International Accounting: Standards, Regulations, Financial Reporting ACT

617 Pages·2006·4.24 MB·English

by  Greg N. Gregoriou

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International Accounting
Standards, Regulations, and
Financial Reporting
Edited by
Greg N. Gregoriou and Mohamed Gaber
AMSTERDAM ● BOSTON ● HEIDELBERG ● LONDON ● NEW YORK ● OXFORD i
PARIS ● SAN DIEGO ● SAN FRANCISCO ● SINGAPORE ● SYDNEY ● TOKYO
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Elsevier
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First edition 2006
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ISBN–13: 978-0-7506-6983-2
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Contents
About the editors xiii
About the contributors xiv
1 Lobbying towards a global standard setter – do national
characteristics matter? An analysis of the comment
letters written to the IASB 1
Ann Jorissen, Nadine Lybaert, and Katrien Van de Poel
1.1 Introduction 3
1.2 Literature review and hypotheses development 5
1.2.1 Literature review 5
1.3 The development of hypotheses 10
1.4 The IASB and the standard-setting process 14
1.4.1 The transformation into a global standard setter 15
1.4.2 The mission of the IASB and its due process 15
1.4.3 The standard-setting process or due process 16
1.5 Research method 18
1.5.1 Data collection 18
1.5.2 Measurement of variables 20
1.6 Research results 23
1.6.1 The preparers lobby more often than the users 23
1.6.2 Large companies participate more often in the
lobbying process 25
1.6.3 Companies that suffer from a larger negative economic
impact of the standards will lobby more often 26
1.6.4 The position of the auditor in the lobbying process 28
1.6.5 The influence of country-level variables on the
lobbying behavior 30
1.7 Conclusion 32
References 33
Appendix A 36
Appendix B 39
2 A fair go for fair value 41
Janice Loftus
2.1 Introduction 43
2.2 Experimental fair value initiatives 44
2.3 Proposals and requirements for fair value for financial
instruments 46
2.4 IAS 39 and the mixed measurement model 49
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2.5 Conclusion 53
References 54
3 The behavior modification impact of International
Accounting Standards on decision-making and risk
management 57
Stanley C.W. Salvary
3.1 Introduction 59
3.2 The capital market and the commodity market 62
3.3 The role and the psychological effect of the capital market 66
3.4 Simplifying assumptions versus necessary conditions for
measurement 71
3.5 Economic reality, decision-making, and operating dynamics 75
3.6 Risk management and performance measurement 77
3.7 Structural and operating differences of companies 82
3.8 Sanity in market pricing and sensibility in
financial reporting 86
3.9 The investment decision, capital budgeting, and
recoverable cost 89
3.10 Discussion and conclusion 90
References 92
4 Fair value – the basis of International Financial
Reporting Standards: a conceptual contradiction
of the relevant measurement attribute in
financial accounting 97
Stanley C.W. Salvary
4.1 Introduction 99
4.2 Money, a credit economy, and the cash-flow process 102
4.3 Profit measurement and management’s
performance assessment 104
4.4 Neutrality, stewardship, and financial reporting 107
4.5 The lower of cost and market rule, fair valuation, and
realization 109
4.6 The IASB’s association of fair market value with the
cash-flow process 114
4.7 The Frameworks’ measurement bases and the mixed
attribute model 116
4.8 Investments, measurement rules, and market simulation 118
4.8.1 Lower of cost and market valuation 120
4.8.2 Realizable value 120
4.9 Summary, discussion, and conclusion 121
References 123
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5 Fair value accounting under IAS/IFRS: concepts,
reasons, criticisms 127
Jochen Zimmermann and Jörg Richard Werner
5.1 Introduction 129
5.2 Fair value accounting and the IFRS: basic properties and
scope of application 130
5.2.1 Definition of fair values 130
5.2.2 Treatment of holding gains and losses 130
5.2.3 FVA and capital maintenance 131
5.2.4 FVA and IAS/IFRS: scope of application 133
5.3 Justifications for the use of fair values in
financial reporting 139
5.3.1 Value relevance and standard setting 139
5.3.2 Revaluations as signals 141
5.3.3 Fair value accounting, contracting, and incentives 144
5.4 Conclusion 146
References 148
6 Does Delaware incorporation add value?
An accounting-based analysis 151
Feng Chen, Kenton K. Yee, and Yong Keun Yoo
6.1 Introduction 153
6.2 Development of hypotheses 154
6.3 Sample selection 156
6.4 Empirical results 160
6.4.1 Descriptive statistics 160
6.4.2 Is there a Delaware value premium? 162
6.5 Conclusion 165
References 166
7 Empirical evidence on the relation between
revaluations of fixed assets and the future
performance of firms in Brazil 169
Alexsandro Broedel Lopes
7.1 Introduction 171
7.2 Revaluation of fixed assets in Brazilian GAAP and
related literature 174
7.2.1 Brazilian GAAP for revaluation 174
7.2.2 Previous research 178
7.3 Models and results 180
7.3.1 Descriptive statistics 180
7.3.2 Research design and results 180
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7.4 Conclusions and implications for future research 185
Acknowledgments 187
References 187
8 Hedge funds and the stale pricing issue 189
Greg N. Gregoriou, William Kelting, and Mohamed Gaber
8.1 Introduction 191
8.2 Background information 194
8.3 Recent developments 195
8.4 Checklist of questions 196
8.5 Conclusion 197
References 197
9 Adopting and implementing International Financial
Reporting Standards in transition economies 199
Robert W. McGee
9.1 Introduction 201
9.2 Adopting and implementing IFRS 202
9.3 Translation problems 205
9.4 Teaching the new rules to practitioners 209
9.5 Reforming university curriculums 209
9.6 Credible accounting certification 218
9.7 Conclusion 220
Acknowledgments 221
References 221
10 International convergence: the Australian journey 225
Janice Loftus
10.1 Introduction 227
10.2 Models of international harmonization or convergence of
accounting 228
10.3 Models of accounting regulation 230
10.4 Australian standard setting 1970–1983 230
10.5 International harmonization of accounting 1970–1983 232
10.6 Australian standard setting 1984–1988 235
10.7 International harmonization of accounting 1984–1988 238
10.8 Australian standard setting 1988–1990 240
10.9 International harmonization of accounting 1988–1990 242
10.10 Australian standard setting 1991–1999 243
10.11 International harmonization of accounting 1991–1999 247
10.12 Australian standard setting 2000 onwards 252
10.13 International harmonization of accounting 2000 onwards 254
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10.14 The beginning of a new journey or the end of the road? 258
Acknowledgments 261
References 261
11 Determinants of bias in management earnings
forecasts: empirical evidence from Japan 267
Koji Ota
11.1 Introduction 269
11.2 Background on Japanese management forecasts 270
11.3 Data 272
11.3.1 Sample selection 272
11.3.2 Management forecast error 272
11.4 Determinants of bias in management earnings forecasts 273
11.4.1 Univariate analysis 273
11.4.2 Multivariate analysis 286
11.5 Market awareness of bias in management earnings
forecasts 288
11.6 Conclusion 290
Acknowledgments 292
References 293
12 Expected earnings growth when there is a
growth option 295
Kenton K. Yee
12.1 Introduction 297
12.2 Perpetual growth option: model setup 299
12.3 Accounting policies and earnings–value relations 303
12.4 Long-run earnings growth with a growth option 307
12.5 Conclusion 312
References 315
Appendix 317
13 The true cost of employee share options: the recent
debate and potential costs for a case study firm 325
Colette Grey, Derry Cotter, and Edel Barnes
13.1 Introduction 327
13.2 Literature review 329
13.2.1 ESO value and accounting income 329
13.2.2 Recognition date 331
13.2.3 Measuring fair values 332
13.3 Case study: ESAT Telecom Group 333
13.4 Results 338
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13.5 Discussion 340
13.6 Conclusion 343
Acknowledgments 345
References 345
14 Impairment of fixed assets: perceived implementation
problems associated with International Accounting
Standard No. 36 347
Mohamed E. Ibrahim
14.1 Introduction 349
14.1.1 Indications of impairment 352
14.1.2 The impairment test 353
14.1.3 Accounting for impairment 353
14.2 Previous studies 354
14.3 Methods 359
14.3.1 Sample 359
14.4 Results 361
14.4.1 Sample profile 361
14.4.2 Implementation problems 362
14.5 Conclusion 364
References 365
15 The rise and impact of hybrid securities in
Australian listed corporations 367
Tyrone M. Carlin and Nigel Finch
15.1 Introduction 369
15.2 The Australian hybrids market 370
15.3 Measuring the impact of hybrids 375
15.4 Results 376
15.5 Conclusion 383
References 385
16 Empirical evidence on the use, size, concentration,
and cost of executive options schemes in Australia 387
Tyrone M. Carlin and Guy Ford
16.1 Introduction 389
16.2 How prevalent are executive options plans in Australia? 390
16.3 Size, activity, and concentration of the observed
options schemes 392
16.4 Estimated cost of executive options schemes 396
16.5 Conclusion 398
References 399
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17 The introduction of fair value in Italy: economic and
financial reporting issues 401
Giovanni Melis, Andrea Melis, and Alessandro Pili
17.1 Introduction 403
17.2 The adoption of the International Financial Reporting
Standards in Italy 404
17.3 Accounting for the fair value changes: a comparative
analysis of IFRS, US GAAP, and Italian GAAP 406
17.3.1 Intangibles and fixed assets 406
17.3.2 Investment properties 415
17.3.3 Assets and liabilities in foreign currency 415
17.3.4 Actuarial gains and losses on defined
benefit plans 418
17.3.5 Financial assets and liabilities 419
17.3.6 Biological assets 424
17.4 The entity’s capital maintenance 425
17.4.1 Example 1 (investment property) 426
17.4.2 Example 2 (financial liability) 430
17.5 Accrual basis vs prudence: a comparative analysis of IFRS,
Italian, and US GAAP 433
17.6 The underlying reasons for the importance of the prudence
principle in Italy 438
17.6.1 Ownership, capital, and control structures
of Italian nonfinancial listed companies 439
17.6.2 Generally accepted concept of the corporate
entity: IASB vs Italy 440
17.6.3 Cultural issues concerning prudence and
risk avoidance 441
17.7 The adoption of the comprehensive income statement
in Italy 443
17.7.1 Example 1 (investment property) 445
17.7.2 Example 2 (financial liability) 445
17.8 Conclusion 450
Acknowledgments 451
References 454
18 Factors affecting accounting development in the
harmonization process with the international
framework: the case of Estonia 457
Toomas Haldma
18.1 Introduction 459
18.2 Literature review 460
18.3 Factors influencing accounting reform in Estonia 462
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