Fr

Indice

Financial Reporting

n. 2/2016

 

Sommario

Put Your Money where Your Mouth is: The Difference between Real Commitment to Sustainability and Mere Rhetoric

Laura Bini, Marco Bellucci, Francesco Giunta

pag. 5
Income Smoothing via Loan Loss Provision in Credit Cooperative Banks

Stefano Azzali, Luca Fornaciari, Tatiana Mazza

» 33
 
The Connectivity of Information in Integrated Reporting. Empirical Evidence from International Context

Alberto Incollingo, Michela Bianchi

» 55
 
Web-Based Financial Reporting: An Interpretative Model for Corporate Communications on Social Media

Paola Ramassa, Costanza Di Fabio

» 79
 
Book Review

Roberto Di Pietra, Stefano Zambon

» 113
 
 
Fr

Put Your Money where Your Mouth is: The Difference between Real Commitment to Sustainability and Mere Rhetoric

Companies exhibit growing interest in sustainability rhetoric. Such an interest is alternatively justified by a company’s need to address legitimacy instances, rather than to satisfy stakeholders’ requests about its sustainability performance. Whatever the case, a main debated issue concerning sustainability rhetoric deals with the difficulties in understanding whether companies’ commitment towards sustainability is “real”, or it only consists of “empty words” that hide opportunistic strategies. Our paper contributes to this debate, proposing a methodological approach, which is based on a company’s business model (BM) representation. We argue that the inclusion of adequate sustainability information in a company’s BM representation can testify to a real company’s engagement, as it illustrates how sustainability affects its value creation process. Compared to extant methodological proposals, mainly based on linguistic analyses, our approach does not require specific competences to be applied. Moreover, it saves user’s time, as it allows the assessment of entire company’s sustainability rhetoric through the analysis of the information reported in its BM. Our approach is consistent with previous contributions that propose a company’s BM as a representation device able to illustrate strategic information that cannot be represented in the traditional corporate reporting. Our approach proposes a possible answer to address the challenges faced by regulators and standard setters involved in the regulation of sustainability disclosure. Such approach has found a first step of implementation in the UK, where since 2013, listed companies are requested to describe their BM in Strategic Reports.

Keywords: Sustainability rhetoric, business model, corporate social responsibility, non-financial disclosure, mining industry

Fr

Income Smoothing via Loan Loss Provision in Credit Cooperative Banks

This research investigates whether income smoothing via loan loss provision is lower for Credit Cooperative Banks than for non-Credit Cooperative Banks. Using data collected from the financial reporting of a sample of private banks, and Ordinary Least Square models based on net income or its variation, as used by previous literature, we find that income smoothing through loan loss provision is lower in Credit Cooperative Banks than in banks with different ownership structures. Results remain the same using several robustness tests (decomposition of loans, quality of loans, change in economic growth, cluster and fixed effect, effect of financial crisis). Mutual ownership, smaller size, and the local boundaries that characterize Credit Cooperative Banks may reduce the need for managers to manipulate earnings. Our findings give a positive evaluation of the recent Italian Law No. 18/2016 which reforms Credit Cooperative Banks, and imply that benefits of Credit Cooperative Banks ownership structure may derive from the group structure which gives a higher level of stability and solidity.

Keywords: Income smoothing, loan loss provision, credit cooperative banks

Fr

The Connectivity of Information in Integrated Reporting. Empirical Evidence from International Context

In recent years, an increasing number of accounting scholars have been investigating the concept and the purpose of integrated reporting. After the issue of IIRC Framework, which is principle-based, it is now recognized that there is an urgent need for empirical analysis of the content of the reports at their first development stage. This in order to understand if the aims of this new reporting approach are realistic and achievable in practice. This paper responds to such call and it tries to contribute in two ways. Firstly, it illustrates the way in which the Guiding Principle of Connectivity of Information is applied at international level. In particular, we analyzed the compliance of disclosure practices in integrated reports of 2013 with the key forms of Connectivity of information presented in the Framework. Secondly, the paper tries to interpret the practices observed, in order to identify useful implementation criteria of this Guiding Principle. This is light of the fact that the Guiding Principle was noted as the most important to obtain a truly integrated report, but, at the same time, difficult to interpret and problematic to apply. The results of the analysis indicate an application of the principle extremely heterogeneous (and in such cases disappointing), confirming the need to establish practical guidelines to apply it. By this study, we made a preliminary attempt to identify some characteristic attributes of Connectivity of information within integrated reporting. The findings carry implications for eventual refinement of the IIRC Framework and, especially, to support companies wishing to prepare an integrated report.

Keywords: Integrated reporting, non-financial information, connectivity of information, IIRC Framework

Fr

Web-Based Financial Reporting: An Interpretative Model for Corporate Communications on Social Media

This paper aims at contributing to financial reporting literature by proposing a conceptual interpretative model to analyse the corporate use of social media for financial communication purposes. In this perspective, the FIRE model provides a framework to study social media shifting the focus on the distinctive features that might enhance web investor relations. The model highlights these features through four building blocks: (i) firm identity (F); (ii) information posting (I); (iii) reputation (R); and (iv) exchange and diffusion (E). They represent key aspects to explore corporate communication activities and might offer a framework to interpret to what degree corporate web financial reporting exploits the potential of social media. Accordingly, the paper proposes metrics based on this model aimed at capturing the interactivity of corporate communications via social media, with a particular focus on web financial reporting. It tries to show the potential of this model by illustrating an exploratory empirical analysis investigating to what extent companies use social media for financial reporting purposes and whether firms are taking advantage of Twitter distinctive features of interaction and diffusion.

Keywords: Investor relations, web financial reporting, social media, Twitter

Fr

Indice

Financial Reporting

n. 1/2016

 

Sommario

“The ‘Real’ Impact Factor: Accounting Research, Practice, and Users: Towards a New Relationship between Academia, Professionals, and Standard Setters in Accounting

Anne McGeachin, Alan Teixeira, Stefano Zambon

pag. 5
The “Real” Impact Factor: Reflections on the Impact of the Research Excellence Framework

Jane Broadbent

» 15
 
The Real Impact Factor and the Gap between Accounting Research and Practice

Alberto Quagli, Francesco Avallone, Paola Ramassa

» 29
 
Accounting Research: Relevance Lost

Andrew Higson, Rasha Kassem,

» 59
 
Who Influences Whom? An Exploratory Analysis of the Interrelations between Accounting Research and the IASB’s Standard Setting Activity

Michele Pizzo, Nicola Moscariello, Claudio Teodori, Monica Veneziani, Laura Rocca, Alberto Quagli, Elisa Roncagliolo

» 77
 
Accounting Theory and Accounting Practice as Loosely Coupled Systems: A Historical Perspective on the Italian Case (1930-1990)

Stefano Zambon, Laura Girella

» 95
 
Commentary. Research and practice in accounting: A collaborative perspective

Allister Wilson

» 135
 
Fr

“The ‘Real’ Impact Factor: Accounting Research, Practice, and Users: Towards a New Relationship between Academia, Professionals, and Standard Setters in Accounting

Researchers are facing a growing demand to demonstrate that their work has consequences – an impact. Those who fund the research are increasingly seeking evidence that the research has practical, or real-world, implications. For example, the Research Excellence Framework (REF – formerly Research Assessment Exercise – RAE) currently run in the UK includes the need for explicit and documented information on the effect of the scholarly work on “real life” and professional realms. The governments of the Netherlands, Canada and Australia are following a similar line. There is nothing new in thinking about who is your audience. Brown (1993) provides 10 qualities good research will possess. He suggests that good empirical research is motivated by the choice of a question that is important to others and an outcome that is believed will add to knowledge or understanding. The author(s) should also have a sound appreciation of the study’s implications and limitations. The other seven qualities are more closely associated with the robustness of the research itself. Research Councils UK (RCUK) defines research impact as “the demonstrable contribution that excellent research makes to society and the economy”. RCUK also differentiates between academic impact and economic and societal impact. The former is the impact the research makes to scientific advances, such as, in understanding, method, theory and application. The latter is the contribution the research makes to society and the economy, of benefit to individuals, organisations and nations. The quality of the research remains paramount. Researchers are not being forced to limit their work to areas that might lead to immediate and observable practical implications, or we hope that they are not. But some funding bodies are providing greater weight to good research that also has demonstrated practical consequences. Bodies such as RCUK want funding applicants to think about the audience for the research, from the outset […]

Fr

The “Real” Impact Factor: Reflections on the Impact of the Research Excellence Framework

This paper is an argument for the importance of academics undertaking some (but not only) research that relates to the practical issues faced by practitioners and policy makers and that is geared to achieving impact. It offers a normative argument informed by my experience as a practitioner and an academic and by my experiences in the assessment of impact as part of the UK Research Excellence Framework (REF) in 2014. The paper introduces the nature of the REF and how it was implemented. It also addresses the implications of the performance measurement of impact of REF for Higher Educational Institutions and the individual academics that work within them. In that respect it recognises that performance measures give extrinsic encouragement to particular behaviours. The paper argues that academics should also be intrinsically driven to research that has impact. In order to achieve impact, the paper suggests that we should not see a gap between academics and practitioners, but should instead see practice and academic endeavour as different but complementary elements of the same profession. We should seek to develop better discourses between academics and practitioners and should not attribute greater importance to the views of either party. Instead we should have an engagement that is open to the generation of disagreement as well as agreement but that nevertheless does not see disagreement as the basis for closing down communication.

Keywords: Research impact, engagement, evidence for policymakers and practitioners, Research Excellence Framework

Fr

The Real Impact Factor and the Gap between Accounting Research and Practice

This paper explores the gap between accounting research and practice with two primary objectives. First, it provides a review of the main results obtained by the impressive literature on the topic to get a comprehensive picture of this phenomenon, considering the different perspectives and research methods used so far. This review aims not only at summarizing results, but also at outlining a logical framework that could be useful for both our analysis and future studies on the topic. Against this background, our second objective is to carry out an empirical analysis on scholars’ motivations and incentives – rather neglected by prior literature – with a particular focus on their relationships with professional associations. Evidence from our survey (with 447 questionnaires completed by EAA members) suggests that there is a hierarchy of objectives informing scholars’ motivations and that the first one is to publish on highly ranked journals. In such a context, the positive attitude of academics towards practice can be sometimes in conflict with scholars’ expectation about effort, individual result and peers’ consideration. In other terms, our study supports the idea that there is a gap between research and practice, together with a risk of an increasingly closed community of scientists. Our results seem in line with studies stating that the reasons for this gap essentially lie in the current evaluation logic driving scholars’ incentives. Additionally, evidence on scholars’ incentives might be helpful in finding new solutions to bridge the gap and supporting future research sharing the same objective.

Keywords: Research-practice gap, research impact, real impact factor, accounting research, accounting practice

Fr

Accounting Research: Relevance Lost

For research to have an impact, it has to exist in the first place. Moves in the UK to link University funding to research activity have reinforced the importance of research to academia – however, this may also have had adverse consequences. It is now very difficult for qualified accountants to obtain teaching and research positions at UK universities because of the lack of a research background. Institutional pressures on those conducting research may also have resulted in dysfunctional behaviour regarding the nature of the work conducted and the output. In the 1960s there was an attempt to make accounting research more “scientific”, however, this seems to resulted in the emphasis on research methodology rather than the importance of making a contribution to knowledge. The lack of emphasis on the reliability (the reproducibility of the results) and validity (whether you are testing what you think you are testing) of statistical findings merely appears to have resulted in the application of pseudoscience to accounting research. All these factors appear to have combined to bring into question the relevance of the accounting research produced.

Keywords: Research, publications, impact, pseudoscience

Fr

Who Influences Whom? An Exploratory Analysis of the Interrelations between Accounting Research and the IASB’s Standard Setting Activity

This study investigates the interrelations between accounting research and the IASB activity. Prior research shows a significant gap between academia, the standard setters and the accounting profession and underlines the failure of academic papers to contribute to accounting practice. Although we find some evidence of the intention of the IASB to fill the gap between accounting theory and practice, our analysis confirms the existence of a significant distance between financial accounting research and the IFRSs. The IASB ‘due process’ definitely influences the academic activity, but the accounting literature does not seem to represent a cornerstone for the IFRSs. Particularly, during the ‘due process’ steps that precede the P.I.R. phase, the IASB only quotes few papers. With the P.I.R. process, the number of research papers analysed by the IASB significantly increases, but it is not yet clear how this ex-post activity might really influence the IFRSs statements. Finally, we find that the traditional academic ranking systems are not a key factor driving the IASB selection of the articles to analyse during the P.I.R. process. This evidence sheds light on the risk of an unfruitful self-referentiality of the accounting academic literature and on the self-feeding nature of the academic world.

Keywords: Academic research, academic ranking systems, accounting practice, standard setting, post-implementation review

Fr

Accounting Theory and Accounting Practice as Loosely Coupled Systems: A Historical Perspective on the Italian Case (1930-1990)

Despite its crucial role for a practically oriented discipline such as accounting, the relationship between theory and practice in this domain appears to be relatively unexplored, and even more so it is in comparative terms. Adopting a longitudinal approach, the paper aims to investigate this relationship referring to the Italian experience in the period 1930-1990, which is set against the background of a well-known interpretation of the theory-practice interplay proposed for the USA, i.e. the “market for excuses” model (Watts and Zimmerman, 1979). In the Italian environment, the relationship between accounting theory and accounting practice shows contents and trajectories which are rather dissimilar from those implied by positive researchers with reference to the American context. In particular, it emerges that in Italy accounting theory, that has an inherent ex ante nature and is encapsulated into a wider institutionally-veined body of knowledge called ‘economia aziendale’, has been in the main detached from practice and operational needs. Thus, Italian theory and practice could be fruitfully described as two loosely coupled systems with occasional and unintended intersections, each of which has its own internal logics and its own “demand-supply” dynamics. In this respect, the Watts and Zimmerman’s model denotes a limited explanatory power when applied to contexts – such as the Italian one – presenting socio-economic features, as well as a theoretical tradition, which are distinctively different from the USA.

Keywords: Accounting theory and practice, Italian accounting, Italian economia aziendale, loosely coupled systems

Fr

Indice

Financial Reporting

n. 2/2015

 

Sommario

Reflections about Italian academic life in Economia Aziendale and its evolution

Sven-Olof Yrjo Collin

pag. 5
     
Corporate governance and information asymmetry between shareholders and lenders: an analysis of Italian listed companies

Sabrina Pisano, Luigi Lepore, Rocco Agrifoglio

» 27
     
Comprehensive Income: which potential effects on firms’ performance evaluation and users’ decision process?

Pier Luigi Marchini, Carlotta D’Este

» 55
     
Managerial discretion in authorising open market share repurchases: empirical evidence from the Italian context

Elisa Roncagliolo

» 95
     
Acquisition-type or merger-type accounting? Further insights on transactions involving businesses governed by the same party(-ies)

Tiziano Onesti, Mario Romano, Marco Taliento

» 117
     
Book Review

Fabrizio Granà

» 139
Fr

Reflections about Italian academic life in Economia Aziendale and its evolution

Applicants for habilitation to Associate and Full professor in Economia Aziendale has during two years been evaluated by a commission, containing four Italian professors and one international professor. Me, being the international evaluator, present here some of my observations and impressions from the evaluation and present some reflections about the evolution of the Italian academic system and the subject, Economia Aziendale. My main conclusion, that the tradition of the subject is, at least in the short run, at threat due to the push towards internationalisation, could be regarded as rather pessimistic. But it is also a call for governed development, which should benefit all of us in the area, the whole international community.

_

Keywords: Research evaluation, academic career, economia aziendale, scientific journals.

Fr

Corporate governance and information asymmetry between shareholders and lenders: an analysis of Italian listed companies

This paper analyzes the information asymmetry between owner/manager and lenders. More specifically, the research investigates the role of corporate governance mechanisms in reducing the agency costs of debt. The findings show that lenders perceive higher agency costs of debt if the controlling shareholder owns a percentage of capital greater than 66%. Results also show that the presence of independent directors elected by minority shareholders on the board mitigates the agency conflicts between borrowers and lenders. In the same way, the audit committee independence reduces the agency costs of debt. Moreover, the study shows that when the audit committee chairman coincides with the board chairman banks perceive more risk and, therefore, a bigger asymmetry. This coincidence increases the concentration of power in the hands of just one person and this enhances the likelihood of opportunistic actions by the management that could damage lenders. This means that it is costly for companies to concede to just one person too much influence over the board activities, because it reduces the effectiveness of the monitoring role played by independent directors, increasing the information asymmetry between borrowers and lenders.

_

Keywords: Agency costs of debt, board of directors, audit committee, ownership concentration

Fr

Comprehensive Income: which potential effects on firms’ performance evaluation and users’ decision process?

The reporting of comprehensive income is becoming increasingly important. After the introduction of Other Comprehensive Income (OCI) reporting, as required by the 2007 IAS 1-revised, the IASB is currently seeking inputs from investors on the usefulness of unrealized gains and losses and on the role of comprehensive income. This circumstance is of particular relevance in code law countries, as local pre-IFRS accounting models influence financial statement preparers and users. This study aims at investigating the role played by unrealized gains and losses reporting on users’ decision process, by examining the impact of OCI on the Italian listed companies RoE ratio and by surveying a sample of financial analysts, also content analysing their formal reports. The results show that the reporting of comprehensive income does not affect the financial statement users’ decision process, although it statistically affects Italian listed entities’ performance.

_

Keywords: Comprehensive income statement, users/investors, International Financial Reporting Standards (IFRS), performance evaluation, analysts’ reaction

Fr

Managerial discretion in authorising open market share repurchases: empirical evidence from the Italian context

This paper contributes to existing literature on open market share repurchases in Italy by studying authorisations that the board of directors needs to obtain from the shareholders’ general meeting in order to acquire company’s own shares. In such a context, I investigate whether the buyback purpose that managers disclose in their report affects number of shares to be repurchased. Particularly, since managers could potentially benefit from share repurchase programmes carried out in the presence of stock option plans, I explore whether this motivation influences the number of shares they require to include in the buyback programme. In pursuit of my objectives, I analyse reports managers provide shareholders’ meeting to obtain the authorisation to acquire company’s own shares over a 6-year period (2004-2009) in Italian listed companies. Main results suggest that the buyback motivation affects number of shares managers intend repurchasing, highlighting the role of the quality of the board of directors in this issue.

_

Keywords: Buyback, stock option plans, management, board quality

Fr

Acquisition-type or merger-type accounting? Further insights on transactions involving businesses governed by the same party(-ies)

[Dialogue with standard setters]

This paper – aiming at encouraging a fruitful debate – intends to highlight the discontinuous evolution of the accounting solutions explored by notable bodies (Efrag-Oic, Iasb, Fasb, Kasb, etc.) with reference to transactions involving businesses under common control. The work finally recompose them in two basic categories (discussing their pros/cons as well), here analyzed: acquisition-type accounting, which emphasizes fair value (emergence of exchange or current amounts) vs. merger-type accounting, linked to historical costs (continuity values approach). The first cluster includes the pure-acquisition and the fresh-start method, whereas the second the predecessor basis and the pooling of interests techniques. The concrete identification of the proper methodology, in this regard, essentially requires the profound understanding of the underlying economics, architecture and key elements of a specific transaction shedding light on the most relevant and reliable information useful to stakeholders.

_

Keywords: Common control, consolidation, financial reporting, acquisition accounting, fresh start, predecessor basis, pooling of interests, IAS/IFRS

Fr

Indice

Financial Reporting

n. 1/2015

 

Sommario

Directive 2013/34/EU, Article 6 An Analysis and some Implications. A Research Note

David Alexander

pag. 5
     
Why Do Firms Write Off Their Goodwill? A Comparison of Different Accounting Systems

Francesco Avallone, Claudia Gabbioneta, Paola Ramassa, Marco Sorrentino

» 23
     
Disclosures in Local Healthcare Organizations’ Social Reports. ‘What?’ and ‘Why?’ An Empirical Analysis of the Italian National Healthcare System

Elisa Bonollo

» 41
     
Graphical Reporting in Italian Annual Reports during the Financial Cri-sis: Impression Management or Incremental Information?

Simone Aresu

» 77
     
Dialogue with standard setters. Business Combinations under Common Control: Concerns, Criticisms and Strides

Raffaele Fiume, Tiziano Onesti, Mauro Romano, Marco Taliento

» 107
     
Book Review

Roberto Di Pietra, Stefano Zambon

» 127
     

 

 

Fr

Directive 2013/34/EU, Article 6 An Analysis and some Implications. A Research Note

[Opinion]

This research note analyses a number of implications of Article 6 of the new EU accounting Directive. Two avenues are explored in some detail. The first is the meaning, or non-meaning, of the measurement basis provisions of the Directive, covered in Article 6 with derogations in Articles 7 and 8, in the context of the previously declared intention to no longer allow the use of current replacement cost. The second relates to the extraordinary flexibility, indeed confusion, relating to the substance/form distinction, both in principle from Article 6, and by example relating to consolidation in Article 22. The Directive is argued to be sufficiently incompetent, ambivalent, and at times internally inconsistent, to allow a considerable degree of de facto carte blanche to Member States. Perhaps it should be called the anti-harmonisation directive.

_

Keywords: Directive 2013/34/EU, measurement bases, substance, dis-harmonisation.

Fr

Why Do Firms Write Off Their Goodwill? A Comparison of Different Accounting Systems

Increased comparability of financial statements across adopting countries is one of the main objectives of IFRS adoption. The level of achievement of this objective, however, is still debatable. While some studies have documented that crosscountry comparability of financial statements has increased after IFRS adoption, other studies have found that comparability has actually decreased since 2005. We contribute to this debate by studying whether the motivations for goodwill writeoff are the same or vary across countries with different accounting systems. Although a good deal of research has investigated the motivations for goodwill writeoff, our study is the first to analyze whether these motivations vary across countries with different accounting systems. We find that firms that expect low cash flows in the future are more likely to report goodwill write-offs if they are located in countries with an Anglo-Saxon accounting system than if they are located in countries with a Continental accounting system. These results suggest that IFRS are “interpreted” differently in different countries and that harmonization of financial statements has not been fully achieved yet.

_

Keywords: Goodwill, impairment, IFRS, accounting systems

Fr

Disclosures in Local Healthcare Organizations’ Social Reports. ‘What?’ and ‘Why?’ An Empirical Analysis of the Italian National Healthcare System

In recent years, public administration reform and the increase in information requests from citizens has drawn attention to the issue of reporting information (other than ‘financial’). Local healthcare organizations, as well as public administrations, have been affected by these developments. This paper presents the results of content analysis conducted on social reports published by Italian local healthcare organizations from 2009-2013 with the purpose of verifying the actual significance of the elements that according to the literature and standard setters, should define the scope and content of social reporting. The study highlights the fact that the healthcare organizations analysed tend to focus on the type and volume of the services provided, while neglecting the connection between predefined objectives and actual performance – as well as stakeholder engagement in the social reporting process. Social reports have the role therefore of being merely a tool for unidirectional communication by the healthcare organization to its stakeholders.

_

Keywords: Social reporting, local healthcare organizations, accountability

Fr

Graphical Reporting in Italian Annual Reports during the Financial Crisis: Impression Management or Incremental Information?

This paper investigates whether, before and during the global financial crisis, Italian firms have used financial key performance indicators graphs in the annual reports as impression management tools, to portray a more favourable picture of the firm’s performance than is warranted. This study shows that, during the financial crisis, firms have increased the number of graphs and decreased favourable distortions, although graphs continued to be designed inaccurately. The findings could reflect an increased public scrutiny on the firm’s performance, during the financial crisis. As a theoretical implication, this paper contributes to the existent financial reporting literature by showing that graphs are not necessarily used in line with an agency theory-based impression management, which is the dominant perspective to explain the graphs’ usage in the annual reports during periods of performance upturn. Moreover, it shows that the institutional context can affect voluntary disclosure practices at a firm-level. As a practical implication, this study suggests to annual reports’ readers not to necessarily consider managers as self-serving preparers in their graphical reporting strategies. The study also suggests accounting associations, audit firms and other regulatory bodies to create a set of guidelines for a correct graph’s use and design.

_

Keywords: Financial crisis, financial key performance indicators graphs, impression management, incremental information

Fr

Business Combinations under Common Control: Concerns, Criticisms and Strides

[Dialogue with standard setters]

Although excluded from the scope of IFRS 3, business combinations under common control (BCUCCs) are widespread transactions that take place all over the world in different forms, often as a reorganization or restructuring among related parties. These transactions occur when entities are ultimately – not transiently – controlled by the same party/ies before and after the combination (which is neither a capital market nor an arm’s length transaction and devoid of economic substance: indeed, no change of control is entailed). The scarce and fragmentary literature, not to mention the lack of clear consensus on the topic, contributes to the prevailing concerns on how to account for BCUCCs. In this complex context, the purpose of this work is to assess the possible and various accounting methods and identify the most suitable, accredited and consistent techniques. […]

_

Keywords: Common control, consolidation, financial reporting, acquisition accounting, fresh start, predecessor basis, pooling of interests, IAS/IFRS

 

Fr

Indice

Financial Reporting

n. 2/2014

 

Sommario

Detecting Earnings Manipulations: Time think about european SMEs. A call for a Joint International Research Project

Francesco Giunta

pag. 5
Comparing the effects of IASB Proposal on leasing: an impact assessment of EU listed Companies

Tommaso Fabi, Enrico Laghi, Marco Mattei, Alessandro Sura

» 17
 
Estimating credit default swap spreads using accounting data, market quotes and credit ratings: the European Banks Case Enrico Laghi, Michele Di Marcantonio, Eugenio D’Amico » 59
 
The value relevance of earnings and book value across the EU. A comparative Analysis

Alessandro Mechelli, Riccardo Cimini

» 83
 
Impairment estimates for available-for-sale equity instruments under IFRS: evidence from italian Banks

Giuseppe Sannino, Gianluca Ginesti, Carlo Drago

» 115
 
Dialogue with standard setters

Vincenzo Sforza

» 141
 
Towards the international convergence of accounting standards: the case of Business Combinations and Goodwill

Maria Elena Olante

» 155
 

 

Fr

Detecting Earnings Manipulations: Time think about european SMEs. A call for a Joint International Research Project

[Opinion]

A large part of the world economic system is in a state of crisis. The financial system has paid very close attention to this problem, developing specific models to predict insolvency. All of the rating systems related to the Basel Accords use these kinds of models. The insolvency prediction models represent a broad research area, which many researchers have been delving into for many years. These models are largely based on accounting data. As a consequence, the effectiveness of any model depends on the accounting data quality. The accounting data quality is menaced by accounting manipulation actions carried out by mangers. Considering many accounting scams, all over the world, it is evident that sometimes managers cope with the crisis by doctoring their accounting data. That is the reason why, in this period of dire straits, many rating systems have shown strong limitations. According to Healy-Wahlen (1999) , earnings management occurs when mangers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers. On the same wavelength, the Association of Certified Fraud Examiners (ACFE) maintains that a company is engaged in earnings manipulation when it asks itself  “How can we best report desired results?”, instead of “How can we best report economic reality?”. […]

Fr

Comparing the effects of IASB Proposal on leasing: an impact assessment of EU listed Companies

In August 2010, the IASB and the FASB jointly released an exposure draft proposing a “right-of-use” model for the recognition of lease-related assets and liabilities. The literature shows that leasing is a relevant subject for study. Many studies have investigated the point of view of users and preparers about lease accounting. Moreover, significant studies on the impact assessment of new accounting models for leases have been conducted. The objective of this paper is to perform an impact assessment of the new standard on leases that takes into account companies listed on the main EU stock exchanges. Specifically, this paper try to estimate the magnitude of the change in some ratios that would have been produced by the new treatment with reference to 2011. The results of the paper show that the debt-to-equity ratio increased significantly and, subject to the IASB final decisions on profit or loss accounting, the EBITDA should also have increased, while ROA should not significantly be affected. Furthermore, the results show that the impact of the introduction of the IASB proposal on financial ratios will differ both among industries and among European Union countries.

_

Keywords: IAS 17, leasing, right of use, impact assessment, lease capitalization

 

Fr

Estimating credit default swap spreads using accounting data, market quotes and credit ratings: the European Banks Case

The aim of this paper is to define a model for estimating the theoretical Credit Default Swap spread of European banks considering firms’ accounting data, market quotes, official ratings and macroeconomic variables. We detect a significant log-linear relation between Credit Default Swaps spreads and four explanatory variables determined on the basis of the stock price, the financial structure, the equity composition, the incidence of the reserve for loan losses on total loans, the official ratings and macroeconomic indicators of the country of domicile of each company. The empirical results show that for the period from 2008 to 2013 the model has a high statistical significance and a remarkable explanatory power. Our main contribution to the existing literature is the exploration of new determinants of banks’ credit risk and the provision of new evidence on the determinants of banks’ default risk in the crisis and post-crisis European context. Furthermore, we define a practical model for estimating Credit Default Swap spreads of banks suitable for professional use.

_

Keywords: Credit default swaps, credit risk, default risk determinants, structural models

 

Fr

The value relevance of earnings and book value across the EU. A comparative Analysis

This paper aims to investigate whether the value relevance of accounting amounts differs across nations depending on the country characteristics identified by Nobes (2008) and Nobes and Parker (2010) that is the source of funds, the legal system and the fiscal legislation that led them to identify, in the EU, the so-called strong-equity and the weak-equity countries. Because of the different disclosure needs, our hypothesis is that insiders, within the strong-equity countries, disclose more relevant information than in weak-equity countries. To test this hypothesis, we analysed a sample including all the listed entities belonging to the EU at the time of the issuance of EU Regulation 1606/2002. The sample covered the period of 2006-2011 and included 16,513 firm-year observations. Our sample selection strategy allowed us to include entities required to comply with the same accounting standards (IAS/IFRS), so our findings do not depend on differences between requirements of different standard setters. Comparatively, our findings demonstrate that the value relevance of accounting amounts not only is higher in strong-equity countries than in weak-equity countries – validating our research hypothesis – but also that it is not driven by specific firms’ characteristics that are the size, the future growth opportunity and the source of funds of the single entity.

_

Keywords: Value relevance, weak-equity countries, strong-equity countries, IFRS.

Fr

Impairment estimates for available-for-sale equity instruments under IFRS: evidence from italian Banks

Literature indicates that accounting choices under a given set of standards is an important topic due to the different economic implications. Daske et al. (2013) suggest that firms have substantial discretion in applying IFRS. Despite the implications on how the firms apply IFRS have motivated many studies, to our knowledge, little is known about the impairment estimates for the Available-for- Sale (AfS) equity instruments. Using a sample of Italian banks over the period 2010-2011, we investigate the determinants of the accounting decisions for impairment estimates. We find that the reporting quality and profitability are explanatory factors of the banks’ decisions to modify the thresholds of the impairment indicators used to assess AfS equity instruments. Our study also suggests that banks use a substantial discretion in implementing the IAS 39 for the AfS equity instruments.

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Keywords: Financial instruments, IAS/IFRS, accounting choices, impairment, financial reporting.