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Audit committee independence and a contracting perspective on goodwill impairment: Singaporean evidence

Author(s): Jamaliah Abdul-Majid / Language(s): English Issue: 1/2017

This study examines factors influencing and constraining the decision to recognize zero goodwill impairment in a sample of 52 Singaporean listed firms from 2010–2012. Using binary logistic regressions, the results reveal that firms that are approaching violation of their debt covenants have a higher likelihood of exercising the recognition choice, while a higher proportion of audit committee independence constrains this choice. The policy implication of this study is that to improve the quality of the financial statements, the relevant authorities need to monitor firms’ reporting incentives closely. This study contributes to the literature on IFRS by providing evidence that supports the applicability of the debt hypothesis in explaining the decision of Singaporean listed firms to recognize zero goodwill impairment.

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MUHASEBE HATA VE HİLELERİ ÜZERİNDE İÇ KONTROLÜN ROLÜ

Author(s): Murat , Medet KARAHAN , İĞDE / Language(s): Turkish Issue: special/2017

Technological and industrial developments have increased the diversity of commercial transactions and have begun to make businesses vulnerable to error and fraud. Errors and tricks negatively affect businesses’ assets, their decisions, and even the continuity of the business. An effective internal control system is required to detect and prevent mistakes and frauds in businesses. TTK has not introduced a clear regulation on internal control applications to business owners. Indirectly, though not directly, the presence of some reference to internal control can be mentioned. TTK (Turkish Commercial Code) also gives information about internal control by the applicator. In the study, a questionnaire study was conducted to determine the effect of the internal control over accounting errors and tricks. In the questionnaire, proposals related to the basic functions of the participant were presented. A questionnaire was applied to 44 enterprises operating in the fields of trade, production and services in Gaziantep with an internal control system. The data are interpreted in descriptive statistical context. As a result, possible errors and tricks in the business have been found to be a significant influence of the internal control system in the prevention.

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Accounting conservatism, financial reporting and stock returns

Author(s): Belle Selene Xia,Elia Liitiäinen,Ignace De Beelde / Language(s): English Issue: 1/2019

Research Question: One of the aims of this paper is to examine accounting conservatism using a robust set of data collected from the recent years to better understand how accounting conservatism affects the relations between stock returns and accounting variables. Motivation: Financial reporting is increasingly dependent on an in-depth understanding of the imperfections in the capital markets as well as the impact of the accounting standards on firm performance. Idea: The effect of accounting regulations on the firms’ reporting practices can be evaluated via a firm’s change in cash investments and its operating assets. Data: This study employs a robust set of data with different market to book ratios and corporate governance characteristics collected from Compustat North America Fundamentals Annual firm year observations for the time period of January 1998 to December 2015 fiscal years to better understand how accounting conservatism affects the relations between stock returns and accounting variables. Tools: Compared to the previous studies, any potential improvement in the research method is provided using a regression weight averaged over the years. Findings: There is an improvement in the explanatory power of the estimates of the coefficients on earnings levels and earnings changes when the variables associated with accounting conservatism are incorporated in the analysis. Contribution: Given the ample amount of research done in the international aspects of financial reporting, analyses of differences in results compared to the previous studies and future research opportunities will be provided.

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The interpretation of the verbal probability expressions used in the IFRS – The differences observed between Polish and British accounting professionals

Author(s): Katarzyna Koleśnik,Sylwia Silska-Gembka,Jerzy Gierusz / Language(s): English Issue: 1/2019

Research Question: Do Polish and British accounting professionals interpret verbal probability expressions (VPEs) differently when presented with identical excerpts from IFRS? Motivation: Our research has been motivated by the ongoing debate of consistent interpretation of VPEs. The major difficulty in the interpretation of these terms is the imperative for the accountants to express their individual subjective judgements. Previous research shows that these expressions may have low communication efficiency (Simon, 2002) as they give way to ‘wide variations in interpretation’ (Chesley, 1986: 196). The lack of consistency in the interpretation of VPEs may limit the usefulness of the financial statements prepared on their basis (Simon, 2002). Idea: We examine the interpretational differences between Poles and the British. We also survey whether the principle of prudence will impact the interpretation manner of the Polish and the British accounting professionals. Data: For the purpose of our study we distributed a questionnaire. 332 questionnaires from Poland and 75 questionnaires from the UK included answers that were subject to the analysis. Tools: We asked a sample of professional accountants from Poland and the UK to interpret the “in context” VPEs used in IFRS establishing the threshold for recognition of various accounting elements. Findings: Our results show that there are differences in the manner the Poles and the British interpret VPEs. Additionally, we indicate that the Polish accountants’ attachment to the prudence principle affects their manner of interpretation. However, we were not able to state whether this principle would not affect the level of probability assigned by the British accountants. Contribution: Our paper provides the first comparative results for Poland and the UK, in terms of surveying professional judgement under with relation to the IFRS.

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Does an improved type of reporting lead to a better financial performance?

Author(s): Ioana Sofian / Language(s): English Issue: 1/2019

Research question: Is there a link between the type of report that a company publishes and its financial performance? Motivation: I draw on previous research that analyses the impact of integrated reporting on the firm’s valuation (Arguelles et al., 2015; Lee & Yeo, 2016; Barth et al., 2017; Zhou et al., 2017; Cosma et al., 2018) conducted mainly on South African samples (where integrated reporting is a mandatory practice) in order to develop an idea for future research based on early practices, a wider geographical distribution and an industry frequently eliminated from this type of studies. Idea: This paper aims to examine whether there is an association between publishing an improved type of report (e.g. integrated report) and financial performance indicators. Data: There were considered the 2013 and 2014 reports of 22 insurance companies listed to a stock exchange. Tools: There were applied different regressions with various variables (report type, integrated report, company size, leverage, return on assets, return on equity, Tobin’s Q and sustainability ranking) using the data sourced manually from the companies’ reports. Findings: Naming the 2013 report as “integrated” leads to changes in firm valuation (a positive and significant association between integrated report variable and Tobin’s Q), but does not cause improvements in terms of profitability (ROA or ROE). Contribution: This study contributes to the literature that examines the benefits of integrated reporting, without considering only mandatory cases and in the context of an influential industry, often eliminated from other studies.

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Facing the mobile revolution: A Romanian insight

Author(s): Victoria Stanciu,Mirela Gheorghe / Language(s): English Issue: 1/2019

Research question: Are the accounting graduates prepared to deal with mobile devices’ security issues? Motivation: Nowadays, mobile computing is a part of the younger generation, the entering workforce in coming years, and from this point of view the BYOD (Bring Your Own Device) approach will continue its increasing trend. The authors investigated the accounting bachelors’ knowledge in regard with mobile devices’ use aiming at signaling the existing gap on mobile devices’ security awareness. IT security specialists consider that both, academia and industry should focus their security awareness campaigns aiming at combat the false sense of security that mobile devices’ users have. Idea: The authors aimed at providing an in-depth understanding of the accounting students’ profile as mobile devices’ users and their knowledge and awareness in regard with mobile security threats. Data: The analyzed sample includes 180 subjects, out of which 81% are bachelors in accounting (38% 1st year; 43% 3rd year) and 19% master students in accounting and banking. Tools: The literature review helped us in structuring our research objectives and design a multiple-choice questionnaire used in the empirical study. Findings: The study reflects the students’ insufficient information in regard with mobile devices features and security issues. This is the result of the limited IT lectures and seminars in the curriculum and the insufficient focus on mobile devices’ use in the accounting profession. Students should understand the mobile devices as complex devices providing diverse features, not limited to communication with friends and Internet information searching. Contribution: The study contributes towards closing the existing gap in the Romanian research and literature in regard with young generation insufficient knowledge on mobile devices’ security and the potential threat brought by BYOD on the companies’ IT environment.

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Occurrence of occupational fraud in family businesses: A Pitch

Author(s): Sneha Raut / Language(s): English Issue: 1/2019

Idea generation is easy but getting a refined and organized form for that idea is a complex process. This letter outlines the utilization of Faff (2018) pitching research framework for developing a personal original pitch. The pitching research template is intriguing as it helps young researchers like myself in determining the core components of their research topic. This “Pitching Research Letter” features my personal thoughts on pitching research and the application of the pitching template to develop my personal pitch on “Occupational Fraud in Family Businesses” using the Fraud Triangle.

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Інформаційні технології в організації бухгалтерського обліку на підприємстві

Author(s): Ruslan Skrynkovskyy,Volodymyr Hladun,Marian Kramar / Language(s): Ukrainian Issue: 02/2019

The purpose of the article is to study the peculiarities of the use of information technologies in the organization of accounting at the enterprise. The relevance of the study is due to the fact that effective organization of accounting management at the enterprise is impossible without the use of information technology and its effective usage becomes more and more important in the process of enterprise management.It has been found out that: 1) accounting as one of the functions of management (regardless of the ownership and the type of economic relations) serves the management process at the enterprise, creating more than 80% of the information base of management decisions which are taken; 2) accounting (as a component of the accounting system) is an orderly system for collecting, registering and generalizing information (in a monetary instrument) about the property (movable and immovable, material assets, things owned by a legal entity), obligations (contractual and non-contractual) the entity of the enterprise (enterprises, institutions, organizations) and their movement by methods of overall, uninterrupted and documentary accounting of all business operations. The directions, possibilities and possible benefits from automation of the accounting processes are presented. It has been established that information technologies (as processes of data systematization and information processing) provide automation of the accounting method and other management functions in information systems. The main (key) elements of the accounting method are: 1) documentation; 2) inventory; 3) costing; 4) accounting bills; 5) double entry; 6) balance sheet.The results of the research suggest that the reform of the accounting system in Ukraine, based on international standards (using modern automated and computerized systems in accounting and management) is the basis of information provision of users for their adoption of sound management decisions.The prospect of further research in this area is the study of the conformity of accounting standards to international standards.

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Accounting Offshoring: The role of Emotional Intelligence

Author(s): Gaurav Gupta,Stephen B. Salter,Philip A. Lewis / Language(s): English Issue: 2/2019

Research Question: The primary purposes of this paper are to compare the emotional intelligence levels of Americans and Indians and explore the potential impacts of these differences in the offshoring relationships. Motivation: The continued growth of the Indian economy and its legions of inexpensive English-speaking graduates has made India a global leader in business process offshoring. U.S. companies, including accounting firms, routinely offshore a variety of their business functions to India. However, the effective functioning of these offshoring relationships has been offset by perceptions of the Indian providers’ poor communication and ineffective management training (Downey, 2018; Jain, 2015; Mayur, James, and Swamynathan, 2015). We believe that a culture-influenced behavioral factor known as Emotional Intelligence (EI) has resulted in less than the optimal performance outcome for the U.S. public accounting firms in these offshoring relationships. Data: Using MSCEIT EI inventory, we collect data from 197 master’s students enrolled in accounting courses in India and the U.S. on four branches of EI. Findings: Our results indicate that the Indian students have statistically lower levels of EI than the U.S. students. We discuss the implications for public accounting firms that offshore to India and advocate for the inclusion of the EI related coursework in Indian master’s programs and firm training. Contribution: Using a well-established inventory of EI, our study provides a deeper understanding of the cultural EI differences between Americans and Indians, and the possible implications for the offshoring environment.

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Cost of debt and corporate information transparency under economic depression: the case of Greek family-controlled firms

Author(s): Aikaterini Bethani,Constantinos G. Chalevas,Christos Tzovas / Language(s): English Issue: 2/2019

Research Question: This study investigates whether corporate information opacity affects the association between family ownership and cost of capital. Motivation: Firms’ ownership structure has been identified as a major factor that affects their cost of capital. Idea: Corporate transparency affects the impact of ownership structure upon firms’ cost of capital, especially in the case of family-controlled firms Data: We examine a sample of companies listed in the Athens Stock Market for the period of 2009-2016. Tools: We compose a Corporate Opacity Index for each sample firm by adopting the Anderson et al. (2009) approach. Additionally, accounting factors such as firms’ size, leverage, profitability and corporate governance characteristics that may affect the above-mentioned association are examined as well. Sensitivity tests have been conducted to check the robustness of the results. Findings: Family ownership and corporate opacity are only marginally related with firms’ cost of capital. Firms’ size, liquidity and their leverage appear to be inversely associated with their cost of debt capital. Contributions: The findings of this study provide insights regarding the impact that corporate transparency has upon cost of debt capital, allowing financial institutions, regulators and market participants to design improved debt contracts under economic depression. Our study sheds light to the impact of information opacity on the association between family ownership and cost of capital within the business environment of Greece that possesses certain structural characteristics in the context of economic crisis.

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Detecting earnings management using Benford’s Law: the case of Romanian listed companies

Author(s): Costel Istrate / Language(s): English Issue: 2/2019

Research question: This study aims to identify possible cosmetic earnings management in the case of the Romanian listed companies. Motivation: According to the literature, the managers tend to overstate the net income presented in the financial statement. For the users of these documents and for the researchers, it is important to find out if the numbers they receive are reliable. Idea: Researchers use sometimes the Benford’s Law which proposes normal frequencies for the appearance of the digit form 0 to 9 in different position of numbers. By comparing these normal frequencies with those actually observed, we can detect differences that suggest possible manipulations of net income. Data: The study take into consideration more than 1,200 observations concerning Romanian listed companies during the 2001-2017 period, divided in three sub-periods. Tools: We compare the real frequencies of the digits in the net income with the BL proposed frequencies, by sub-period, firm size, auditor category, type of audit opinion, and gender of the CFO. Findings: In general, the upward rounding of earnings are confirmed in a limited number of cases, even if the amplitude of these differences is often very important. The evolution of the accounting regulation leads to a situation where we start with rather downward manipulations, to arrive on the opposite direction. The IFRS transition seems to not lead to a limitation of the differences between the real frequencies and the normal ones. By separating the observations according to the size (total assets), we found that the bigger companies manipulate more upward the net income than the smaller ones. The companies audited by a Big N auditor report less upward manipulations. Women CFOs seems to be less prudent, the net income reported by these companies presenting more upward rounding. Contribution: Our findings contribute to the literature through a better understanding of the behaviour of Romanian listed companies, providing information about the situations in which users can expect some manipulation of reported financial indicators.

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Intangible assets – insights from a literature review

Author(s): Mirela Elena Nichita / Language(s): English Issue: 2/2019

Research Question: How do researchers address the definition, measurement, recognition and potential of intangible assets to generate future economic benefits when a formal structure for reporting them is highly controversial? Motivation: The inexistence of inclusive reporting mechanism to capture the value of intangible assets rise many debates for both researchers and users of accounting financial reports (Jeny and Moldovan, 2016). Although the role of intangible resources is increasing in the modern economy (OECD, 2011), traditional reporting is unable to provide a comprehensive representation of this class of assets (Lev, 2000; Stolowy and Jeny-Cazavan, 2001) and many intangible assets are still not recognised or may even not referred at all in the financial statements (Barth et. al., 2000). Idea: The paper investigates the status-quo of intangibles in research papers and identifies blank spots and ways to improve the information on intangible assets and how IASB revised IAS 38 Intangibles to catch-up the business’ challenges in regard with them. Data: The sample of current work comprises research papers about intangibles published during 2000-2019 in cutting-edge accounting and business journals. Tools: The content analysis of published papers was applied to discover categories of intangibles analysed, applied polices for measurement, debates on recognition and disclosure and potential of new intangibles to be reported. Findings: Conclusion of paper confirms that researches on intangibles have not arrived at a universally accepted framework for definition, measurement, recognition criteria, disclosure, but, in the same time, they emphasis the contribution of these resources to broaden competitiveness, performance, earnings. Contribution: This literature review covers all categories of intangibles – recognized and not-recognized from accounting perspective – explored in research papers from the latest 19 years and provide an interpretative approach for further investigation.

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The profile of IPSAS-adopters

Author(s): Donia Ben Amor,Salma Damak Ayadi / Language(s): English Issue: 2/2019

Research question: What is the general profile of countries adopting IPSAS in accounting, institutional and economic terms? Motivation: IPSAS are perceived as the benchmark of public sector’s accounting standardization. Their adoption becomes highly promoted by several institutional organizations such as the World Bank and the IMF. Following previous literature review about IPSAS-adoption, researchers focused on only both factors (Ilie & Miose, 2012) and effects (Christiaens et al., 2015; Opanyi, 2016) of the use of these standards. Hence, this study focus on the specificities of IPSAS-adopters. Idea: This research aims to determine the profile of countries adopting IPSAS internationally for the year 2016. Also, it suggests an empirical treatment of countries' economic risk. Indeed, this axis was not treated by previous IPSAS researches. Thus, we add to the literature review by analyzing, empirically the profile of IPSAS-adopters. Data: Data sources are the World Bank, the FMI and IPSAS Board. Moreover, we propose two new measures for the public-market security and for the accounting-system’s modernization and transparency. Tools: A logistic regression is applied to test the theoretical hypotheses. Then, the test of marginal effect was applied in order to detect the most common character among IPSAS-adopters. Findings: The result of the empirical study showed that IPSAS-adopters have a modern accounting system based on accruals. These countries have a flexible legal system and an internationally legitimated private accounting system based on IFRS. However, there is any relationship between "IPSAS-adoption" and "the public-market’s security". Moreover, the test of marginal effect indicates that the most widely character among IPSAS-adopters the use of IFRS. Contribution: Determining IPSAS-adopters’ profile is a new research’s axis. It is useful for countries’ stakeholders that look for accounting, institutional and economic profiles of these entities.

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Self-serving performance attributions in the letters to shareholders: A longitudinal case study

Author(s): Maria-Silvia Săndulescu / Language(s): English Issue: 2/2019

Research Question: How are post-privatization corporate narratives used by the companies in framing their financial performance? Motivation: This research departs from previous literature that scrutinized the use of narratives in the context of corporate privatizations (Craig & Amernic, 2008). The study adopts a social-psychology perspective on impression management (Leary & Kowalski, 1990), drawing on the attributional repertoire developed by Aerts (2005) in order to analyse the causal explanations of performance outcomes. Idea: This paper relies on the case of OMV Petrom with a view of analysing the evolution of the messages used in framing the success of the company. Data: The letters to shareholders issued by the company from 2005 to 2011 were considered. Tools: A manual content analysis was performed in order to identify the causal attributions of performance outcomes. The enriched self-serving explanatory patterns (i.e. entitlement, enhancement, excuse, justification and causality denial) were evaluated. Findings: The results confirm the use of assertive and defensive tactics in framing performance upturns and downturns. Moreover, the decrease in the financial performance was presented by highlighting the negative influence of external factors which was counterbalanced by remedial actions. Contribution: The paper contributes to the impression management literature by using the context of a forced privatization as a means of providing explanations. The study illustrates the use of additional techniques in framing negative results which may further extend the attributional repertoire developed by previous researchers.

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Does Increasing Public Hospital Financial Autonomy Improve Performance? A Study of Indonesian Public Hospitals

Author(s): Fitri HANDAYANI,Hasan Basri,Heru FAHLEVI / Language(s): English Issue: 1/2019

This study aims to compare the financial and non-financial performance of Indonesian public hospitals after gaining improved autonomy in financial management (Badan Layanan umum/ BLU or Public Service Agency/ PSA). It is conducted in two public hospitals in Banda Aceh City, Indonesia. Qualitative research design and descriptive analysis were undertaken to obtain a clearer picture of the performance and to provide a comparative analysis. The financial performance analysis is measured by using trend analysis, profitability ratio, cost recovery rate, and independence level. The non-financial performance analysis is measured by using BOR (Bed Occupancy Ratio), TOI (Turn over Interval), BTO (Bed Turn Over), ALOS (Average Length of Stay), GDR (Gross Death Rate), and NDR (Net Death Rate). The results show divergent results. There is an increase in revenue and profit after gaining BLU, but profitability, cost recovery rate, and independence level have decreased. The ratios of BOR, TOI, and NDR after BLU has changed slightly. However, the BTO, ALOS, and GDR after BLU are far above the criteria/standard of hospital service performance.

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Doskonalenie zawodowe osób zajmujących się rachunkowością na wybranych przykładach

Author(s): Katarzyna Świetla,Krzysztof Jonas / Language(s): Polish Issue: 522/2018

Szybko zmieniająca się sytuacja na rynku pracy wymusza na osobach zajmujących się zawodowo rachunkowością nieustanne doskonalenie swoich umiejętności oraz zdobywanie nowych. Aktywność poznawcza wyrażająca się w postawie lifelong learning jest w tej dziedzinie szczególnie istotna. Celem niniejszego artykułu jest wskazanie potrzeby ciągłego doskonalenia zawodowego oraz wybranych możliwości zdobywania i doskonalenia zawodowego poza studiami wyższymi. Dla realizacji tak określonego celu zastosowano metodę przeglądu polskiej i międzynarodowej literatury tematu. Przeprowadzono analizę wybranych form doskonalenia zawodowego pod kątem możliwości zdobycia potrzebnej wiedzy oraz faktu jej udokumentowania w sposób uznany na rynku pracy. Analiza prowadzi autorów do wniosku, iż potrzeba ustawicznego doskonalenia zawodowego jest coraz bardziej rozumiana w tym środowisku. Świadczy o tym rosnąca liczba osób kształcących się na studiach podyplomowych czy w SKwP na kursach certyfikowanych.

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Definicja zawodu księgowego – teoria a praktyka

Author(s): Urszula Wolszon / Language(s): Polish Issue: 522/2018

Głównym celem artykułu jest przedstawienie definicji zawodu księgowego w Polsce. Ponadto autor analizuje definicje tego zawodu spotykane w literaturze przedmiotu, przedstawia terminy opisujące zawód księgowego, ponieważ są one stosowane w praktyce gospodarczej, wskazuje na różnice między rachunkowością i księgowością oraz prezentuje podział rachunkowości.

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Instytucjonalizacja rachunkowości – aspekt międzynarodowy

Author(s): Patrycja Krawczyk / Language(s): Polish Issue: 523/2018

Obserwowane obecnie zmiany w przestrzenni społecznej, w tym te związane z szeroko pojętą globalną ekonomią, są świeże i trudno je jeszcze jednoznacznie ocenić. Faktem jest to, że ich szybkość wzrasta w dotychczas niespotykanym tempie. Celem rachunkowości jest liczbowy opis zachodzących procesów gospodarczych. Oznacza to, że i ona sama musi ewoluować, by dotrzymywać kroku następującym przeobrażaniom: czy zmiany te mogą następować intuicyjnie i wynikać z bieżących decyzji, czy może potrzebni są animatorzy zachodzących zmian? Celem opracowania jest podkreślenie roli międzynarodowych instytucji w procesie tworzenia globalnych zasad sprawozdawczości finansowej. Zaprezentowana zostanie ich rola w procesie harmonizacji i standaryzacji rachunkowości. W przygotowaniu opracowania wykorzystana została metoda krytycznej analizy literatury, raportów branżowych, a także znajdą się tu odwołania do obserwacji praktyki gospodarczej, własnych doświadczeń i przemyśleń.

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The impact of the application of the accounting concept of fair value on the quality of ﬁnancial statements of business entities in Bosnia and Herzegovina

Author(s): Selma Novalija Islambegović,Erna Delić / Language(s): English Issue: 1/2019

The primary objective of financial reporting in a modern market economy, which is based on the capital market, is to inform the investor about the financial position of a business entity. The unavoidable theme in modern accounting research is the valuation of balance sheet positions, regardless of the type and size of the business entity whose reports are the subject of this paper. The purpose of the research is to investigate whether there is a connection between the frequency of applying the accounting concept of fair value in valuing property positions and the quality of financial statements for businesses in Bosnia and Herzegovina. The target population comprises 34,515 small, medium and large enterprises registered as joint stock companies and limited liability companies in Bosnia and Herzegovina, and the questionnaire will be used as the empirical research instrument. The questionnaire is structured in parts to obtain knowledge about which technique or approach business entities use when using the fair value for the valuation of balance sheet items, and consequently how it affects the relevance, comprehensibility, comparability and credibility of the information presented in the financial statements.

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Implications of the new accounting model for leases

Author(s): Ivan Čevizović,Ivo Mijoč / Language(s): English Issue: 1/2019

Leases often appear to be a practical way of securing some property. The advantage of the lease is in easy replacement and minimum engagement of resources for the acquisition of assets. However, sometimes leases, depending on their form, also serve to hide the financing through the so-called “off -balance financing”. With the aim of eliminating these unwanted effects, the IASB has adopted a new standard for leases – the International Financial Reporting Standard 16 Leases. The key change from the previous accounting model for lease recognition is in the financial statements of the lessee. This change results in recognition of lease liabilities for practically all forms of leases. Of course, this also entails recording the appropriate property item of asset in the financial statements. The result of this approach is also significantly different recognition of expenses during rental time, as well as the nature of expense. This applies particularly to operating leases that do not recognize assets and liabilities in the existing model, and the effect on profit and loss is based on a linear model that most often corresponds to the contractual lease payment dynamics. In this paper the authors research the implication of the new accounting model for leases on financial statements.

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