Home About us Contact
|
Home About us Contact | ||
|
|
||
Accounting Rules (accounting + rule)
Selected AbstractsImpact of International Financial Reporting Standard adoption on key financial ratiosACCOUNTING & FINANCE, Issue 2 2009Anna-Maija Lantto M41 Abstract Although previous research has investigated the economic consequences of International Financial Reporting Standard (IFRS) adoption, there is little evidence on the impact of IFRS adoption on key financial ratios. To fill this gap, we examine this issue in a continental European country (Finland). Our results show that the adoption of IFRS changes the magnitude of the key accounting ratios. Moreover, we extend the literature by showing that the adoption of fair value accounting rules and stricter requirements on certain accounting issues are the reasons for the changes observed in accounting figures and financial ratios. [source] Disclosure Practices, Enforcement of Accounting Standards, and Analysts' Forecast Accuracy: An International StudyJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2003Ole-Kristian Hope Using a sample from 22 countries, I investigate the relations between the accuracy of analysts' earnings forecasts and the level of annual report disclosure, and between forecast accuracy and the degree of enforcement of accounting standards. I document that firm-level disclosures are positively related to forecast accuracy, suggesting that such disclosures provide useful information to analysts. I construct a comprehensive measure of enforcement and find that strong enforcement is associated with higher forecast accuracy. This finding is consistent with the hypothesis that enforcement encourages managers to follow prescribed accounting rules, which, in turn, reduces analysts' uncertainty about future earnings. I also find evidence consistent with disclosures being more important when analyst following is low and with enforcement being more important when more choice among accounting methods is allowed. [source] The Financial Crisis: Causes and Lessons,JOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2010Kenneth E. Scott The author argues that the root cause of the recent crisis was a housing bubble whose origins can be traced to loose monetary policy and a government housing policy that continually pushed for lower lending standards to increase home ownership. The negative consequences of such policies were amplified when transmitted throughout the financial system by financial institutions through the process of securitization. In attempting to assess culpability for the crisis and identify possible reforms, the author focuses on three categories: 1Defects in Financial Products: Without criticizing derivatives and the process of securitization, the author identifies the sheer complexity of the securities as a major source of the problem,for which the solution is a simpler security design combined with greater disclosure about the underlying assets being securitized. 2Defects in Risk Management: Thanks in large part to agency and other incentive problems, there was universal underestimation of risks by mortgage originators and financial institutions throughout the securitization chain. Changing incentive pay structures is part of the solution, and so are better accounting rules for SPEs. But more effective regulatory oversight and ending "too big to fail" may well be the only way to curb excessive private risk-taking. 3Defects in Government Policy and Regulation: While acknowledging the need for more effective oversight, the author argues that there was ample existing authority for U.S. regulators to have addressed these issues. Lack of power and authority to regulate was not at the heart of the problem,the real problem was lack of foresight and judgment about the unexpected. After expressing doubt that regulators can prevent major financial failures, the author recommends greater attention to devising better methods of resolving such failures when they occur. One of the main goals is to ensure that losses are borne not by taxpayers but by private investors in a way that maintains incentives for market discipline while limiting spillover costs to the entire system. [source] TRANSFERABLE STOCK OPTIONS (TSOS) AND THE COMING REVOLUTION IN EQUITY-BASED PAYJOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2004Brian J. Hall The dominant form of equity pay in the U.S. will change dramatically when accounting rules are changed (most likely in 2005) to require companies to charge the cost of their stock option plans on their income statements. Many companies are already switching from stock options to other forms of equity pay, especially restricted stock. The most notable switcher was Microsoft, the world's largest user of stock option pay. In July 2003, partnering with J.P. Morgan, Microsoft created a onetime transferable stock option (TSO) program that allowed holders of underwater Microsoft options to sell their options to J.P. Morgan in return for restricted shares. But the most important consequence of this transaction may not be a widespread shift by corporate America to restricted shares, but rather the creation of a more costeffective kind of stock option. By clearing the potentially messy hurdles involving taxes, accounting, SEC rules, and "transaction mechanics," Microsoft has opened the door for TSOs to be considered as an ongoing equitypay instrument, perhaps replacing standard stock options (which are not transferable). TSOs share the key advantages of restricted stock in terms of providing robust retention and ownership incentives and higher valuecost efficiency, while maintaining the key "leverage" advantage of options. In so doing, they create significant upside (and downside) while largely avoiding the "pay for pulse" problem of restricted stock. They also introduce the discipline of competitive pricing by third-party bidders. The bid prices of investment banks create nearly all of the information required for accurate estimates of option cost, which should foster greater board accountability and improved corporate governance. [source] Does the Capitalization of Development Costs Improve Analyst Forecast Accuracy?JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2010Evidence from the UK It has been documented that investments in Research and Development (R&D) are associated with increased errors and inaccuracy in earnings forecasts made by financial analysts. These deficiencies have been generally attributed to information complexity and the uncertainty of the future benefits of R&D. This paper examines whether the capitalization of development costs can reduce analyst uncertainty about the future economic outcome of R&D investments, provide outsiders with a better matching of future R&D-related revenues and costs, and therefore promote accuracy in analyst forecasts. UK data is used, because accounting rules in the United Kingdom permitted firms to conditionally capitalize development costs even before the introduction of the International Financial Reporting Standards. The choice to expense R&D rather than conditionally capitalize development costs is found to relate positively to signed analyst forecast errors. This finding is robust to controlling for the influence of other factors that may affect errors, as well as for the influence of R&D investments on forecast errors. The decision to capitalize versus expense is not observed to have a significant influence on analyst forecast revisions. The findings are interpreted as evidence that the choice to capitalize as opposed to expense may help to reduce deficiencies in analyst forecasts; hence, is informative for users of financial statements. Increased informativeness is expected to have repercussions for the effectiveness with which analysts produce earnings forecasts, and, as a result, market efficiency. [source] Global Market Segmentation and Patterns in Stock Market Reaction to US Earnings Announcements: Further EvidenceJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2005Tony Kang The purpose of this study is to investigate why the information content of US earnings announcements of non-US firms cross-listing in the US varies with the degree of capital market segmentation in the cross-listing firms' countries of domicile. My evidence shows that indirect barriers to investing (i.e., accounting rules and liquidity differences) rather than direct investment barriers (i.e., investment restrictions) mainly account for this difference. After controlling for the level of accounting disclosure in a firm's country of domicile, I do not observe a systematic difference in the size of market's reaction to earnings announcements depending on the degree of market segmentation in the firm's country of domicile. This study contributes to the literature by providing evidence that accounting disclosure plays an important role in the integration of global capital markets. [source] Bridging the GAAP: the Changing Attitude of German Managers towards Anglo-American Accounting and Accounting HarmonizationJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2000Martin Glaum This paper presents and compares results from two empirical studies into the attitudes of financial executives of large German corporations towards a global harmonization of accounting principles and towards the adaptation of German accounting to Anglo-American Standards. The first of the studies was conducted in 1994, the second in late 1997, early 1998. A comparison of the results reveals that German managers' attitudes have changed profoundly over the course of only three years. In 1994, they objected to the view that German accounting is inferior to Anglo-American accounting; they had a negative attitude towards US accounting; and they were highly sceptical about adapting German accounting to Anglo-American accounting rules. Today, German managers openly concede that German financial accounts have a lower information value for investors and that the use of German accounting rules reduces the demand for German shares abroad. They are also more willing to accept far-reaching changes in the German accounting system. The survey shows that numerous large corporations have already adopted international standards, or are planning to do so in the near future. A further finding is that opinion among German managers and firms has shifted significantly towards accepting IAS rather than US-GAAP as the basis for the internationalization of German accounting. In fact, more than 80%of managers believe that five years from now the great majority of German firms will publish their consolidated financial accounts according to either IAS or US-GAAP. [source] Option Awards for Australian CEOs: The Who, What and WhyAUSTRALIAN ACCOUNTING REVIEW, Issue 26 2002Jeff Coulton The compensation structure for Australian CEOs, and especially the extent to which they receive executive stock options, is explored. Evidence suggests that the award of executive stock options is common in Australia, but not in as systematic a manner as has been documented for US CEOs. Where ESOs are awarded, they form a significant component of total compensation, even allowing for limitations in the way we approximate their value. Modelling the use of ESOs shows relatively few empirical regularities, other than a positive association between firm size and ESO use. This is consistent with a view that ESOs are a form of "rent extraction" by CEOs, but it may also reflect a bias towards their use created by accounting rules. [source] | ||||||||||