Disclosure Requirements Research Articles

Navigating the Future: Blockchain’s Impact on Accounting and Auditing Practices

This study seeks to meticulously analyze the scholarly discussion on the integration of blockchain technology into accounting and auditing. Based on a total of 67 articles from the Web of Science (WoS) database, this study adopts a bibliometrics and content analysis approach which uses both numerical and visualization techniques to examine the extant literature. It spans the timeframe between 2016 and 2022. Bibliometrix R-package (Biblioshiny, version 4 is employed to analyze the descriptive analysis, which includes publication trends, the most trustworthy sources of scientific publications, prominent scientific authors, prominent documents, and country collaborations. VOSviewer software Version 1.6.20, is used for a network visualization of keywords and bibliographic coupling. Leveraging the content analysis, this research reveals three fundamental themes: first, the use of blockchain technology to strengthen financial reporting systems; second, blockchain technology and the future of auditing; and third, the valuation of cryptocurrencies. Research gaps in the current literature include a lack of comprehensive studies on blockchain’s regulatory and governance aspects in accounting, insufficient exploration of risks and challenges in adopting new technologies in auditing, and a limited understanding of tax consequences, disclosure requirements, and regulatory frameworks for cryptocurrencies, necessitating future research endeavors. Thus, this study extends existing theoretical insights by exploring blockchain’s role in financial reporting, its transformative impact on auditing, and the possible adaptation or development of new valuation methods for cryptocurrencies. It further identifies and discusses future research directions, contributing to potential novel frameworks for addressing regulatory, governance, and socio-economic dimensions of blockchain integration into accounting and auditing practices.

First year’s application of revised revenue recognition guidance by companies under NL-GAAP

This study focuses on the revenue recognition disclosure quality of a sample of 63 large Dutch legal entities applying revised DAS 221 and DAS 270 in their 2022 financial statements. A large majority of companies in our sample use a prospective method for transitioning to the revised standards, though many companies were not really transparent in disclosing the transition method used. Further, only a small portion of companies in our sample (35%) disclosed how the revisions impacted their solvency. Overall, we conclude that the effects of the amended guidance in DAS 221/270 appear to be limited in financial reporting practice and that disclosure quality varies to a large extent. Also, we recommend the DASB to add specific disclosure requirements to DAS 221

Regulating Gatekeeper Artificial Intelligence and Data: Transparency, Access and Fairness under the Digital Markets Act, the General Data Protection Regulation and Beyond

AbstractArtificial intelligence (AI) is not only increasingly being used in business and administration contexts, but a race for its regulation is also underway, with the European Union (EU) spearheading the efforts. Contrary to existing literature, this article suggests that the most far-reaching and effective EU rules for AI applications in the digital economy will not be contained in the proposed AI Act, but in the Digital Markets Act (DMA). We analyse the impact of the DMA and related EU acts on AI models and underlying data across four key areas: disclosure requirements; the regulation of AI training data; access rules; and the regime for fair rankings. We demonstrate that fairness, under the DMA, goes beyond traditionally protected categories of non-discrimination law on which scholarship at the intersection of AI and law has focused on. Rather, we draw on competition law and the FRAND criteria known from intellectual property law to interpret and refine the DMA provisions on fair rankings. Moreover, we show how, based on Court of Justice of the European Union jurisprudence, a coherent interpretation of the concept of non-discrimination in both traditional non-discrimination and competition law may be found. The final section sketches out proposals for a comprehensive framework of transparency, access and fairness under the DMA and beyond.

Allopathic Medicine Practitioners’ perspectives on facilitating disclosure of traditional medicine use in Gauteng, South Africa: a qualitative study

BackgroundTraditional medicine (TM) plays a key role in maintaining health in many societies. Given the requirement for TM disclosure, Allopathic Medicine Practitioners (AMPs) must encourage open communication with patients to persuade those who use TM to disclose. Addressing patient non-disclosure of TM requires this dialogue to be facilitated. We sought to understand and describe how South African AMPs facilitate disclosure of TM use during a consultation with patients who use both TM and allopathic medicine (AM) and how it influences the patients’ willingness to disclose TM use.MethodsThis qualitative exploratory descriptive study on AMPs at Gauteng district public hospitals in South Africa was conducted between 2021 and 2022. Non-probability purposive sampling was employed to select a sample of 14 AMPs. Individual participants were encouraged to share their unique experiences and interpretations of the phenomenon concerning TM use disclosure. The raw transcribed textual data were processed using ATLAS.ti, and inductive content analysis was undertaken following the coding of the content to identify categories.ResultsThe data revealed four major categories: ‘providing a suitable atmosphere for disclosure,’ ‘encouraging patients to disclose TM usage to AMPs,’ ‘patient autonomy,’ and ‘AMP training’. During a consultation with patients who use both TM and AM, participants expressed their experiences and perceptions of TM nondisclosure. They also discussed several methods for encouraging patients to disclose their TM usage, particularly when TM is used concurrently with AM.ConclusionThis study expands on previously reported findings by describing how South African AMPs facilitate the disclosure of TM use during consultation. Many AMPs struggle to initiate TM conversations with their patients which results in non-disclosure. This study revealed that integrating TM into AM training programmes, promoting cross-practice, and creating a safe environment is necessary for the development and application of the most appropriate approaches that would assist in facilitating disclosure.

Does audit regulation improve corporate decision making? Evidence from the disclosure of tax‐related key audit matters

AbstractOur study examines changes in corporate cash tax savings around the disclosure of tax‐related key audit matters (tax KAMs). We expect publicly disclosed tax KAMs to increase the visibility of a firm's tax complexity and uncertainty, thereby motivating the firm to improve its tax function. In turn, we expect to observe increased cash tax savings as an outcome of improvements to corporate tax functions. As predicted, we document that firms exhibit lower cash effective tax rates in the period after their auditors disclose tax KAMs. Additional tests suggest that disclosure of tax KAMs does not increase the likelihood of firms being aggressive in cash tax planning and increased cash tax savings are primarily driven by firms that adjust toward their optimal levels of cash tax savings. Cross‐sectional analyses support our expectation that post‐disclosure increases in cash tax savings are less pronounced when investors were better informed about firms’ tax strategies in the pre‐disclosure period and when firms faced stronger tax enforcement in the pre‐disclosure period. Collectively, our results highlight the role of KAM disclosure requirements in prompting firms to improve their internal operational decisions.

The impact of directors' attributes on IFRS fair value disclosure: an institutional perspective

PurposeThe current study investigates the impact of directors' attributes on the extent of compliance with International Financial Reporting Standards (IFRS) fair value disclosure requirements. The attributes investigated include directors' human capital (accounting qualification) and social capital (political association), directors' share ownership and the power distance between the chief executive officer (CEO) and the rest of the board members.Design/methodology/approachThe study uses disclosure analysis to measure the extent of compliance with the fair value disclosure requirements of IFRS. Ordinary least squares (OLS) regression is used to test the relationship between the disclosure score and directors' attributes. Data were collected from the annual reports and websites of the sample companies.FindingsContrary to conventional belief, this study's findings suggest that directors' social capital and the power distance between the CEO and the rest of the board act as more powerful factors than directors' human capital in explaining corporate mandatory disclosure. Specifically, the results indicate that powerful actors form a dominant coalition and co-opt influential constituents from the institutional domain to neutralize the effect of legal coercion and the accounting expertise of board members and Big Four audit firms on the extent of compliance with institutional (fair value) rules.Research limitations/implicationsThis study utilizes Oliver's (1991) framework of strategic response to institutional processes in the Bangladeshi context. Although the study provides new insights into corporate disclosure practices, findings are not generalizable due to different institutional settings in different countries. Therefore, future studies could replicate the approach in different institutional settings.Practical implicationsThe findings of this study will be of interest to the International Accounting Standards Board (IASB) as it focuses on a developing country that has adopted IFRS 13 and other fair value-related standards relatively recently.Originality/valueThe disclosure analysis contained in this study represents the first comprehensive analysis of the extent of compliance with the fair value disclosure requirements of IFRS. Furthermore, this study considers the impact of directors' social capital and finds that it is a more powerful determinant of the extent of compliance with IFRS as compared to human capital.

Rethinking the signature rule and the sufficiency of signatures as evidence of notice of terms in (business-to-business) commercial contracts

Using socio-economic analysis, this article critiques the oversimplification at the heart of the signature rule, which governs sufficiency in the notice of terms to a contractual counterparty concerning signed contracts in Commonwealth common law jurisdictions. As demonstrated in this article, two main factors account for the inadequacy of the signature rule as currently conceived. The first is the assumption that commercial entities are sophisticated. Second, in contested cases concerning notice, only manifest onerousness or unusualness of terms should warrant a heightened duty of notification on an offeror. This article argues that the signature rule lacks nuance and should be reformed to account for context-specificity. This is because: a) commercial sophistication is a matter of gradation; and b) terms need not be unusual or onerous to require heightened disclosure requirements – what matters for specific disclosure is the salience or peculiarity of a term.

The Decision-Usefulness of ASC 606 Revenue Disaggregation

ABSTRACT The disclosure requirements of ASC 606 significantly expanded the volume and granularity of revenue information. However, because of the significant judgment associated with the standard, it is unclear whether the new disclosures increased the decision-usefulness of financial reports. To shed light on this question, we investigate the revenue disaggregation requirements of ASC 606. These requirements had significant disclosure consequences, illustrated by an over two-fold increase in the median number of revenue items in disaggregating firms’ reports. Consistent with enhanced decision-usefulness, we find higher (lower) analyst sales forecast accuracy (dispersion) for disaggregating firms. These benefits are primarily present when disaggregation is accompanied by detailed qualitative disclosures, when disaggregated revenues are comparable, and when the granularity of segment information is low. Our study contributes to research evaluating ASC 606 and offers valuable insights to standard-setters currently considering broader disaggregation of income statement items (Financial Accounting Standards Board (FASB) 2022). Data Availability: Data are available from the sources identified in the paper. JEL Classifications: G24; G30; G34.

How green credit affects corporate environmental information disclosure: evidence from new energy listed companies in China

IntroductionEnvironmental information disclosure is an important means to protect the ecological environment, and global climate change puts forward higher requirements for corporate environmental information disclosure. New energy companies play an important role in addressing climate change and environmental information disclosure, and should strengthen environmental information disclosure and actively participate in ecological environmental protection.MethodsThis paper selected Chinese new energy listed companies as the research sample to investigate the impact of green credit on corporate environmental information disclosure, and proposed and empirically tested the hypothesis on the mechanism of the effect of green credit on environmental information disclosure.ResultsThe regression results indicated that green credit can effectively improve the quality of corporate environmental information disclosure, and this conclusion is still significantly valid after robustness test; The impact mechanism tests showed that green credit can change the level of corporate environmental information disclosure by controlling company size. This paper also tested the heterogeneity and adjustment effects, showing that the relationship between green credit and environmental information disclosure are affected by multiple factors.DiscussionsCombining the research of this paper and previous research results, it is found that the positive impact of green credit on corporate environmental information disclosure has been confirmed by academic research and practical verification. However, the implementation effect of green credit policy will be affected by the economic level, regional differences, and the comprehensive impact from companies, financial institutions and government departments.

Allocation of Shares for Non-cash Consideration

The allocation of shares in exchange for non-cash assets, such as intellectual property, real estate, or services, is a common transaction in the business world. This practise offers businesses a means to raise capital, expand operations, or acquire valuable assets without depleting their cash reserves. However, this seemingly straightforward exchange is subject to various legal and regulatory requirements that must be adhered to. In this article, we will explore the process of allotting shares for non-cash consideration and the key legal considerations associated with this practice. First and foremost, it is important to conduct a thorough valuation of the non-cash assets being exchanged for shares. The valuation process should be conducted by a qualified third-party expert to ensure that the exchange is fair and equitable for all parties involved. Additionally, it is crucial to document the valuation process and maintain clear records to demonstrate compliance with regulatory requirements. regulatory complexities that demand careful consideration. This essay begins by examining the fundamental principles underlying the allocation of shares for non-cash consideration, highlighting its importance in contemporary corporate finance. It then navigates through the legal landscape, discussing the relevant statutory provisions, regulatory oversight, and judicial precedents that shape this practice. Special attention is given to issues such as valuation, disclosure requirements, and shareholder rights, which are critical in ensuring transparency and fairness. To provide a comprehensive perspective, international comparisons are drawn to illustrate how different jurisdictions approach the allocation of shares for non-cash consideration. This cross-jurisdictional analysis sheds light on best practises and emerging trends in this field, offering valuable insights for legal practitioners, corporate executives, and policymakers.

Compliant marketing: Breaking down the New Marketing Rule

The Securities and Exchange Commission (SEC) adopted the New Marketing Rule on 4th May, 2021, giving registered investment advisers until 4th November, 2022 to comply. This New Marketing Rule (the Rule) replaced the original advertising rule that was adopted in 1961 and the original cash solicitation rule that was adopted in 1979. This much-needed update takes into consideration the modernisation of advisers' marketing efforts and combines the two old rules into one. As with any new rule, advisers run into the added challenge of interpretation. This Rule is primarily principles-based, and we do not know yet how the SEC will interpret advisers' various implementations. This paper will only address the requirements that apply to investment advisers registered with the SEC. As such, this paper will tackle the new definition of an ‘advertisement’, principles-based prohibitions, specific disclosure requirements and restrictions for performance, testimonials and endorsements, third party ratings, clarification on the applicability for private fund managers, new ADV disclosure requirements around advertising and new books and records requirements.

Classifying Internal Control Deficiencies: The Case of Magnum Hunter Resources Corporation

ABSTRACT Magnum Hunter Resources Corporation (MHRC) was an oil and gas company headquartered near Dallas, TX. Although the company grew rapidly through acquisitions, the accounting department did not keep pace with the company’s growing size and sophistication. Management identified this as an internal control deficiency (ICD) prior to issuing the 2011 financial statements but did not disclose it because management underestimated its severity. The company later disclosed multiple material weaknesses when it restated its financial statements. This case study is designed for use in the undergraduate or graduate audit classroom to examine the classification and disclosure requirements for ICDs. After completing this case study, students will be able to apply professional standards to classify ICDs; critique the decision-making process of management, consultants, and auditors tasked with evaluating ICDs; and consider the impact of material weakness disclosure on investors. JEL Classifications: M41; M42.

Analyzing the Relationship Between Inventory Policies and CSR Practices: Case of Jordanian Companies

Abstract The present research aims to assess the impact of inventory policies on the Corporate Social Responsibility practices of companies listed on the Amman Stock Exchange. The companies included in the research belonged to manufacturing or related sectors in which holding inventory is inevitable. The sample size chosen for the research was 45 companies, mainly because of the availability of financial data from the period 2012 to 2022. The data for the research was extracted from the Amman Stock Exchange, and we utilized a regression-based ANOVA model for our analysis, containing the dummy variable to enhance the model’s validation and facilitate the statistical analysis, hence enabling a deeper understanding. We utilized. We also used the GMM model to validate our analysis. The financial variables of the research were based on the reported financial statements of the companies. The study explores the impact of the relationship between inventory policy and Corporate Social Responsibility on the different stakeholders, such as customers, employees, and environmental groups. We found that the CSR disclosure requirements also tend to have an impact on the inventory policies of these companies. Our results revealed that inventory levels are positively associated with satisfied customers. We found that the company’s total CSR and sales ratio do not have a straight-line relationship. It led us to conclude that inventory levels are positively associated with satisfied customers.

The role of ownership structure, board, and audit committee in corporate social responsibility disclosure: Jordanian evidence

Purpose This paper aims to explore the extent of corporate social responsibility disclosure (hereafter CSRD) in Jordan and also examine whether ownership structure, board of directors and audit committee characteristics influence CSRD. Design/methodology/approach The extent of CSRD is measured by constructing a CSRD index for industrial firms listed on the Amman Stock Exchange from 2016 to 2021. Panel regression analysis is used to examine the potential effect of ownership structure, board of directors and audit committee on the level of CSRD. Findings This study provides empirical evidence that diverse groups of shareholders have different effects on CSR engagement, and board characteristics (board size, board independence and gender diversity) play a vital role in increasing voluntary disclosure, including CSR information. There is no evidence to support that CSRD is influenced by audit committee characteristics. Practical implications This study recommends that corporate regulators and policymakers can improve CSRD practices by expanding the scope of existing disclosure requirements related to CSR and developing a structured CSRD index to measure the degree of CSRD practices for comparative purposes. Encourage firms to actively participate in social responsibility programs by granting tax incentives and government facilities to firms with the best CSR reports. Policymakers should introduce initiatives that support female’s representation on board. Finally, firms should restructure their boards by increasing board size and the percentage of independent directors to enhance their effectiveness to support CSRD. Originality/value This paper contributes further insights into the literature on CSRD practices and disclosure by analyzing data from developing market contexts.

Understanding Global And Indian Patent Disclosure Requirements For Genetic Resources And Traditional Knowledge

A thoughtful exploration of Patent Disclosure Requirements (PDRs) within the context of the global patent system and legal policy frameworks of different nations, with special reference to India, and PDRs emergence as a linchpin in the preservation and safeguarding of Genetic Resources (GRs) and Traditional Knowledge (TK), particularly when intertwined with the heritage of indigenous and local communities, their significance as guard against biopiracy, while upholding the doctrine of Access and Benefit-Sharing (ABS) as envisioned by the Convention on Biological Diversity (CBD) and the Nagoya Protocol. PDRs scope to mandate transparently revealing the origins and sources of GRs and TK, deployed in their innovations for patents. PDRs are a litmus test for patent offices and governing authorities to assess the reliability of patent claims and are an indispensable weapon in the fight against biopiracy. Further, different kinds and the evolving nature of PDRs are also acknowledged, as they adapt to cope with new challenges, technological advancements, and the dynamic evolution of the legal framework, finally, positioning PDRs as key protagonists in shaping responsible innovation while preserving biodiversity.

Does Greater Transparency Discipline the Loan Loss Provisioning of Privately Held Banks?

Whether transparency helps or hurts the stability of the financial system is an unresolved question. Recent trends have seen a decline in disclosure requirements especially for small and privately held banks. To assess the consequences of such regulations, we investigate the relationship between the transparency of loan loss provision disclosures and the provisioning practices of privately held banks. We study a unique change in disclosure regulation under German banking law which introduces mandatory disclosures of loan loss provisions. Using proprietary data provided by the national supervisor, we are able to observe provisioning practices before and after disclosure becomes mandatory. Our findings suggest that bank managers use loan loss provisions to a lesser extent for income smoothing once they are required to disclose their accounting choice. At the same time, provisions become timelier and loan portfolio quality improves. The change comes in the absence of capital market pressure and highlights the role of depositors and public pressure in the monitoring and disciplining of bank managers. Overall, these findings support the view that bank transparency helps establish financial stability.

The Impact of Corporate Environmental Information Disclosure on Investor Attitudes in A Carbon Neutral Context

With the rapid development in the field of technology and production, the adverse consequences of energy-intensive industries have become impossible to ignore. The frequent occurrence of extreme weather, loss of biodiversity, and degradation of ecosystems across the globe has made the process of global environmental governance particularly urgent. In order to meet the needs of sustainable development strategies, many countries have begun to emphasize the fulfillment of corporate environmental responsibility and have put forward a series of requirements for environmental information disclosure. At the same time, the general public has also actively responded to the state's call to monitor corporate emissions behavior. This study focuses on individual investors in China's capital market, using a survey method of designing a scale, distributing a questionnaire, and analyzing it with SPSS to explore their attitudes toward environmental information disclosure of heavily polluting enterprises. The study finds that investors are more favorable to enterprises with higher levels of environmental information disclosure, especially in today's environmentally conscious world. Such disclosure not only increases public trust in the enterprise and enhances its image, but also helps investors to more accurately assess the long-term value and sustainable development prospects of the enterprise. This study aims to provide more targeted and effective disclosure strategies for enterprises to promote the realization of both economic and social benefits. This study provides important insights and guidance for Chinese heavy polluters in addressing environmental challenges and sustainable development.

Private equity investment in Germany's primary care sector

Abstract Background A major reform of the primary care sector in Germany that included a new law on health system financing in 2004 introduced new tools to be used by “entrepreneurial doctors”. These new tools provided opportunities for corporate investments into primary care, including through private equity funds (PEFs). Since then, there has been a stark increase of private investments. Methods A review of academic and grey literature, media reports and relevant organizational websites. Results Investments by PEFs in Ambulatory Health Care Centres (in German: Medizinische Versorgungszentren, MVZs) have increased continuously in recent years, and latest estimates suggest that in 2020 about 750 of overall 3800 MVZs were owned by PEFs. However, exact and robust data on how many MVZs are owned by PEFs do not exist, as there are no (legal) requirements for disclosures of these investment and ownership structures in Germany. Often, investors are located in tax havens, making the identification of ownership difficult. In addition, a PEF investing into an MVZ may include one health care facility, several dozens or over 100, depending on how well developed the network is (sometimes including long-term care facilities), further complicating an understanding of ownership status. The public debate on private equity investments in Germany's health system has been intensifying in recent years and a number of concerns have been raised, leading to calls by medical chambers for stricter regulation. Federal Minister of Health, Karl Lauterbach, announced in late 2022 that a law prohibiting private equity acquisitions of MVZs would be forthcoming in 2023. Conclusions The involvement of PEFs in Germany's ambulatory health care centres has increased substantially in recent years, leading to increasing public concerns and calls for stricter regulation.

INTERNATIONAL REGULATIONS FOR SUSTAINABLE DEVELOPMENT ACCOUNTING REPORTS

The International Standards Board for Sustainable Development (ISSB) published in 2023 the ”General Requirements for Disclosure of Sustainability-related Financial Information” and the International S2 IFRS Standards for "Climate-Related" Financial Reporting, whereby the accounting community felt the need for additional informative comments. The article analyzes the prerequisites for the introduction of sustainable development standards and the possibilities of their application. The priorities of the information related to the sustainable development of the organizations in the published integrated financial reports were partially clarified.

Aligning disclosure requirements for managerial assessments of going concern risk: Initial evidence from New Zealand

AbstractThis study examines the impact of the Financial Reporting Standard No. 44 New Zealand Additional Disclosures (FRS 44) amendment issued by the New Zealand Accounting Standards Board (NZASB). The FRS 44 amendment aligned disclosure requirements for managerial assessments of going concern risk in financial reports with auditing standards for periods ending on or after 30 September 2020. We first present descriptive evidence on the frequency of going concern opinions (GCO), frequency of going concern issues identified as key audit matters (GCKAM), and frequency and content of managerial assessments of going concern risk (GCMA) before and after the FRS 44 amendment. Second, we show lower audit fees and shorter audit lags for financially distressed companies post‐FRS 44 implementation. This suggests that the harmonisation of accounting and auditing disclosure requirements alleviates tension during the going concern decision‐making process for affected companies, subsequently leading to reduced audit fees.