non-operating income, and comprehensive income have value relevance which is indicated by the negative effect of OCI on stock prices and the positive effect of non-operating income and comprehensive income on stock prices. However, operating income and net income have no effect on stock prices.

PENGARUH OTHER COMPREHENSIVE INCOME, KARAKTERISTIK KOMITE AUDIT DAN KUALITAS AUDIT TERHADAP REAL EARNING MANAGEMENT DENGAN LEVERAGE SEBAGAI VARIABEL MODERASI

<p><em>This study aims to analyze the effect of Other Comprehensive Income, Audit Committee Characteristics and Audit Quality on Real Earning Management with Leverage as Moderating Variable. The data used are secondary data obtained from the financial statements of manufacturing companies listed on the Indonesia Stock Exchange. This research is a research conducted by testing the hypothesis. A total of 216 samples from 57 companies with an observation period of 4 years, 2016-2019 were selected using the Data Cross Sections method. The analytical method used to test the hypothesis in this study is multiple linear regression analysis.</em><em> </em><em>The results of this study indicate that Other Comprehensive Income Variables, audit committee financial expertise, audit committee tenure, number of audit committee meetings and audit quality do not have a negative effect on real earning management while financial leverage variable has a positive effect on real earnings. management, and the financial leverage variable was not able to weaken the negative influence of the Other Comprehensive Income variable, the variable financial expertise/ financial expertise of the audit committee, the tenure of the audit committee, the number of audit committee meetings and audit quality on real earnings management.</em></p>

Mandatory ESG Reporting and XBRL Taxonomies Combination: ESG Ratings and Income Statement, a Sustainable Value-Added Disclosure

Corporate financial statements address multiple stakeholders’ needs. International Financial Reporting Standards (IFRSs), among others, allow two different classifications, “by function of expense” and “by nature of expense”, for the statement of profit and loss and other comprehensive income for the period (from now on, also identified in short as “Income Statement”, or “IS”). XBRL standards ensure compliance and consistency in financial statements’ drafting and filing. XBRL taxonomies reflect the Income Statement IFRS disclosure requirement in the {310000} and {320000} codifications, respectively. Given the recent EU enhanced regulations that proposed extend mandatory ESG reporting to SMEs, this study aims to design and recommend an additional Income Statement to embed structured Environmental, Social, and Governance (ESG) disclosure. A restatement of the IS is organised following an adjusted Value-Added perspective to fit the purpose of sustainability disclosure. The above-mentioned Income Statement should be suitable and adaptable for entities of any size and operating in any industry. This goal can be achieved through customised input weighting. Therefore, this applied research can fill a current financial ESG disclosure gap, ensuring financial statements’ comparability and encouraging additional mandatory disclosures through standardisation. Two more items in the XBRL (IFRS-based) structure are suggested, leading to the introduction of one fully structured statement “{330000}—Statement of comprehensive income, profit or loss, by Added Value, ESG based” and a semi-structured “{814000}—Notes—ESG Ratings and Reporting” to better discuss and disclose the assumptions and results of the ESG Statement.

Fair value accounting from the users’ perspective: an experiment on how financial analysts rely on fair value estimates in their decisions

Purpose The current paper aims to understand whether fair value accounting (FVA) affects analysts’ loan approval decisions and default risk judgments. Design/methodology/approach This study focusses on three issues: unrealized gain or loss resulting from FV measurement recognized in other comprehensive income (OCI), recognition of assets at FV or historical cost and the disclosure or non-disclosure of the FV of collateral assets. It uses an experiment carried out with a sample of 29 CFA analysts. Findings The results show that all three issues have a significant effect on analysts’ judgment and decision-making in processing FV estimates. Originality/value The paper extends knowledge on how financial analysts perceive FV estimates and disclosure and may help the accounting standard boards assess the challenges facing analysts when they apply professional judgments in interpreting FV measurements and disclosures. Moreover, it offers fresh views to the debate on the decision usefulness of FVA, particularly relevant in the post-implementation review of IFRS 13.

Bridge over troubled water: Is it possible to define other comprehensive income?

Although other comprehensive income did not exist in the conceptual framework until 2018, it has been a part of IFRS for many years, and it has not been defined based on accounting theory. This paper considers arguments for the current use of other comprehensive income under IFRS and finds that matching and prudence are at the core of other comprehensive income in IFRS despite not being elements of the conceptual framework. This suggests that the concept of other comprehensive income exists because the IFRS standards are founded on a mix of balance sheet-based and income statement-based accounting principles. Based on the characteristics of other comprehensive income and the IASB's arguments for the recognition of gains and losses in other comprehensive income, this paper proposes a definition of other comprehensive income that can be used to ensure a uniform application of the concept across accounting standards and to reduce risks of inconsistency.