Balance Sheet Items Research Articles

The trialistic nature of charging bank balance sheet itemswith public levies – de lege ferenda postulates

This article concerns the issue of imposing three different public levies on banks, fulfilling different purposes,based on the balance sheet items of banks – a tax on certain financial institutions, a contribution to the compulsorybank restructuring fund and payments for banking supervision. It is pointed out that both the economicburden of banks and administrative obligations are multiplied in the situation of the identity of the subject of thelevy burden. The author characterizes the aforementioned public levies to the necessary extent and puts forwardde lege ferenda postulates aimed at changing the current legal status until Po land joins the banking union.

The Role of Fair Value Accounting in Debt Structure Decisions: Evidence from Priority Structure and Financial Flexibility

Synopsis The research problem This study investigates whether the debt structure of a firm — that is, how a firm organizes its debt contracts — depends on the extent to which fair value measurement is applied to the balance sheet. Motivation Most public firms have a nontrivial percentage of balance sheet items measured at fair value under the mixed attribute accounting, and there is a lack of understanding of its effect on the reporting entity’s debt structure. This study focuses on two aspects of the debt structure that have both practical and theoretical relevance, namely the priority structure and the financial flexibility. A priority structure involves the simultaneous use of different priorities of debt and is common among risky borrowers. Survey results show that financial flexibility is of first-order importance regarding the debt policy of firms. Here, financial flexibility refers to a firm’s ability to pursue new investment opportunities via debt issuance. The test hypotheses The first hypothesis states that a borrower with a higher percentage of balance sheet items measured at fair value is less likely to have a priority structure. The second hypothesis states that a borrower with a higher portion of balance sheet items measured at fair value likely has a debt structure that is more financially flexible. The third hypothesis states that the fair value of liabilities and the fair value of assets are equally relevant to debt structure decisions. Target population This study focuses on nonfinancial firms in North America that are subject to the mixed attribute accounting, which measures a certain percentage of assets and liabilities at fair value. Adopted methodology The main tests use multivariate analysis that includes both logistic regressions and OLS regressions. Additional tests include cross-sectional analyses and the Granger causality test. Analysis Using a sample constructed from Compustat North America and Capital IQ (6,220 firms and 36,487 firm-year observations), the main tests regress dependent variables, namely the priority structure measures and financial flexibility, on the exposure to fair value measurement. Findings Results show that fair value measurement reduces information asymmetry and has favorable effects on the debt structure. A high exposure to fair value measurement reduces the need for a priority structure. A high exposure to fair value measurement also enhances financial flexibility. Additional analyses reveal that the favorable effect mainly comes from assets measured at fair value. The effect becomes weaker with respect to liabilities measured at fair value.

Determinants of Net Transactions in TARGET2 of European Banks Based on Micro-data

AbstractThis paper examines German and foreign bank factors that can explain net flows of cross-border central bank liquidity between Germany and the rest of the euro area. Using data from the German component of Eurosystem’s real-time gross settlement system TARGET2 and BankFocus for the period between 2009 and 2021, we provide empirical evidence that only few balance sheet items and profit and loss accounts affect net flows with Germany. We control for bilateral bank-specific relationships and time-varying macroeconomic country effects in our regressions. In general, German bank factors seem to be more important than characteristics of foreign banks. A German bank that exhibits relatively high claims against central banks seems to attract less additional central bank liquidity from abroad than a German bank with fewer existing central bank claims. Net claims against central banks, which also control for liabilities, have no effect on net transactions in TARGET2. However, higher overall liquidity of a German credit institution corresponds to additional net inflows. Foreign bank factors only matter for central bank payments and intragroup payments. We also document heterogeneities across different types of transactions which influence the German TARGET2 balance. While customer payments, interbank payments and central bank payments have increased net flows to Germany in sum, intragroup payments and ancillary systems’ transactions have led to net outflows.

Measuring Financial Statement Disaggregation Using XBRL

ABSTRACT We develop a measure of disclosure quality using disaggregation of financial statement items from the Form 10-K XBRL filing. Our measure (ITEMS) extends Chen, Miao, and Shevlin’s (2015)DQ measure and is distinct from R. Hoitash and U. Hoitash’s (2018)ARC measure. Our measure provides a simple measure of disaggregation by counting the balance sheet and income statement line items, it does not depend on the data aggregators’ collection process and is readily available shortly after the Form 10-K is filed. We validate ITEMS by showing that firm fundamentals correlate to ITEMS in the predicted direction using OLS regression. We find that ITEMS explains consequences of disclosure quality: forecast error, forecast dispersion, bid-ask spread, and cost of equity capital. Further, ITEMS has explanatory power of disclosure quality consequences incremental to DQ and ARC, and it is distinct from ARC evident from different associations with disclosure quality consequences and reporting quality. Data Availability: Data are available from public sources identified in the text. JEL Classifications: M10; M40; M41.

Window dressing in the banking sector of an emerging economy: evidence from aggregate data

PurposeThis study aims to investigate window dressing as practiced by commercial banks in Kuwait, using monthly aggregate balance sheet data covering the period January 1993 to December 2017.Design/methodology/approachThis study applies the structural time series model to decompose an observed time series into unobserved components based on monthly data covering January 1993 to December 2017 on the consolidated balance sheet of commercial banks in Kuwait.FindingsThe empirical results indicate that Kuwaiti commercial banks indulge in upward window dressing to boost size and liquidity. This kind of behaviour is indicated by a statistically significant rise in assets under the control of banks in December, followed by a statistically significant decline in January. The operation is funded by borrowing, leading to a December rise and a January fall in foreign and other liabilities, which are also under the control of commercial banks.Originality/valueThis study uses a novel methodology to detect window dressing based on the seasonal behaviour of balance sheet items. This study suggests a unified framework for the motives, targets, types and consequences of window dressing and how they are related.

The Accruals–Cash Flow Relation and the Evaluation of Accrual Accounting

Considerable research has evaluated the role of accruals in determining informative earnings, with an accrual–cash flow relation at the centre of the investigation. However, much of the research is based on a misunderstanding. First, accruals are identified as the numbers that reconcile earnings to cash flows in the cash flow statement. But these are not the non‐cash accruals applied in determining earnings in the accrual accounting system; rather, they are changes in balance sheet items, most of which are the relevant accruals reduced by cash flow. Thus, they are in part determined by cash flows. Second, accruals are characterized as an adjustment to cash flows, to reduce volatility of cash flows. Consequently, a negative correlation between accruals and cash flow—the accruals–cash flow relation—has been taken as the criterion for quality accruals. However, the correlation with cash flows is spurious, for the so‐called accruals are determined in part by cash flows. This paper presents a corrective analysis under which non‐cash accruals are identified as the components of earnings that do not involve cash flows. With this correction, the paper then conducts empirical tests that re‐examine hypotheses about accruals tested in previous research, reporting contrasting results.

Do social cooperatives stimulate social change? An investigation on Italian firms based on DEA-Malmquist approach

The cooperative system and especially social cooperatives are increasingly regarded as a fundamental tool in the transition from the welfare state to the welfare society. In Italy, different types of social cooperatives exist (i.e., Type A and Type B), and in particular, Type B social cooperatives have been recognized as playing a major role in active labour policies. Even if a portion of the literature still attributes a sort of entrepreneurial “adolescence” to social cooperatives, some argue that cooperatives have an anti-cyclical role. In the present paper, we discuss the role of Type B social cooperatives in social change and social innovation, suggesting their impact in labour market, productivity and national growth. In order to explore managerial gap compared to for-profit firms, we looked at three composite indicators of balance sheet items, commonly used in the analysis of for-profit companies (i.e., solvency, efficiency, and productivity) before the Covid-19 pandemic. Results suggest that differences exist and social change can be affected by policies for social cooperatives.

ОРГАНІЗАЦІЯ І МЕТОДИКА ОБЛІКУ, АНАЛІЗУ ТА АУДИТУ ВІДОБРАЖЕННЯ МАТЕРІАЛЬНИХ АКТИВІВ У БАЛАНСАХ БАНКІВ І ПІДПРИЄМСТВ

The main scientific result of the article consists in distinguishing the concepts of tangible, intangible, monetary assets of enterprises and banking institutions. Assets that are not intangible, monetary, or securities are tangible. A critical assessment of the content of the balance sheet items of enterprises and banks is given in terms of their materiality, and a description of synthetic accounts intended for accounting of tangible assets of banking institutions is given. The common set of tangible assets of enterprises and banking institutions is determined. It is shown that in the balance sheet, the value of tangible assets is included in the residual value as the difference between the balance of active and contracted accounts. For fixed assets, investment real estate, other non-current tangible assets, counter-accounts are represented by depreciation, in banking institutions they are also used to record reserves for the risks of non-confirmation of cash and bank metals. It was determined that cash funds in the balance sheets of enterprises are shown under the item "Cash and their equivalents", while in the balance sheets of banking institutions under the item "Cash funds and their equivalents". It is proposed to rename the relevant article of the balance sheet of banking institutions, taking into account the etymology of the Ukrainian words, to "Funds and their equivalents". It has been established that the differences in the display of tangible assets in the balance sheets are reduced to the following: the principle of increasing liquidity applies to enterprises of the real sector of the economy, while the principle of decreasing liquidity applies to banking institutions. A specific feature of banking institutions is the presence of tangible assets, which are collateral for customer loans and debts, represented by movable property and immovable property (including residential and non-residential). The requirements for the display of tangible assets in the notes to the financial statements of banking institutions have been systematized in terms of: accounting policy principles, funds and their equivalents, customer loans and debts, investment real estate, fixed assets, other assets, non-current assets held for sale, and disposal group assets.

Corporate Financial Policy as a Factor of Corporate Sustainability and Health during COVID-19 Pandemic Period

Research Question: This paper analyses whether a relationship exists between the financial policy of the companies, embodied in the structure of assets and liabilities, and their financial health during the COVID-19 pandemic. Motivation: The paper aims to consider the impact of changes in the value of individual items of the balance sheet of selected companies on the movement of profitability, liquidity, and market value of companies, as measures of the companies’ financial health. Idea: The core idea of this paper was to empirically evaluate the financial health of domestic companies, where the financial policy that the selected companies implemented was taken as a factor of financial health. The financial policy was viewed through the structure of assets and financing of the chosen companies, while financial resilience observation was based on indicators of profitability, liquidity, and market value of the companies. Data: Secondary data from the reference database (Index of the Belgrade Stock Exchange) during the period 2016-2020, which includes 30 companies from the real sector, serve as the relevant basis for the realization of the research within the adequately set area of the research. Tools will be used to study the relationship, i.e., connectivity of selected research variables based on regression analysis in the frame of parametric quantitative procedures. The financial policy was viewed through the structure of assets and financing of the chosen companies, based on their balance sheets, while financial resilience observation was based on indicators of profitability, liquidity, and market value of the companies, which were used as dependent variables in the research. Findings: The point that changes in a relatively small number of the balance sheet items of selected companies influenced the movement of the mentioned financial health indicators during the COVID-19 pandemic. Contribution: Presented research results are significant and representative for future corporate practice. The key contribution of this research is the identification of assets’ elements with a critical impact on companies’ financial health.

A Suggested Model to Measure the Quality of Financial Statements Using Balance Sheet Items with Empirical Study

A Suggested Model to Measure the Quality of Financial Statements Using Balance Sheet Items with Empirical Study

ANALISIS TINGKAT KESEHATAN PERBANKAN MENGGUNAKAN METODE RISK-BASED PADA PT.BANK MUAMALAT INDONESIA

Banking is a financial institution that has great potential and enormous social value to grow and develop in carrying out its role as a source of financing for customers and the business sector, especially in facing the era of globalization in a country, especially Indonesia. Likewise, the soundness of a bank becomes a barometer of the ability to compete in the business world, because a bank is a company. Therefore, it is very important to maintain public trust in its performance. Based on Bank Indonesia regulation, bank soundness assessment will be very useful in implementing Good Corporate Governance and for dealing with future risks. The Risk-Based Bank Rating method is a policy issued by the government as a tool for assessing the soundness of a bank with the scope of the assessment covering the following factors: Risk profile, Good Corporate Governance , Profitability and Capital to produce a composite rating of bank soundness. The purpose of this study was to determine the soundness of the bank on the balance sheet items, profit and loss and cash flow as well as the financial performance of PT. Bank Muamalat Indonesia Tbk uses the Risk-Based Bank Rating method for 3 years. The results of the research generally show that PT Bank Muamalat Indonesia Tbk is in the composite rank 3 with the criteria of "Sufficiently Healthy". This indicates that the bank's condition is generally quite healthy and able to face significant negative effects from changes in business conditions and other external factors. 

Stokların VUK, TMS 2 ve BOBİ FRS Açısından Karşılaştırılması: Bir Uygulama

Küreselleşme her alanda olduğu gibi sosyal bir bilim olan muhasebe alanında da önemli ihtiyaçlar ortaya çıkarmıştır. İşletmelerde küreselleşmenin etkisiyle hızla değişim gösteren konjonktüre uyum sağlanabilmesi için muhasebe kural ve uygulamalarının düzeltilmesi ihtiyacı ortaya çıkmıştır. Dolayısıyla stoklara ilişkin muhasebe işlemlerinin belirli bir standarda dayandırılması amaçlanmıştır. Stoklar konusu Vergi Usul Kanunu (VUK) Hükümleri, Türkiye Muhasebe Standartları (TMS) 2, Büyük ve Orta Boy İşletmeler için Finansal Raporlama Standardı (BOBİ FRS) bölüm 6 kapsamında ele alınmıştır. 
 Çalışmada, öncelikle stokların TMS 2 standardı, VUK ve BOBİ FRS açısından karşılaştırılmasına değinilmiş, düzenlemeler arasındaki benzerlikler ve farklılıklar üzerinde durulmuştur. Düzenlemelerin genel hatlarıyla uyumlu olmasının yanı sıra bazı temel farklılıkların da olduğu tespit edilmiştir. Bu farklılıkların temelde; stoklar içerisindeki borçlanma maliyetleri ile kur farkları, stok maliyetlerinde yer alan vade farkları, stokların değerlemesi, kapsamına göre maliyet yöntemleri hususlarında olduğu görülmüştür.
 Çalışmada; TMS 2, VUK ve BOBİ FRS’nin stoklara ilişkin hükümleri karşılaştırılarak aralarındaki temel farklılıklar doğrultusunda TMS 2 standardı, VUK ve BOBİ FRS’nin bir üretim işletmesinin bilanço ve gelir tablosu kalemlerine etkisinin tespit edilmesi amaçlanmıştır. Bu amaç doğrultusunda, çalışmada seçilen yöntem, olay (vaka) çalışması yöntemi olup, bu yöntemin yanı sıra gözlem ve mülakat yöntemlerine de yer verilmiştir. Çalışmada, standartların uygulanmasıyla birlikte işletmenin bilanço ve gelir tablosu kalemlerinin değişiklik gösterdiği sonucuna ulaşılmıştır.

Accounting measurement of Balance Sheet items according to the financial accounting system

The primary objective of this study is to highlight the reality of the accounting measurement of budget items in the light of the implementation of the financial accounting system, in addition to illustrating the extent to which this measurement contributes to preparing and providing a clear picture of the institution's situation by offering credible and decision-making-capable information. A descriptive-analytical research method is used to achieve the research objectives. The results indicated that the Algerian telecom direction of Khenchela city depends mainly on the historical cost of measuring the budget elements, which makes the accounting value of this society differ from the market value of its parts, and consequently negatively affects the users of accounting information.

Impact of Disclosure Practices on Investment Decision

This study aims to investigate the impact of different parts of the disclosure index on concerned components of investors’ decisions. For this consideration, this study has constructed an unweighted disclosure index under eight headings: corporate profile items, corporate governance items, employees and social responsibility items, risk management items, indicators of financial performance, income statement items, balance sheet items, and accounting policy items. The individual disclosure of each part of the disclosure index has been calculated. This study also identified some concerning components of investors' decisions like current ratio, working capital ratio, deposit assets ratio, cash deposit ratio, return on equity, return on assets, dividend yield ratio, and dividend payout ratio. To achieve the study objective, this study has used secondary data extracted from published audited annual reports of ten sample banks in Bangladesh from 2015 to 2019. The ANOVA test and multiple regression analysis with the ordinary least square model (OLS) have been employed to reveal the study findings. The results of the ANOVA test report significant variation in the disclosure scores of different parts of the disclosure index and the various concerned components of investors’ decisions. The results of multiple regression analysis illustrated that the disclosure scores of the other parts of the disclosure index had a significant positive impact on the different concerned components of investors’ decisions.

When do Governments ‘Go Dark'? Evidence on Governments’ Disclosure Choices in Periods of Uncertainty

ABSTRACT We examine the effect of uncertainty shocks on the level of fiscal guidance – the guidance issued by governments on the expected evolution of the fiscal and economic outlook. Because uncertainty makes governments’ expectations less precise but potentially more valuable to users, we hypothesize that a disclosure dilemma leads governments to balance a higher demand for guidance with a higher probability of issuing inaccurate forecasts. Using natural disasters to randomize uncertainty shocks in our sample, we find that on average, governments issue less guidance in periods of uncertainty. The effect is driven by a reduction in the number of forecasts on the future evolution of balance sheet items, but only when governments have low refinancing needs and face a relatively quiet bond market. Instead, governments that maintain a stable level of guidance in periods of uncertainty appear to cater to coercive isomorphic pressures stemming from creditors. We further document that the relative ‘transparency’ of governments in periods of uncertainty is negatively related to indicators of fiscal reporting quality. Collectively, the evidence indicates that in the public sector, uncertainty leads to a trade-off between disclosure quantity and quality.

Dynamic Analysis of Business Development of Auditing Firms: Case of the Republic of Serbia 2010-2020

Abstract Auditing firms are very important for business decision-makers and they have a large impact on business development, due to issued reports and competent opinions contained in such reports. The purpose of this paper is to present, to professional public, the current condition and changes of business results achieved by active auditing firms in the Republic to Serbia over the period of eleven years. The goal of the paper is an objective assessment of the state of play and operations of active auditing firms, as well as a determination of business trends and monitoring of the results achieved in the audit services market. The paper analyzes the changes in individual balance sheet items and profitability indicators, that is their average growth during the eleven years. The results indicate that the members of the "Big Four” had not acquired a leadership position in the market, observed according to the productivity indicators. Actually, the results indicate that the auditing firms with the largest growth of net results, in the observed period, are not the leaders according to the criterion of assets growth. At the same time, the firms with the greatest growth of business income in the observed period are not at the same time the most productive firms, measured by net result per employee. The results obtained in this paper contribute to the formation of a realistic view of the situation in the audit services market, as well as the perspectives and tendencies in the development of audit firms.

THE CHALLENGES IN AUDITING FINANCIAL STATEMENTS AT FAIR VALUE CONCEPT (FVC) IN DEVELOPING ECONOMIES: THE CASE OF REPUBLIC OF SERBIA

Some balance sheet items are the result of judgments, including fair value estimates, so the relevant evidence is very complicated to collect by auditors, thus the risk of misstatements in financial statements is inevitably greater. The research objective of this paper is to: a) highlight the problems encountered by auditors from developing countries when auditing FV accounting estimates; b) identify the challenges that auditors from Serbia face in auditing FV accounting estimates; c) consider the possibility of adequately responding to these audit challenges in Serbia. The research confirmed that the problems of auditors in Serbia in the audit of FV estimates are generated by inefficient capital markets, and that they are primarily in the field of FV assessment which are connected to the impossibility of applying the market model and higher volatility of FV financial statements, as well as those in the field of auditing techniques used in providing assurance on the objectivity of FV assessments in various business activities, which requires additional training of auditors. Thus, the research confirmed the similarity of the problems in Serbia with the problems in the auditing FV estimates in developing countries.

Accounting Implications on Financial Deepening in Kenya

Purpose: Financial deepening linked to Kenya’s financial ingenuity, M-Pesa has positively impacted livelihoods. The study examined accounting implications on financial deepening in Kenya’s Kitui County. Design/methodology/approach: This was a case study design survey and sought to examine the complex relationship between accounting and financial deepening in Kitui County. Findings: Based on the results, the overall fitted model was significant F (3, 26) = 6.634, p < .05, R2 = .434). This clearly showed that accounting for costs, revenue, and balance sheet items had a positive significant impact on financial deepening which enhanced the livelihoods of the shop owners. Originality/Value: Mobile platforms have created an opportunity and enhanced financial deepening in many of Africa's rural setups such as Kitui County in Kenya. However, financial deepening can only be sustained through wealth creation or profit maximization. This implies that mobile platforms are means and not the end, hence the need to examine accounting and financial deepening relationships.

Impact of Covid-19 Pandemic on the Financial Performance of the Banking Sector of Bangladesh

Covid-19 pandemic has affected both real and nominal sectors of all countries in the world. The paper has examined the impact of this pandemic on the banking sector of Bangladesh. Using ratio and correlation analysis on 2019 and 2020 data some interesting findings are invented. Pandemic has incurred devastating and homogeneous impacts for all type of banks in Bangladesh. Profitability and efficiency have decreased sharply. The analysis shows that if the provision criteria had not been relaxed, the profit rate would have been decreased further. Negative growth of profitability and interest earning by the most banks are very glaring. Aggregate profit of the banking system has fallen about 4 percent. Further, evidence of investment scope shrinking is also manifested. Hence, sheer income rearrangement is also detected by the banks in pandemic situation. The loss caused by the decrease of interest earning was attempted to offset by the increase of fee based income. However, productivity is remained largely unchanged during the pandemic. Additionally, drastic fall of major balance sheet items in 2020 are also noticed. Banks were desperate to save themselves from the tsunami of losses by searching alternative sources of business too. Additionally, profit fall and international linkage of individual banks have very high association. The paper has very high stake particularly for crisis management of the banking system of developing countries where banks are suffering from the less variety of product and lending activities.

Banking Risks in the Asset and Liability Management System

Banking risk management is considered weak compared to rapid changes in financial markets. In light of the recent global financial crisis, banking risk management has become a significant concern of banking regulators and government agencies. This work aims to build a model for assessing banking risks. The primary study method is economic–mathematical modeling based on the standardized model of the Basel Committee for Operational Risk Management, the modified CAPM model, and the model developed by Shapiro and Cornell for currency risk management. The information base was the financial statements of Bank Credit Agricole (Poland). As a result, an economic–mathematical model is built, which is the optimal combination of operational, currency, and credit risk management models. This model calculates the optimal values of bank balance sheet items, which allows for making the right management decisions. It allowed adjusting the value of the bank profit by 3.6 million US dollars. In conclusion, considering the results of banking risk modeling, the need to build a strategy for the bank’s development is determined.