Consolidated Statements Research Articles

Information Value of Individual and Consolidated Financial Statements for Indicative Liquidity Assessment of Polish Energy Groups in 2018–2021

Electricity is currently one of the most popular sources of energy. Considering such widespread use of electric energy, we may ask, what is the economic cost of producing and supplying it? The climate crisis and the social pressure associated with it have triggered the necessity to make further investments in renewable and low-emission energy sources, while the COVID-19 pandemic has abruptly limited electricity consumption in industry. All these factors can have an impact on disruptions or loss in the liquidity of companies responsible for supplying electricity to end users. Guaranteeing cash flow for energy sector entities is a prerequisite for energy supply continuity. In this context, the selection and application of reliable sources of information are vital for the management of the financial liquidity of energy sector entities. The aim of this article is to prove the value of the financial information of individual (IFR) and consolidated financial statements (CFR) essential for the indicative liquidity assessment of Polish energy groups in 2018–2021. The hypothesis of this study is that individual and consolidated statements do not offer coincident analytical data due to the diversified role of their parent undertakings. We have applied indicative liquidity assessment analysis from a static and dynamic perspective to 2018–2021, on the basis of individual and consolidated financial statements. The results clearly show high dysfunction in the application of indicative liquidity assessment in the case of the individual financial statement of the parent company. This is mainly due to the role parent companies play in Polish energy sector groups, as they are mainly responsible for support processes.

INNOVATIVE STRATEGIC ASPECTS OF APPRAISAL CORPORATE MANAGEMENT OF THE METALLURGICAL ENTERPRISES

The article is devoted to the origins of the corporate management’s indigenous model with reference to metallurgical industry extension. The corporations, manufacturing steel production, as PJSC “NLMK”, PJSC “MMK”, PJSC “Severstal’”, stock company “HK METALLOINVEST”, PJSC “Mechel” EVRAZ plc., stood out the study objectives. Methodology of the research was based on the set of methods of comparative, generalization and synthesis approaches, data logical and trend analysis. The analysis was carried out to evaluate methods of corporate management and reveal its elements that allow to trace the companies’ innovative activity and effectiveness within the adopted development strategy. It has been stated that the universal tool for these purposes is missing. The analysis of the metallurgic enterprises’ innovative activities during 2017-2021 years was carried out. A source to escalate development of innovative corporate system’s basic elements at an enterprise and to integrate consequent monitoring of cumulative innovative effect and its components has been summoned by the author as a solution to the problem of corporate management effectiveness based on the system approach. Some references have been provided to reveal information on the results of such monitoring, illustrating the types of effects in the annual consolidated statements of metallurgic enterprises to develop further actual corporate governance score and give opportunities for corporate scouting in order to master management practice by the Russian enterprises.

КОНВЕРГЕНЦІЯ ФІНАНСОВОГО ЗВІТУВАННЯ В ЄВРОПЕЙСЬКОМУ СОЮЗІ (ЄС)

In the conditions of European integration processes, the convergence of enterprises’ financial reporting of EU member states is one of the priority strategic directions, the implementation of which is aimed at forming a single set of standards that could be used by the international community. European integration is a rather time-consuming socio- economic process and involves close cooperation of European states, in which investment activity is provided with a quite significant place. However, the differences in the national legislation regarding the preparation and submission of financial and consolidated statements between EU member states restrain positive developments in the context of increasing the level of their investment attractiveness. The convergence process itself is aimed at eliminating differences in the display of the European enterprises’ results in the financial reporting system, which will encourage an increase in its comparability, accessibility and comprehensibility for external real and potential investors. Accordingly, the elimination of differences in financial reporting standards in EU member states is a significant factor of effective cooperation in the active capital market in today's conditions. This, in turn, determines the relevance of the research. The purpose of the article is to research and substantiate peculiarities of the financial reporting convergence in the European Union and to disclose the content and characteristics of the Directive 2013/34/EU, requirements for the list of articles of the horizontal and vertical balance sheet, the structure of the profit and loss statement, as well as the management report for EU member states. In the process of carrying out the research, general scientific theoretical methods of cognition were used, namely: the system analysis - to clarify the main categories of the research; the abstract-logical method - to make theoretical generalizations and conclusions about the current level of financial reporting convergence in the EU, the tabular method - for visual presentation of the list of articles (horizontal and vertical) of the micro-enterprises balance sheet; as well as the forming the profit and loss statement structure. The article attempts to theoretically substantiate the concept "convergence", in the process of which convergence is considered as a synonym for the concept "integration". The main provisions of sections and annexes of the Directive 2013/34/EU, the structure of horizontal and vertical balance sheets, the statement of profits and losses by function and by nature of expenses are considered. The characteristics of the options for the list of articles of the micro-enterprises horizontal and vertical balance sheet are presented and their comparative analysis with the requirements of the Directive 2013/34/EU is carried out. The authors revealed the composition of the annual financial statements and specific features of the unified management forms of reports using the example of the EU member states. It has been proven that convergence is the absence of differences in financial reporting standards between EU member states, therefore the need for further convergence of financial reporting standards is a strategic priority for establishing active cooperation between European states in the long term. The peculiarities of financial reporting convergence in the European Union (EU) were comprehensively and thoroughly substantiated, which made it possible to objectively assess the content and characterize the Directive 2013/34/EU, as well as follow the reporting forms structure of the member states: horizontal and vertical balance sheet, report on profit and loss, with an emphasis on micro-enterprises. Examples of approaches to assessment of assets and liabilities on the balance sheet of EU companies are given. The composition of annual financial statements in the EU member states is considered. Prospects for further research lie in the implementation of theoretical and practical substantiation of the need for financial reporting convergence in the European Union, as the main mechanism of convergence and comparability of information in financial reporting of EU member states; directing efforts to increase the image of the investment attractiveness of enterprises through the prism of integrated financial and management reporting; justification of peculiarities of content and structure of the articles of actuarial management reporting compiled in the context of the Conceptual basis of financial reporting, aimed at assessing the increase (reduction) in the enterprise value in the conditions of the business sale as a complete property complex.

Production and Reserves of the World's Leading Publicly Traded Oil and Gas Corporations

Subject. The article considers the production and proved reserves of the twenty five leading publicly traded oil and gas companies from 2006 through 2018. Objectives. The aim of the study is to determine the current level of values of the production and proved reserves of leading publicly traded oil and gas companies, as well as to identify key trends in their changes during the study period, to establish the factors that led to the changes. Methods. The study rests on methods of comparative and financial-economic analysis, as well as generalization of materials of consolidated income statements. Results. The paper established a practically commensurate growth in the production of liquid hydrocarbons and natural gas. It determined that most of the total production fell on liquid hydrocarbons. There was an increase in proved reserves, and the component of liquid hydrocarbons gradually reached almost two-thirds in the structure. The growth in the production of liquid hydrocarbons and natural gas outpaced the growth of the corresponding proved reserves in terms of its pace at the level of the world's leading publicly traded oil and gas corporations, and, therefore, there was a general decrease in the level of reserves to production ratio of companies. The indicators of proved reserves to production ratio inherent in the stock market sector of the oil and gas industry are mainly from 10 to 15 years. Therefore, the specified time range is a guideline in assessing the value of proved reserves life of liquid hydrocarbons and natural gas of publicly traded oil and gas corporations. It was determined that the largest publicly traded oil and gas corporations from Russia and Canada managed to strengthen their position in terms of operating indicators in the industry. The situation with production and proven reserves has become noticeably worse for most independent companies from the United States and corporations from China. Conclusions. It becomes difficult for most independent companies to maintain an acceptable level of proved reserves to production ratio in the face of increasing production by leading oil and gas corporations at current prices for raw materials.

International Determinants of Comprehensive Income Reporting by Groups – An Analytical and Comparative Study of Poland and Germany

The mainstream theoretical and empirical research presented in the study is a comparative analysis of comprehensive income reporting by groups listed in the Polish and German capital markets. The theoretical part of the article is dedicated to a scientific discussion on the determinants of the capital market and corporate governance in continental Europe and the so‑called ‘new governance’, related to the convergence of financial reporting standards, including IFRSs, that oblige groups of entities to prepare consolidated statements of comprehensive income. It also assesses the relevance of comprehensive income to capital market players. The empirical part contains the results of comparative research on the format and structure of consolidated statements and the nomenclature of their components, as well as the findings from studies of the value relevance of comprehensive income for the WIG30 and DAX groups in 2009–2019.

Figures of consolidated statements of cash flows of the world's leading publicly traded oil and gas corporations

Subject. The article considers the main figures of consolidated cash flow statements of twenty five leading publicly traded oil and gas companies from 2006 through 2018. Objectives. The purpose is to determine the current values of the main components of the said consolidated cash flow statements, to identify key trends in their changes during the study period, to establish the factors that led to the changes. Methods. The study draws on methods of comparative and financial-economic analysis, generalization of materials of consolidated income statements. Results. The paper determines dynamics of changes in the value of key indicators and their correlation in the structure of cash flow statements in the stock market sector of the industry, establishes the main factors that contributed to the transformation, based on the results of a comprehensive analysis of annual reports of 25 oil and gas companies. It shows an increase in cash from operating activities within the studied period; the dynamics of the indicator is quite consistent with the change in average annual oil prices, despite the integrated business structure of most companies; capital expenditures of companies also depend on the level of oil quotations with a general upward trend. The analysis demonstrated that the exploration and production sector often dominates in the structure of capital expenditures, even for integrated corporations. Free cash flow returned to its previous level after a fall during the global financial crisis, only when corporations at the height of the industry crisis were able to reduce capital expenditures, which increased during a favorable period. I also revealed a growth in dividend payments, which outperformed the free cash flow most of the time. This contributed to the debt burden growth. Conclusions. The stock market segment of the industry is characterized by the need to limit capital expenditures in order to maintain the free cash flow of companies.

Аналіз методів та організаційних основ складання консолідованої фінансової звітності

The article provides a theoretical substantiation and an analysis of the methods and organizational bases for the preparation of consolidated financial statements. The essence of the concept, purpose, regulatory support of consolidation of financial statements are considered. Conceptual principles of consolidation methods application, which are generalized and studied: continuity and systematicity, essentiality, unified methods of valuation, unified date of preparation of consolidated financial statements, unified accounting policy, unified currency. The main requirements for the preparation of the consolidated financial statements are displayed. The main stages of consolidation of financial statements are provided. The main methods of consolidation of financial statements are analyzed: full consolidation, proportional consolidation, share participation method. The defining problems that arise at the stage of preparation and submission of consolidated financial statements are systematized as follows: the reporting methodology is rather complex, there is no clear instrumentarium for the practical application of the IFRS requirements, known inconsistencies between the IFRS and the current legislation of Ukraine (the IFRS requires additional disclosure), slow operational responsiveness of consolidated statements, the use of different software products for operational and financial management, the lack of qualified personnel, and the inconsistency of the accounting methods. Additional problems are identified by the following: complexity of normative regulation; complexity of organizing the accounting process; complexity of collecting and structuring credentials in order to compare them; supported multicurrency; impossibility to determine the contribution of a particular company to the general indicators of the group; difficulty in determining the amount of unrealized profit and equity participation shares; high labor intensity and duration of reporting; lack of methodology for analyzing consolidated statements. It is concluded that further research is needed to solve existing problems.

Analyzing the figures of consolidated statement of cash flows of the world's biggest publicly traded oil and gas corporations

Subject. The article investigates key figures disclosed in consolidated cash flow statements of 25 leading publicly traded oil and gas companies from 2006 to 2018. Objectives. The focus is on determining the current level of values of the main components of consolidated statement of cash flows prepared by leading publicly traded oil and gas companies, identifying key trends within the studied period and factors that led to any transformation. Methods. The study draws on methods of comparative and financial-economic analysis, as well as generalization of materials of consolidated cash flow statements. Results. The comprehensive analysis of annual reports of 25 oil and gas companies enabled to determine changes in the key figures and their relation in the structure of consolidated cash flow statements in the public sector of the industry. It also established main factors that contributed to the changes. Conclusions. In the period under study, I revealed an increase in cash from operating activities; established that capital expenditures in the public sector of the industry show an overall upward trend and depend on the level of oil prices. The analysis demonstrated that even integrated companies’ upstream segment prevail in the capital expenditures structure. The study also unveiled an increase in dividend payments, which, most of the time, exceeded free cash flows thus increasing the debt burden.

Analyzing the figures of consolidated income statements of the world's biggest public oil and gas corporations

Subject. The article considers the main figures of consolidated income statements of 25 leading public oil and gas companies, from 2006 to 2018. Objectives. The purpose is to determine the current values of the main components of consolidated income statements of leading public oil and gas companies, unveil key trends during the period under review. Methods. I employ methods of comparative and financial-economic analysis, as well as generalization of materials of consolidated income statements. Results. The comprehensive analysis of annual reports of 25 oil and gas companies enabled to capture changes in the main figures and their interrelation in the structure of consolidated income statements in the public sector of the industry. I also established the key factors that contributed to the changes. Conclusions. The study revealed a decrease in the shareholders' net profit at the industry level, which occurred against the backdrop of a growth in net revenue from core activities. The main factor of such changes in the income statement structure was the increased expenses on core business, which were ahead of revenue, primarily due to depreciation, depletion and amortization of assets. A positive development was a general reduction in the tax burden on income. A return to the previous structure is possible only if there is a significant rise in oil prices, a reduction in expenses on core activities, and a decrease in excise taxes, duties and all other taxes not related to income tax.

Do donors respond to discretionary accounting information consolidation?

PurposeThe purpose of this paper is to investigate donor responses to discretionary accounting information consolidation. Nonprofit (NP) financial statement consolidation discretion significantly impacts program ratio reporting, the primary NP performance measure. Stakeholders are misled to allocate limited resources inefficiently. While some NPs file group Internal Revenue Service (IRS) Form 990 returns with their affiliates, effectively providing consolidated statements, others choose to file independently of their affiliates.Design/methodology/approachThe authors use OLS regression analysis and panel data for 5,697 NP-year observations for the period 2009-2011 retrieved from the National Center for Charitable Statistics Form 990 database.FindingsThe authors find evidence that consolidation discretion substantially impacts donor decisions. NP managers have incentive to utilize consolidation discretion to influence charitable giving.Practical implicationsThe authors urge the IRS and the Financial Accounting Standards Board to reconsider the consolidation guidance for NP organizations, to develop performance measures beyond the widely used program ratio, and to require program ratio segment reporting to allow for better comparability among NPs irrespective of consolidation status. Further, the authors caution stakeholders to consider supporting organization transactions in their resource allocation decisions.Originality/valueThe authors are the first to use NP supporting organization information to investigate consolidation discretion and its impact on donor responses.

Land and resources acquisition, equity investment increase and enterprise overinvestment

PurposeThis paper comes to the point from the tax competition of local government in investment promotion and capital introduction. This paper aims to empirically examine the internal mechanism of enterprises obtaining land resources from local government and its resulting equity investment increase and economic consequences of overinvestment.Design/methodology/approachThe data of China’s A-share listed companies from 2007 to 2014 were used to test the relationship between the increase in enterprise equity investment and the acquisition of land resources and overinvestment. The descriptive statistics, correlation analysis and least squares linear regression were used to solve the above question.FindingsOne of the reasons for the enterprise equity increase is to obtain scarce land resources. The enterprise acquisition for land resources leads to overinvestment. The equity investment increase from obtaining land resources will further stimulate enterprise group to overinvest.Research limitations/implicationsThe authors could not get the actual data of land that subsidiaries have obtained directly. In this research, the authors get the data using consolidated statements and subsidiary statements indirectly.Practical implicationsThe results make contributions to the influencing factors and economic consequence of the enterprise investment structural deviation.Social implicationsIt provides reference to optimize the “interaction” relationship between government and enterprises.Originality/valueIt identified the “dual-channel” conduction mechanism between land resource acquisition and enterprise overinvestment.

Multiple logics and accounting mutations in the Italian National Health Service

Traditional public administration (PA) relied on cash- or commitment-based budgets, while NPM advocated accruals accounting. Currently, Continental Europe is witnessing the re-emergence of the PA logic, but the relevant accounting implications have been insufficiently investigated. We focus on the Italian National Health Service. Our findings suggest that accruals accounting will not be repealed. However, accounting mutations will be introduced to increase consistency with the PA logic and budgetary accounting. Accruals accounting numbers will be interpreted and used accordingly. Great attention will be paid to nation-wide consolidated statements for the control of public finances, while faithful representation of individual organisations will be overshadowed.

Multiple logics and accounting mutations in the Italian National Health Service

Traditional public administration (PA) relied on cash- or commitment-based budgets, while NPM advocated accruals accounting. Currently, Continental Europe is witnessing the re-emergence of the PA logic, but the relevant accounting implications have been insufficiently investigated. We focus on the Italian National Health Service. Our findings suggest that accruals accounting will not be repealed. However, accounting mutations will be introduced to increase consistency with the PA logic and budgetary accounting. Accruals accounting numbers will be interpreted and used accordingly. Great attention will be paid to nation-wide consolidated statements for the control of public finances, while faithful representation of individual organisations will be overshadowed.

Comparing the Relative Value Relevance of Operation Income between Consolidated and Separate Financial Statements under Pre- and Post-K-IFRS

Comparing the Relative Value Relevance of Operation Income between Consolidated and Separate Financial Statements under Pre- and Post-K-IFRS

Book-Tax Conformity and Earnings Management: Insights from European One- and Two-Book Systems

ABSTRACT:There is an ongoing debate in the U.S. about the effect of book-tax conformity on earnings management in consolidated statements. Although both one- and two-book systems are present in Europe, European data have not been used to contribute to this debate. In this study, we examine the influence of one- and two-book systems on earnings management using consolidated statements and single financial statements of European firm-years from 2004 to 2011. A one-book system is defined as a situation in which financial accounting income and taxable income are highly conformed, whereas a two-book system is characterized by differences between consolidated financial income and taxable income. We find that firms in one-book systems show significantly more (downward) earnings management in their consolidated statements than do firms in two-book systems. With these findings, we contribute to the U.S. policy debate on book-tax conformity and earnings management.

South-South Cooperation

Purpose– India is described as an emerging donor. Actually India has started providing development assistance to developing countries immediately after independence. The amount of aid was relatively small, but grew over the years to a recognisable size. The purpose of this paper is to review the long experience of India in the framework of development assistance which is laid in the foundational principles of South-South Development Cooperation (SSDC).Design/methodology/approach– Based on secondary data, the paper provides an exhaustive account of India's programme of development assistance, and a critical discussion of issues involved.Findings– The analysis shows that given certain unique features of its aid programme, India has a great potential to emerge as a major donor country, and even to rank among big traditional donor countries. It can also influence the global aid architecture. There are many lessons that others can learn from the “Indian model of aid”. However, there are certain problems and challenges that India has to address for it to become a major international player in the aid business. One of the most important problems refers to the absence of detailed information.Research limitations/implications– The available details on India's assistance are sketchy and confusing; there are no detailed and consolidated statements of assistance; and it is only now a proper formal agency to coordinate all external assistance and to provide effective management in a cohesive manner has been set up.Originality/value– The analytical and critical account of India's aid programme presented here is hoped to provide valuable fresh insights to the whole issue and should be of considerable academic and policy value.

Similarities and disparities between Romanian individual and consolidated financial group statements

The purpose of this study is to identify, analyse and assess the main connections and implications of consolidated accounts on enterprise economy. Appearance of consolidated financial statements is intrinsically linked to certain concepts, such as group, control, the perimeter of consolidation, percentages of interests, methods of consolidation, or restatements. For a more complete view regarding consolidated annual accounts, it is necessary to delimit and define these particular elements. This approach targets the presentation of our vision over positioning, place and function of financial consolidated statements in the process of the financial report. The study envisages a summary and comparison of ideas found on this subject in thespecialty literature, the regulations developed by various international bodies. Thus, we think it will facilitate the correct positioning of the consolidated financial statements and the consolidated accounts’ concepts. To achieve the proposed desiderates, we have used a constructive methodology for identifying disagreements, approvals and development of a speech to more efficient and effective management of the mentioned concepts.

Determinantes da defasagem na divulgação das demonstrações contábeis das companhias abertas brasileiras

Este trabalho investiga os fatores determinantes da defasagem na divulgação das demonstrações contábeis, trimestrais e anuais, das companhias brasileiras cujas ações compuseram o Índice da Bolsa de Valores de São Paulo (IBOVESPA) no período 1997/1-2009/2. Os fatores determinantes foram agrupados em quatro dimensões: complexidade das operações, características de governança corporativa, nível de assimetria informacional, e custos proprietários e conteúdo dos demonstrativos. Com uma amostra final de 83 companhias (1585 observações), foram examinados, por meio de métodos de dados em painel, os efeitos de 13 variáveis explicativas, tais como alavancagem de controle, tamanho da companhia, nível de governança corporativa, propriedade institucional, consolidação das demonstrações, volatilidade e prejuízo, sobre a defasagem na divulgação das demonstrações contábeis. Os principais resultados encontrados sugerem que a divulgação de demonstrativos consolidados e/ou que reportam prejuízos impacta positivamente a defasagem esperada, corroborando as hipóteses de que a maior complexidade das operações e o conteúdo dos demonstrativos (nesse caso, "más notícias") afetam positivamente a defasagem na divulgação. A variável alavancagem de controle, por sua vez, mostrou-se negativamente relacionada à defasagem, sugerindo que pode haver uma relação de substituição entre essas variáveis. Contrariando as expectativas teóricas, a variável volatilidade apresentou coeficientes positivos e estatisticamente significantes. No entanto, ao utilizar o método de variáveis instrumentais para obter estimativas consistentes na presença de simultaneidade entre a volatilidade e a defasagem na divulgação, a variável volatilidade apresentou coeficiente negativo e estatisticamente não diferente de zero.

Issues in the Preparation of Public Sector Consolidated Statements

Issues that have arisen in the preparation of public sector consolidated statements are identified by reference to audit qualifications, by noting items recognized (or not recognized) in different reports, and by consideration of items or treatments that are peculiar to the public sector. Australian governments have agreed to align government financial reports with local interpretations of Government Finance Statistics, and this has secured some standardization of reporting. Suggestions are offered as to how reporting issues might be resolved, by reference to decisions routinely made by stakeholders. Proposals relate to asset and liability identification, the disclosure of details of inter‐sector transfers, the disaggregation of reports on expenditure in terms of both line items and policy areas of government; and that these reports be accompanied by performance indicators relating to policy areas.

Public Sector Consolidated Statements—an Assessment

Judgments potentially made by various participants in (or observers of) the public sector on the basis of aggregative financial information about governments are reviewed. Distinctions are drawn between judgments that are made routinely, or under certain conditions, by decision makers or observers. It is recognized that (in Australia) the financial information that is relevant to the majority of these judgments is already supplied by other sources (principally budget documents, or in Government Finance Statistics) rather than by public sector consolidated statements. It is concluded that a number of routine judgments could be based on financial information presented in the form of consolidated statements (of varying scope). Alternative criteria for determining the scope of consolidated statements are reviewed. Accountability and control are noted as potential bases. Depending on the adopted objective, it is concluded that tests of control are either not relevant, or inappropriate. It is contended that prior studies that have recommended use of control have focused on processes (trying to find a suitable test for determining the ambit of consolidated statements) rather than on objectives, and examining in some detail what information would be relevant to different users and uses.