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Financial Reporting (financial + reporting)
Terms modified by Financial Reporting Selected AbstractsBAYLOR UNIVERSITY ROUNDTABLE ON INTEGRITY IN FINANCIAL REPORTINGJOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2003Article first published online: 11 APR 200 At the center of the U.S. corporate governance controversy are questions about the integrity of the U.S. financial reporting system. Can investors trust the numbers now being reported in corporate financial statements? And, if not, what steps are being taken to bring about the return of investor trust and confidence? The academics and practitioners who took part in this discussion began by expressing their reluctance to describe the current situation as a "crisis." The consensus was that the recent governance failures are not the reflection of a general decline in corporate moral standards, but rather the work of a handful of opportunists who found ways to exploit some weaknesses in the present system. Part of the discussion focused on the expected benefits (and costs) of the heightened regulatory scrutiny provided by the Sarbanes-Oxley Act and the newly formed Public Company Accounting Oversight Board. But most of the panelists placed greater emphasis on the role of self-regulation in resolving problems such as the conflicts of interest within auditing and brokerage firms that played a major role in scandals like Enron and WorldCom. And rather than relying on more vigorous SEC oversight of financial statements, a number of panelists argued that top priority should be given to comprehensive reform of U.S. accounting standards, which are said to be a major source of confusion for both managers and investors. [source] Financial Reporting for Private Companies: The Canadian Experience,ACCOUNTING PERSPECTIVES, Issue 1 2009Morina D. Rennie ABSTRACT The issue of whether small and/or private companies should be allowed to use simplified accounting standards in financial reports has concerned the accounting profession for decades. It has been argued that preparing financial reports in accordance with the large volume of promulgated standards contained in generally accepted accounting principles (GAAP), some of which are relatively complex, has put a significant strain on the resources of small/private business. Moreover, information produced and presented in accordance with at least some accounting standards within GAAP may not be relevant for the users of small/private companies' financial statements. In this paper we look at differential reporting in Canadian GAAP, which gives nonpublicly accountable enterprises the ability to opt out of certain CICA Handbook requirements with unanimous consent of the shareholders. We look at lobbying activity in response to the proposed differential reporting standard and at nonpublicly accountable company experience with the differential reporting opportunity in the period since the standard was promulgated. [source] Evidence from the United States on the Effect of Auditor Involvement in Assessing Internal Control over Financial ReportingINTERNATIONAL JOURNAL OF AUDITING, Issue 2 2009Jean C. Bedard Securities regulators around the world are considering the costs and benefits of alternative policies for providing information to financial markets on corporate internal control. These policy options differ on the level of auditor involvement, among other dimensions. We examine the association of relative auditor involvement and auditor characteristics with Section 302 internal control disclosures made by US ,non-accelerated filers' from 2003 to 2005. We find more material weaknesses disclosed in the fourth quarter, when there is relatively more auditor involvement, relative to the first three quarters. Clients of larger audit firms have higher disclosure rates (although they are probably less risky due to more stringent client acceptance standards), but this difference is due to fourth quarter disclosures. Audit firms with Section 404 experience also have greater material weakness disclosure, implying process improvement associated with knowledge sharing across engagements. Collectively, our results shed light on ways to increase the effectiveness of internal control regulation. [source] Market Efficiency, Bounded Rationality, and Supplemental Business Reporting DisclosuresJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2001J. Richard Dietrich The AICPA Special Committee on Financial Reporting has urged disclosure of relevant forward-looking information on risks and opportunities to supplement conventional financial statements. We conduct a laboratory market experiment to assess the effects of such disclosures on capital allocation decisions. We develop two sets of competing hypotheses regarding how capital markets react to supplemental disclosures. One set is based on the assumption of semi-strong market efficiency, while the other posits that the bounded rationality of individual traders leads to inefficient market prices. We find that explicit disclosure of management's best estimate of an uncertain quantity improves market efficiency, even though this disclosure is redundant with information in financial statements. Second, we find disclosure of an upper bound of management's estimate has the potential to bias security prices upward, while informationally equivalent disclosure of both upper and lower bounds removes this bias. These results suggest that experimental market reactions to these supplemental disclosures are inconsistent with market efficiency. Supplemental analyses of individuals' price predictions and trading behavior support our conclusion that inefficiencies are at least partially attributable to individual information processing biases. [source] Determinants of Internet Financial Reporting by New Zealand CompaniesJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2003Peter Oyelere The development of the Internet as a global medium for the dissemination of corporate financial information creates a new reporting environment. Extensive literature examines the determinants of voluntary financial reporting through traditional media such as print,based annual reports. This paper extends this literature by examining the voluntary adoption of the Internet as a medium for transmitting financial reports and determinants of such voluntary practice by New Zealand companies. The results indicate that some determinants of traditional financial reporting,firm size, liquidity, industrial sector and spread of shareholding,are determinants of voluntary adoption of Internet financial reporting (IFR). However, other firm characteristics, such as leverage, profitability and internationalization do not explain the choice to use the Internet as a medium for corporate financial reporting. [source] Financial Reporting of Small Business Entities in Canada,JOURNAL OF SMALL BUSINESS MANAGEMENT, Issue 4 2006Michael Maingot Financial reporting for small business entities (SBEs) has been the subject of much debate and concern by the accounting bodies (institutes) in Canada, the United States, the United Kingdom, Ireland, Australia, New Zealand, and other countries. The main issue for the standard setters is whether they should have one set of standards for all companies or two sets of standards (one for big companies and one for SBEs). The main objective of our study is to examine whether SBEs in Canada should have their own new set of Generally Accepted Accounting Principles (GAAP) or should they continue to use big GAAP used by public companies. To address this issue in the Canadian environment, we sent out a questionnaire to a sample of managers and owners of small businesses, preparers, auditors, and users of small business accounts. These stakeholders were asked to identify the purposes of SBE financial statements, their levels of satisfaction or dissatisfaction with the present accounting standards for SBEs, the burdens imposed on the preparers of the financial statements, and the weaknesses of the present standards. Furthermore, they were asked to give the expected advantages of adopting new standards, after having ranked four models of financial reporting of SBEs. The results are quite interesting. Stakeholders indicated that financial statements of SBEs are prepared mainly for taxation purposes and borrowing. They are not satisfied with the present standards because they are costly to comply with and very complex. The burden of producing SBE financial statements can be reduced by simplifying the present standards. The new standards would mean a shorter and simpler form of financial statements. It is hoped that the results of this study will provide the standard setters in Canada and other countries with an indication of the future direction for SBE reporting and accounting. [source] Financial Reporting by Business Groups and the Market's Ex ante Valuation of Tunneling: Evidence from Korean Chaebols,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 4 2009Kwon-Jung Kim Abstract This study examines how the Korean stock market reacts to the release of group-level financial statements by Korean business groups (chaebols). I find that chaebol firms that perform relatively well (measured by ROE) within their group but whose controlling shareholders have low levels of cash-flow rights experience negative price reactions particularly when their group ROE is low. In contrast, chaebol firms whose controlling shareholders have high levels of cash-flow rights do not experience negative price reactions even when their group ROE is negative. These findings are consistent with the market anticipating that "tunneling" will occur in low-cash-flow-right firms, but not in high-cash-flow-right firms, to provide support to poorly performing firms. To corroborate these results, I also examine whether tunneling actually occurs within one year after the group-earnings announcements. I find that in many cases, resources of low-cash-flow-right firms with relatively good performance are actually transferred to poorly performing firms (mostly, unlisted firms) through purchasing new equity of poorly performing firms. Moreover, the magnitude of negative price reactions at the time of group-earnings announcements is significantly related to the magnitude of resources transferred to poorly performing firms. [source] The Puzzle of Financial Reporting and Corporate Short-Termism: A Universal Ownership PerspectiveAUSTRALIAN ACCOUNTING REVIEW, Issue 4 2009Michael E. Drew This study considers the controversy surrounding financial reporting and corporate short-termism as a puzzle. The question remains as to why corporate managers and investors persist in exhibiting behaviours that trade off long-term value creation for meeting short-term financial targets. Using inter-temporal choice theory, the myopia characterising decision-making is entirely rational, given the set of incentives faced. This study views the puzzle through the prism of universal owners (pension and superannuation funds), arguing that the investment policies or ,mandates' implemented by these financial behemoths is the source of the myopic behaviour. The paper explores a range of policies that universal owners may consider implementing to ensure that the payoffs to corporate managers and investors are optimised through the pursuit of long-termism. [source] User Requirements for Not-For-Profit Entity Financial Reporting: An International ComparisonAUSTRALIAN ACCOUNTING REVIEW, Issue 41 2007LYDIA KILCULLEN This study investigates the not-for-profit (NFP) external financial reporting regulatory environments of the US, the UK, Canada and New Zealand and compares them with that of Australia. It finds a lack of clarity in the definition of a NFP entity under Australian accounting standards. The study also identifies various types of information that earlier research and the guidance in other countries suggest are useful to the users of NFP entities' financial statements. This information is not currently required under Australian accounting standards. [source] Financial Reporting of Small Business Entities in Canada,JOURNAL OF SMALL BUSINESS MANAGEMENT, Issue 4 2006Michael Maingot Financial reporting for small business entities (SBEs) has been the subject of much debate and concern by the accounting bodies (institutes) in Canada, the United States, the United Kingdom, Ireland, Australia, New Zealand, and other countries. The main issue for the standard setters is whether they should have one set of standards for all companies or two sets of standards (one for big companies and one for SBEs). The main objective of our study is to examine whether SBEs in Canada should have their own new set of Generally Accepted Accounting Principles (GAAP) or should they continue to use big GAAP used by public companies. To address this issue in the Canadian environment, we sent out a questionnaire to a sample of managers and owners of small businesses, preparers, auditors, and users of small business accounts. These stakeholders were asked to identify the purposes of SBE financial statements, their levels of satisfaction or dissatisfaction with the present accounting standards for SBEs, the burdens imposed on the preparers of the financial statements, and the weaknesses of the present standards. Furthermore, they were asked to give the expected advantages of adopting new standards, after having ranked four models of financial reporting of SBEs. The results are quite interesting. Stakeholders indicated that financial statements of SBEs are prepared mainly for taxation purposes and borrowing. They are not satisfied with the present standards because they are costly to comply with and very complex. The burden of producing SBE financial statements can be reduced by simplifying the present standards. The new standards would mean a shorter and simpler form of financial statements. It is hoped that the results of this study will provide the standard setters in Canada and other countries with an indication of the future direction for SBE reporting and accounting. [source] Who Cares about Auditor Reputation?,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2005JAN BARTON Abstract I provide evidence on the demand for auditor reputation by examining the defections of Arthur Andersen LLP's clients following the accounting scandals and criminal conviction marring the auditor's reputation in 2002. About 95 percent of clients in my sample did not switch auditors until after Andersen was indicted for criminal misconduct regarding its failed audit of Enron Corp. I test whether the timing of client defections and the choice of a new auditor are consistent with managers' incentives to mitigate potentially costly information and agency problems. I find that clients defected sooner, mostly to another Big 5 auditor, if they were more visible in the capital markets; such clients attracted more analysts and press coverage, had larger institutional ownership and share turnover, and raised more cash in recent security issues. However, my proxies for agency conflicts , managerial ownership and financial leverage , are not associated with the timing of defections or the choice of new auditor. Overall, my study suggests that firms more visible in the capital markets tend to be more concerned about engaging highly reputable auditors, consistent with such firms trying to build and preserve their own reputations for credible financial reporting. [source] An Experimental Investigation of Approaches to Audit Decision Making: An Evaluation Using Systems-Mediated Mental Models,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2005AMY K. CHOY Abstract The objective of this research is to articulate a decision-making foundation for the systems audit approach. Under this audit approach, the auditor first gains an understanding of the auditee's economic environment, strategy, and business processes and then forms expectations about its performance and financial reporting. Proponents of this audit approach argue that decision making is enhanced because the knowledge of the system allows the auditor to focus on the most important risks. However, there has not been an explicit framework to explain how systems knowledge can enhance decision making. To provide such a framework, we combine mental model theory with general systems theory to produce a hypothesis we refer to as a systems-mediated mental model hypothesis. We test this hypothesis using experimental economics methods. We find that (1) subjects make systematic errors under the setting without an organizing framework provided by the systems information, and (2) the presence of an organizing framework results in lower reporting errors. Importantly, the organizing framework significantly enhances decision making in the settings where the environment changed. Establishing a decision-making foundation for systems audits can provide an important building block that, in part, can contribute to the development of a more effective and efficient audit technology - an important objective now when audits are facing a credibility crisis. [source] Board Characteristics and Audit Fees,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2002Joseph V. Carcello Abstract This paper examines the relations between three board characteristics (independence, diligence, and expertise) and Big 6 audit fees for Fortune 1000 companies. To protect its reputation capital, avoid legal liability, and promote shareholder interests, a more independent, diligent, and expert board may demand differentially higher audit quality (greater assurance, which requires more audit work) than the Big 6 audit firms normally provide. The audit fee increases as the auditor's additional costs are passed on to the client, such that we expect positive relations between audit fees and the board characteristics examined. We find significant positive relations between audit fees and board independence, diligence, and expertise. The results persist when similar measures of audit committee "quality" are included in the model. The results add to the growing body of literature documenting relations between corporate governance mechanisms and various facets of the financial reporting and audit processes, as well as to our understanding of the determinants of audit fees. [source] The Impact of Financial and Tax Reporting Incentives on Option Grants to Canadian CEOs,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2000KENNETH J. KLASSEN Abstract This study explores the effects of financial and tax reporting incentives on options granted to chief executive officers in Canada. Extant studies with a similar objective (Yermack 1995; Matsunaga 1995) explore predominantly nonqualified U.S. option grants that are deductible to the extent that the options are in the money at the time of exercise. In contrast, Canadian firms do not get a tax deduction for their stock option grants at any time. In both countries, no expense is recorded for financial reporting purposes. As a result, the financial reporting and tax reporting trade-off is more pronounced in the Canadian setting of this study compared with the U.S. setting. We measure option granting behavior as the ratio of the Black-Scholes value of stock option grants to the sum of cash compensation and the value of stock option grants. Using a sample of 806 firm-year observations during the period 1993-95, we find that observed option grants are significantly correlated with proxies for short-run financial reporting incentives. We also find evidence that option granting behavior is correlated with proxies for tax incentives. [source] The Impact of New Zealand's Public Sector Accounting Reforms on Performance Control in MuseumsFINANCIAL ACCOUNTABILITY & MANAGEMENT, Issue 1 2001George D. Thompson Accounting by most New Zealand museums was subject to public sector reforms requiring private sector -style financial reporting, and service performance reporting. This study into the impact of the reforms on how museum managements pursue successful performance found museums adopting a more accounting-oriented approach to planning and evaluation. Service performance reporting has facilitated the periodic evaluation of non-financial targets by managements, but as currently constituted the reporting model is flawed, particularly in its implications for essential long-term resource capacity of museums. This threatens its effectiveness for promoting good performance. Non-accounting based professional practices also have a role in museum success. [source] Accounting losses and earnings conservatism: evidence from Australian Generally Accepted Accounting PrinciplesACCOUNTING & FINANCE, Issue 3 2007Harishankar Balkrishna C12; M41 Abstract We provide evidence on three important aspects of Australian financial reporting; namely, the characteristics of losses, the extent to which Australian firms' earnings are conditionally conservative (i.e. bad news is reflected in earnings more quickly than good news) and the extent to which losses reflect incrementally greater conditional conservatism. We find evidence that loss incidence in Australia is frequent, with around 40 per cent of the sample firm-years from 1993 to 2003 being losses. Losses are also surprisingly persistent, and the probability of loss reversal declines monotonically as the history of losses extends. Although conditional conservatism is also shown to be a pervasive aspect of Australian Generally Accepted Accounting Principles, we demonstrate that it is more evident among loss observations. This result is robust across different methods of capturing conditional conservatism, and supports the conclusion that the relatively high frequency of losses is, at least in part, a reflection of conservative reporting. [source] Knowledge transfer costs and dependence as determinants of financial reportingACCOUNTING & FINANCE, Issue 3 2003David Hay Abstract This paper examines the circumstances in which financial reporting exists. Jensen and Meckling (1995) observe that where there are high knowledge transfer costs, then decentralisation is necessary; and that where decentralisation occurs there is a control problem, which can be addressed by providing a control system. I predict that where there are high knowledge transfer costs there will be a control system; if the control system uses financial reports, these will occur for activities with high knowledge transfer costs. The ability to decentralise is reduced where dependence makes it potentially costly to allow a subordinate to make decisions about the activity. The paper predicts that high dependence will be negatively associated with the existence of financial reports. The results confirm the predictions that financial reports are positively associated with knowledge transfer costs and negatively associated with dependence. [source] Valuation-based accounting research: Implications for financial reporting and opportunities for future researchACCOUNTING & FINANCE, Issue 1 2000Mary E. Barth This paper discusses the relation between financial reporting research and practice, particularly standard setters. Many studies addressing financial reporting issues use a valuation approach. The paper describes alternative approaches to valuation research and summarises the findings relating to four major current issues: fair value accounting for financial, tangible, and intangible assets, cash flows versus accruals, recognition versus disclosure, and international harmonisation of accounting standards. The summaries include identifying what standard setters and others would like to learn from research, what we have learned, and what is left to learn. The paper concludes with observations about future financial reporting academic research. [source] Applying XBRL in an Accounting Information System Design Using the REA Approach: An Instructional Case,ACCOUNTING PERSPECTIVES, Issue 1 2010JACOB PENG base de données relationnelles; document d'instance; modélisation REA; XBRL Abstract The Church in Somewhere (CIS) is a small community church which uses an Excel spreadsheet to keep its financial records. The church administrator is considering moving from a spreadsheet accounting system to a relational database system that can easily be expanded to include more information in the future. In this paper we examine the transforming process in this hypothetical case by following a resource-event-agent (REA) modeling paradigm to create a database. We then link the REA model to financial reporting using Microsoft Access. In addition, using the financial report in the database, students prepare and validate an eXtensible Business Reporting Language (XBRL) document for CIS. Instead of applying the complex U.S. Generally Accepted Accounting Principles (GAAP) Taxonomies, Release 2009, the case uses a dedicated CIS Taxonomy to complete the mapping and tagging processes. L'application du XBRL dans la conception d'un système d'information comptable selon le modèle ressource-événement-agent: cas didactique Résumé Church in Somewhere (CIS) est une petite église communautaire qui utilise un tableur Excel pour tenir ses registres financiers. L'administrateur de l'église songe à passer du système comptable du tableur à un système de base de données relationnelles susceptible d'être facilement élargi de manière à recevoir ultérieurement davantage d'informations. Dans ce cas hypothétique, les auteurs examinent le processus de « conversion », en suivant le paradigme du modèle ressource-événement-agent (REA), menant à la création d'une base de données. Ils relient ensuite le modèle REA à l'information financière par le truchement de Microsoft Access. En se servant du rapport financier de la base de données, ils fournissent en outre aux étudiants l'occasion de préparer et de valider un document XBRL pour CIS. Plutôt que d'appliquer les taxonomies complexes des PCGR des États-Unis, édition 2009, les auteurs utilisent dans leur cas une taxonomie propre à CIS pour réaliser les processus de cartographie et de codage. [source] Fair Value Accounting and the Financial Crisis: Messenger or Contributor?,ACCOUNTING PERSPECTIVES, Issue 3 2009Michel L. Magnan ABSTRACT This commentary discusses how fair value accounting (FVA) affects the nature of financial reporting, especially for financial institutions that were deeply affected by the 2007-9 financial crisis. Toward that end, I address four questions. First, I review FVA's role in financial reporting, emphasizing its development over time. While the commentary's focus is on the interface between financial instruments and FVA, its reach extends well beyond financial instruments. Thereafter, I discuss the measurement and valuation challenges that arise from the use of FVA in financial reporting. Then, I analyze the evidence, analytical and empirical, on the role that FVA may have played in the financial crisis of 2007-9. Since, to some extent, the crisis is still unfolding, there is limited yet very insightful empirical evidence on this issue. The evidence does suggest that FVA, in combination with its use by regulators, may have severely undermined the financial condition of some institutions. The effect was amplified for institutions holding assets in markets that saw their liquidity dry up during the crisis. In other words, FVA may have amplified the crisis. Finally, I discuss some implications that we can draw from the crisis about the merits and risks underlying FVA. For instance, I conclude that, in a search for relevance, the use of FVA in financial reporting may accelerate its disconnection from a firm's business reality. [source] The Many Challenges of Pension AccountingACCOUNTING PERSPECTIVES, Issue 2 2009Thomas H. Beechy ABSTRACT Accounting for defined benefit pension plans has long been a major issue in accounting. Standard-setters are grappling with revisions to pension accounting standards, and much change has already occurred in the United Kingdom. This paper identifies and discusses most of the major issues that standard-setters must confront in developing new approaches to financial reporting for pensions. Key issues concern how to report the impact of changes in assumptions, how to recognize pension costs on the balance sheet and income statement, and how to reconcile the differences between accountants' and actuaries' approaches to pensions. Current standards assume that accounting estimates are independent of actuarial assumptions, and yet require a direct comparison of the accounting liability with the pension plan assets, when in fact they are incompatible measures based on differing assumptions and differing methodologies. As well, accounting has been complicit in managers' wishes to hide the volatility inherent in a pension plan investment strategy that focuses on higher-risk equities to fund estimated monetary liabilities that have been discounted at low-risk interest rates. Drawing on studies and research done largely in Europe, this paper attempts to consolidate some of the current thinking on the topic and to propose some preferred approaches to dealing with the problems of pension accounting. [source] Recent Changes in the Regulation of Financial Markets and Reporting in Canada,ACCOUNTING PERSPECTIVES, Issue 1 2007Carla Carnaghan ABSTRACT The regulation of financial reporting and financial markets has undergone significant change in both the United States and Canada since 2000. In Canada, the regulatory regime is particularly complex and politically controversial, with much speculation about possible future directions. This paper's purpose is to explain the current regulatory environment as it stands in mid-2006 to assist those who teach or conduct research in this domain. On the basis of a review of existing regulations and related studies, this paper first provides an explanation of the major jurisdictional issues that affect financial reporting and regulation in Canada, including identifying the roles of the key players. Second, it identifies specific reporting changes that might be of particular relevance to prospective capital market researchers. Where relevant, comparisons are made with regulatory provisions in the United States, because the majority of capital markets research concerns U.S. securities exchanges regulation, and the Canadian regulations themselves often refer to U.S. regulations as a point of comparison. We find that the lack of a single national securities regulator in Canada and overlaps in federal and provincial jurisdiction and among regulatory bodies mean there is a large range of players involved in financial markets regulation. Ongoing efforts to improve integration include the new passport system, improved harmonization of securities regulation, and consideration of mergers between some of the involved organizations. Other changes have led to a greater emphasis in Canada on the regulation of continuous disclosure and corporate governance than was previously the case. Changes in specific reporting regulations and guidelines since 2002 have generally increased the amount of disclosure. [source] Enforced Standards Versus Evolution by General Acceptance: A Comparative Study of E-Commerce Privacy Disclosure and Practice in the United States and the United KingdomJOURNAL OF ACCOUNTING RESEARCH, Issue 1 2005KARIM JAMAL ABSTRACT We present data on privacy practices in e-commerce under the European Union's formal regulatory regime prevailing in the United Kingdom and compare it with the data from a previous study of U.S. practices that evolved in the absence of government laws or enforcement. The codification by the E.U. law, and the enforcement by the U.K. government, improves neither the disclosure nor the practice of e-commerce privacy relative to the United States. Regulation in the United Kingdom also appears to stifle development of a market for Web assurance services. Both U.S. and U.K. consumers continue to be vulnerable to a small number of e-commerce Web sites that spam their customers, ignoring the latter's expressed or implied preferences. These results raise important questions about finding a balance between enforced standards and conventions in financial reporting. In the second half of the 20th century, financial reporting has been characterized by both a preference for legislated standards and a lack of faith in its evolution as a body of social conventions. Evidence on whether this faith in standards over conventions is justified remains to be marshaled. [source] IAS Versus U.S. GAAP: Information Asymmetry,Based Evidence from Germany's New MarketJOURNAL OF ACCOUNTING RESEARCH, Issue 3 2003CHRISTIAN LEUZ abstract Motivated by the debate about globally uniform accounting standards, this study investigates whether firms using U.S. generally accepted accounting principles (GAAP) vis-à-vis international accounting standards (IAS) exhibit differences in several proxies for information asymmetry. It exploits a unique setting in which the two sets of standards are put on a level playing field. Firms trading in Germany's New Market must choose between IAS and U.S. GAAP for financial reporting, but face the same regulatory environment otherwise. Thus, institutional factors such as listing requirements, market microstructure, and standards enforcement are held constant. In this setting, differences in the bid-ask spread and share turnover between IAS and U.S. GAAP firms are statistically insignificant and economically small. Subsequent analyses of analysts' forecast dispersion, initial public offering underpricing, and firms' standard choices corroborate these findings. Thus, at least for New Market firms, the choice between IAS and U.S. GAAP appears to be of little consequence for information asymmetry and market liquidity. These findings do not support widespread claims that U.S. GAAP produce financial statements of higher informational quality than IAS. [source] SOX: Unintended dilemmas for auditingJOURNAL OF CORPORATE ACCOUNTING & FINANCE, Issue 4 2006Jonathan Duchac The Sarbanes-Oxley Act of 2002 brought widespread changes to U.S. financial reporting. Companies now must report on internal control deficiencies. There are criminal penalties for false certification of financial reports. The new Public Company Accounting Oversight Board was established. And audit committees have enhanced responsibilities. Considered in isolation, these reforms appear to improve the quality of financial information and increase public confidence. But when considered as a whole,in the context of practical application,some unanticipated effects are causing audit dilemmas. And they may damage the quality of financial information. © 2006 Wiley Periodicals, Inc. [source] The Impact of the Asian Financial Crisis on Conservatism and Timeliness of Earnings: Evidence from Hong Kong, Malaysia, Singapore, and ThailandJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2010Thanyaluk Vichitsarawong This paper examines conservatism and timeliness of earnings in the period surrounding the 1997 Asian financial crisis in Hong Kong, Malaysia, Singapore, and Thailand. Prior research suggests that managers tended to be more aggressive in reporting good news and delayed recognition of bad news during the financial crisis (less conservative and less timely in financial reporting). After the crisis, these four countries implemented corporate governance measures to stabilize their financial systems and improve regulation and supervision (that should improve conservatism and timeliness). We examine and find that conservatism and timeliness of earnings during the crisis period are low, but improved in the post-crisis period. More importantly, conservatism and timeliness in the post-crisis period is even greater than in the pre-crisis period. We measure conservatism using Basu's model and the accumulation of non-operating accruals suggested by Givoly and Hayn. The findings from both measures are consistent with an increase in conservatism after the crisis period. Overall, the results indicate that corporate governance reforms in these four countries had a positive impact on conservatism and timeliness of earnings. [source] Ownership Structure and Accounting Information Content: Evidence from FranceJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2007Ronald Zhao This paper investigates how family and bank ownership affect the accounting information content of French firms. In Continental Europe, the existence of block-holders triggers specific corporate governance issues, including the transparency of financial reporting. Our test results for the clean surplus model show that book value carries a significantly greater weight for family-controlled firms. This finding is attributed to their lack of incentive to report timely and relevant earnings to outside (minority) investors. In contrast, bank owners are under more market pressure to achieve earnings persistence through the use of accounting accruals. Bank ownership is also associated with higher levels of debt. These results are consistent with findings that in code law countries, insiders dominate as a source of finance, and financial reporting is aimed at creditor protection. [source] Determinants of Internet Financial Reporting by New Zealand CompaniesJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2003Peter Oyelere The development of the Internet as a global medium for the dissemination of corporate financial information creates a new reporting environment. Extensive literature examines the determinants of voluntary financial reporting through traditional media such as print,based annual reports. This paper extends this literature by examining the voluntary adoption of the Internet as a medium for transmitting financial reports and determinants of such voluntary practice by New Zealand companies. The results indicate that some determinants of traditional financial reporting,firm size, liquidity, industrial sector and spread of shareholding,are determinants of voluntary adoption of Internet financial reporting (IFR). However, other firm characteristics, such as leverage, profitability and internationalization do not explain the choice to use the Internet as a medium for corporate financial reporting. [source] Financial Reporting of Small Business Entities in Canada,JOURNAL OF SMALL BUSINESS MANAGEMENT, Issue 4 2006Michael Maingot Financial reporting for small business entities (SBEs) has been the subject of much debate and concern by the accounting bodies (institutes) in Canada, the United States, the United Kingdom, Ireland, Australia, New Zealand, and other countries. The main issue for the standard setters is whether they should have one set of standards for all companies or two sets of standards (one for big companies and one for SBEs). The main objective of our study is to examine whether SBEs in Canada should have their own new set of Generally Accepted Accounting Principles (GAAP) or should they continue to use big GAAP used by public companies. To address this issue in the Canadian environment, we sent out a questionnaire to a sample of managers and owners of small businesses, preparers, auditors, and users of small business accounts. These stakeholders were asked to identify the purposes of SBE financial statements, their levels of satisfaction or dissatisfaction with the present accounting standards for SBEs, the burdens imposed on the preparers of the financial statements, and the weaknesses of the present standards. Furthermore, they were asked to give the expected advantages of adopting new standards, after having ranked four models of financial reporting of SBEs. The results are quite interesting. Stakeholders indicated that financial statements of SBEs are prepared mainly for taxation purposes and borrowing. They are not satisfied with the present standards because they are costly to comply with and very complex. The burden of producing SBE financial statements can be reduced by simplifying the present standards. The new standards would mean a shorter and simpler form of financial statements. It is hoped that the results of this study will provide the standard setters in Canada and other countries with an indication of the future direction for SBE reporting and accounting. [source] Business Growth and Performance and the FinancialReporting Practices of Australian Manufacturing SMEsJOURNAL OF SMALL BUSINESS MANAGEMENT, Issue 2 2001Richard G.P. McMahon This article describes an explanatory study of the impact of financial reporting practices upon business growth and performance outcomes amongst small and medium-sized enterprises (SMEs) engaged in manufacturing in Australia. The study is able to establish some statistically significant bivariate associations between the extent and frequency of financial reporting undertaken and certain measures of SME growth and performance. However, the state of financial reporting practices becomes subsumed by other important influences in multivariate analysis. Management is a complex activity affected by a myriad of interacting internal and external factors, and must inevitably be undertaken in an holistic manner in SMEs. Particular practices make a contribution to the whole task without necessarily standing out as all-embracing solutions to problems generally encountered. Thus, it is argued that improved financial reporting should be realistically viewed as simply part of a broader competence in financial management which, taken together with other functional capabilities, is likely to lead to more effective and efficient management of SMEs and significantly improve their prospects. [source] | |||||||||||||||||||||||||