Generally Accepted Accounting Principles Research Articles

Impact of Indian Accounting Standards (IND AS) on Financial Statements

The adoption and implementation of accounting standards play a pivotal role in shaping the financial reporting landscape of a country, influencing how businesses communicate their financial performance and position to stakeholders. In the case of India, the transition from Generally Accepted Accounting Principles (GAAP) to Indian Accounting Standards (Ind-AS) marked a significant paradigm shift in the accounting framework. The move was aimed at aligning Indian accounting practices with global standards, fostering transparency, comparability, and international investment. Historically, India had been following its own set of accounting standards, which sometimes diverged from international norms, leading to challenges in cross-border financial analysis and investment decisions. Recognizing the need for convergence with International Financial Reporting Standards (IFRS), the Ministry of Corporate Affairs (MCA) in India mandated the adoption of Ind-AS for certain classes of companies, primarily listed entities and large unlisted companies. The adoption of Ind-AS was a phased process, with the first set of companies transitioning in the financial year 2016-17. The primary objective was to enhance the quality and reliability of financial reporting, making it more comparable and relevant on a global scale. Ind-AS aimed to bring about consistency in accounting treatments, disclosures, and presentation of financial statements, fostering a more transparent and investor-friendly environment. One of the key motivations behind the shift to Ind-AS was to facilitate easier access to global capital markets for Indian companies. By adhering to internationally recognized accounting standards, Indian businesses sought to attract foreign investment and broaden their investor base. This move was particularly crucial as India aimed to position itself as a global economic player, attracting multinational corporations and fostering cross-border investments. The implementation of Ind-AS introduced changes in various aspects of financial reporting, affecting balance sheets, income statements, and disclosure practices. Companies faced the challenge of adapting to new measurement criteria, recognition principles, and disclosure requirements. The impact of these changes extended beyond mere compliance; it influenced how companies assessed their assets, liabilities, and overall financial performance. Additionally, the adoption of Ind-AS prompted companies to reevaluate their internal control mechanisms, financial policies, and governance structures. The transition required a robust framework for training and educating financial professionals, auditors, and other stakeholders to ensure a smooth and accurate implementation of the new standards.

THE CHALLENGES OF IMPLEMENTING ACCOUNTING INFORMATION SYSTEMS IN IFRS AND GAAP : GLOBAL STUDY

This paper provides a thorough analysis of the difficulties that arise when putting accounting information systems (AIS) into practice under the auspices of generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS). The research delves into the worldwide terrain, covering a range of commercial settings and legal structures. Using both qualitative and quantitative research methods, the study looks into important variables that affect how well AIS is adopted and integrated in accordance with GAAP and IFRS requirements. KEYWORDS: Accounting Information Systems (AIS), International Financial Reporting Standards (IFRS), Generally Accepted Accounting Principles (GAAP), Global Study

Revenue Recognition (Topic 606) at Salesforce.com, Inc.

This case uses an array of carefully selected and excerpted revenue recognition related information contained in Salesforce.com's January 31, 2019, 10-K. Maria, the fictional protagonist, is seeking to understand those disclosures as part of her preparation for an upcoming job interview with the company. As such, she is relying on those disclosures to provide insights as to the company's main product/service lines, the events that signal when and how much revenue the company has earned (i.e., the essence of its business model), along with the related official generally accepted accounting principles (GAAP) criteria pertinent to the valuing and timing of recorded revenues.

Tax implications of leasing vs. purchasing: a comprehensive analysis of the impact on firms and government tax revenue

ABSTRACT The decision between leasing and purchasing can significantly influence a firm’s tax responsibilities, potentially impacting government tax revenue. This study aims to conduct a thorough analysis and measurement of the tax implications on the asset’s user or lessee, lessor, and government tax revenue. It also considers the revised U.S. Generally Accepted Accounting Principles (GAAP) standard under ASC 842 and the Tax Cuts and Jobs Act (P.L. 115–97), which have been recently implemented. Through analytical and numerical examinations, our objective is to provide a comprehensive understanding of how leasing practices impact the financial position of firms and government tax revenue.

Readability level of prescribed Accounting textbooks used in South African secondary schools

The results of a study that investigated the readability of three Accounting textbooks used in South African secondary schools are presented. In South African schools, textbooks remain the primary source of course content that drives the students’ learning of the subject matter. The study followed the traditions of the positivist paradigm. The Flesch reading ease score and Gunning fog index are readability measurement methods that are helpful in measuring the difficulty or challenging nature of text in the Accounting textbooks. Using them assists teachers of Accounting who have the responsibility to choose textbooks that would assist their students to make meaning of the subject matter. Three sections from each textbook were analysed: an introduction section on budgeting, analysis and interpretation section, and section on General Accepted Accounting Principles. These topics are very important in understanding the discipline of Accounting; their readability or accessibility by students play a crucial role in learning the subject of Accounting. The results showed that some textbooks are not readable, or are not straightforward and user friendly, and are thus difficult to understand and engage with. This points to these textbooks being challenging to some Accounting students, especially since to some English is their second language. The recommendations for future research are discussed. It is suggested that authors of Accounting textbooks must consider the readability of the textbooks.

Minimizing falsified financial reports

The study criticizes the way South Africa collects taxes from different segments of the population, primarily pensioners and workers with two sources of income. It also condemns the ineffective manner in which it administers some tax payouts, especially in the unfairness that has shown bias to some groups. Primarily, taxing of the pensioners is condemned, as well as the taxing of second earnings of employees, mainly where there were victims of the apartheid policies. The paper recommends taxing people with caution, in order not to perpetuate apartheid-initiated poverty of the South African masses of people, and in cases where earners who are being taxed could be having extra financial responsibilities. In order to resolve these problems, taxpayers and tax preparers should make sure that tax laws are applied correctly, that they are aware of the consequences of breaking the Generally Accepted Accounting Principles (GAAP), and that they routinely review and update their tax return positions in response to modifications to accounting standards and tax legislation.

Value relevance of IFRS adoption in the deposit money banks in Nigeria

The prime role of financial statements is to provide information that is useful to existing and potential investors, creditors and other users in making rational investment and similar decisions. Accounting information is a product of Generally Accepted Accounting Principles (GAAP), standards and other institutional settings which are presumed to shape the form and content of the financial reports. Uniform accounting standards assist investors and other market participants to effectively analyze firms from countries with accounting standards that they are familiar with and that IFRSs are adopted in order to achieve information of higher quality than local standards. Value relevance is one of the most common methods of examining the quality of accounting information. Information has the quality of relevance when it influences the economic decisions of users. This study examined value relevance of accounting information after the mandatory IFRSs adoption in the Nigerian Banking industry. Correlational research design using pre-and-post IFRSs regime analysis in a sample of 15 banks for a period of 8 years (2008-2015) was employed. Panel regression technique of data analysis was used and the study found that the adoption of IFRS has significantly improved the value relevance (decision usefulness) of accounting information of deposit money banks in Nigeria during the period covered by the study. However, the results show that the adoption of IFRS improves the value relevance of book values of equity and accounting earnings significantly. We recommend that accounting regulators should investigate the implementation credibility of IFRS in the Nigerian banks.

Impact of manager’s motivation on fraudulent accounting: An empirical study

This study empirically examines the motives of Indian firms’ managers to violate Generally Accepted Accounting Principles (GAAP) and engage in so-called fraudulent accounting. Managers’ motivations for fraudulent accounting rather than profit adjustment are empirically analyzed using data from Indian-listed companies. The sample includes 91 firms and the period of study is March 2001 to March 2022. The tests were conducted using single and multiple variables by the empirical methods used in other studies on profit adjustment. In the case of single variables, the tests are the chi-square test of independence for dummy variables and the significance test of the difference between the mean and median for continuous variables. In the case of multiple variables, the sample firms with a dependent variable of 1 and the control firms with a dependent variable of 0 are analyzed using the logit model. The estimation is done by the robust covariance method. The findings indicate that firms that engage in fraudulent accounting are significantly worse off than other firms in terms of their financial position and operating results, have significantly higher financing needs, and significantly more frequently conduct initial public offerings (IPOs).

Adoption of International Financial Reporting Standards and Financial Performance of Listed Manufacturing Firms in Nigeria

This study reviewed the literature on the effect of the International Financial Reporting Standards (IFRS) adoption on financial performance of listed manufacturing firms in Nigeria. Forty-five journal articles on the subject published between 2012 and 2021 were analyzed. The study employed a narrative literature review. The review focused on determining whether there wre any significant differences between the financial performance measurements of listed manufacturing firms operating in Nigeria that were prepared using IFRS-compliant financial statements and local Generally Accepted Accounting Principles (GAAP). Second, to determine whether financial performance indicators developed using IFRS-compliant financial statements exhibit superior performance than those developed using local GAAP. The Studies reviewed employed secondary data, which were sourced from the annual reports of companies listed on the Nigerian Exchange Group, and the data were analyzed using panel regression analysis. According to the analysis of the literature, IFRS financial ratios are more accurate performance indicators than local GAAP financial ratios. Further investigation indicated that there were no notable discrepancies between the financial performance indicators (financial ratios) reported by listed manufacturing firms operating in Nigeria under local GAAP and IFRS-compliant financial statements. The study concluded that a company's financial performance (return on capital employed) improves in direct proportion to how closely it complies with IFRS disclosure guidelines. The study recommended that to sustain the positive effects of compulsory and voluntary financial performance disclosure, manufacturing firms should be concerned with the disclosure of important information at every point in time.

Principles based accounting standards, audit fees and going concern: evidence using advanced machine learning

PurposeThe current study uses an advanced machine learning method and aims to investigate whether auditors perceive financial statements that are principles-based as less risky. More specifically, this study aims to explore the association between principles-based accounting standards and audit pricing and between principles-based accounting standards and the likelihood of receiving a going concern opinion.Design/methodology/approachThe study uses an advanced machine-learning method to understand the role of principles-based accounting standards in predicting audit fees and going concern opinion. The study also uses multiple regression models defining audit fees and the probability of receiving going concern opinion. The analyses are complemented by additional tests such as economic significance, firm fixed effects, propensity score matching, entropy balancing, change analysis, yearly regression results and controlling for managerial risk-taking incentives and governance variables.FindingsThe paper provides empirical evidence that auditors charge less audit fees to clients whose financial statements are more principles-based. The finding suggests that auditors perceive financial statements that are principles-based less risky. The study also provides evidence that the probability of receiving a going-concern opinion reduces as firms rely more on principles-based standards. The finding further suggests that auditors discount the financial numbers supplied by the managers using rules-based standards. The study also reveals that the degree of reliance by a US firm on principles-based accounting standards has a negative impact on accounting conservatism, the risk of financial statement misstatement, accruals and the difficulty in predicting future earnings. This suggests potential mechanisms through which principles-based accounting standards influence auditors’ risk assessments.Research limitations/implicationsThe authors recognize the limitation of this study regarding the sample period. Prior studies compare rules vs principles-based standards by focusing on the differences between US generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) or pre- and post-IFRS adoption, which raises questions about differences in cross-country settings and institutional environment and other confounding factors such as transition costs. This study addresses these issues by comparing rules vs principles-based standards within the US GAAP setting. However, this limits the sample period to the year 2006 because the measure of the relative extent to which a US firm is reliant upon principles-based standards is available until 2006.Practical implicationsThe study has major public policy suggestions as it responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US Securities and Exchange Commission (SEC), to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the International Accounting Standards Board (IASB) Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks such as climate change.Originality/valueThe study has major public policy suggestions because it demonstrates the value of principles-based standards. The study responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US SEC, to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information as business transactions and investor needs continue to evolve globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the IASB Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks like climate change. The study fills the gap in the literature that auditors perceive principles-based financial statements as less risky and further expands the literature by providing empirical evidence that the likelihood of receiving a going concern opinion is increasing in the degree of rules-based standards.

PCAOB inspection deficiencies and audit fees

AbstractThis study aims to extend research on the effect of PCAOB inspections on audit firm behavior by examining generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP) type PCAOB inspection deficiencies, separately, to reveal the differential effects on audit fees in subsequent years. We empirically examine the audit fees of 98,393 client firm‐year observations for auditors who received a PCAOB inspection report during 2004–2021 via multivariate regression analyses. We find that GAAS (GAAP) deficiencies are associated with higher (lower) audit fees in the years following the reported deficiency. Our results suggest that the PCAOB inspection process modifies audit firm behavior when GAAS deficiencies are reported leading to the firm charging higher audit fees to defray the costs of addressing the deficiencies, but due to the severity of GAAP deficiencies that are identified, audit firms are willing to negotiate lower fees to retain the client. Our results are primarily driven by annually inspected audit firms. These results suggest that auditors respond to GAAS and GAAP PCAOB inspection deficiencies differently. The results of our study are useful to regulators and policymakers, such as the SEC and the PCAOB, in understanding how auditors respond to PCAOB inspection deficiencies and their due diligence to correct those deficiencies. PCAOB inspections are intended to evaluate compliance with accounting and auditing standards to improve audit quality and our study helps to extend the research to date which has not yet clearly demonstrated whether or not this has been accomplished.

Assessing the Influence of Budgeting and Forecasting Accuracy on Financial Performance in Corporate Accounting using SPSS Statistics

corporate accounting, Corporate accounting is a fundamental facet of modern business operations, serving as the backbone of financial management and reporting within organizations. It encompasses the systematic recording, analysis, and interpretation of financial data to provide accurate insights into a company's economic activities. This branch of accounting operates within the corporate context, dealing with the financial transactions and events that transpire within a business entity. At its core, corporate accounting enables companies to track their financial health, make informed decisions, and fulfill regulatory requirements. It involves processes such as recording revenue, expenses, assets, and liabilities, as well as preparing financial statements like balance sheets, income statements, and cash flow statements. These financial reports play a pivotal role in communicating the company's financial performance and position to various stakeholders, including investors, creditors, regulatory bodies, and management. In the dynamic landscape of modern business, corporate accounting is constantly evolving. Advancements in technology have introduced innovative software and tools that streamline accounting processes, enhance accuracy, and enable real-time reporting. Additionally, the complexity of global markets and regulatory frameworks has heightened the importance of adhering to accounting standards such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). In essence, corporate accounting serves as the financial compass of a company, guiding it towards prudent financial management, effective resource allocation, and transparency in reporting. It plays an integral role in supporting strategic decision-making, fostering investor confidence, and ensuring the organization's compliance with financial regulations.Research in corporate accounting holds significant value as it ensures financial transparency, guides ethical conduct, and aids in compliance with international standards. By refining accounting practices, detecting fraud, and informing strategic decisions, such research promotes accurate financial reporting, safeguards against mismanagement, and supports sustainable business growth in a complex and interconnected global economy.SPSS (Statistical Package for the Social Sciences) is a comprehensive software tool used for statistical analysis and data management. It offers a user-friendly interface for researchers and analysts to conduct various statistical tests, create visualizations, and explore data relationships. SPSS facilitates tasks such as data cleaning, descriptive statistics, hypothesis testing, regression analysis, and more. It's widely employed in research, social sciences, and business for its ability to process and interpret data, aiding in evidence-based decision-making and insights generation.Financial Statement Analysis, Budgeting and Forecasting, Tax Compliance, generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) Knowledge, Financial Software Utilization.Cronbach's Alpha Reliability analysis. The collective Cronbach's Alpha coefficient for the model stands at .537, indicating a reliability level of 49%. Drawing from the literature review, the model with the aforementioned Cronbach's Alpha value of 53% is deemed suitable for further analysis.

Assessing the Influence of Budgeting and Forecasting Accuracy on Financial Performance in Corporate Accounting using SPSS Statistics

corporate accounting Corporate accounting is a fundamental facet of modern business operations, serving as the backbone of financial management and reporting within organizations. It encompasses the systematic recording, analysis, and interpretation of financial data to provide accurate insights into a company's economic activities. This branch of accounting operates within the corporate context, dealing with the financial transactions and events that transpire within a business entity. At its core, corporate accounting enables companies to track their financial health, make informed decisions, and fulfill regulatory requirements. It involves processes such as recording revenue, expenses, assets, and liabilities, as well as preparing financial statements like balance sheets, income statements, and cash flow statements. These financial reports play a pivotal role in communicating the company's financial performance and position to various stakeholders, including investors, creditors, regulatory bodies, and management. In the dynamic landscape of modern business, corporate accounting is constantly evolving. Advancements in technology have introduced innovative software and tools that streamline accounting processes, enhance accuracy, and enable real-time reporting. Additionally, the complexity of global markets and regulatory frameworks has heightened the importance of adhering to accounting standards such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). In essence, corporate accounting serves as the financial compass of a company, guiding it towards prudent financial management, effective resource allocation, and transparency in reporting. It plays an integral role in supporting strategic decision-making, fostering investor confidence, and ensuring the organization's compliance with financial regulations. Research in corporate accounting holds significant value as it ensures financial transparency, guides ethical conduct, and aids in compliance with international standards. By refining accounting practices, detecting fraud, and informing strategic decisions, such research promotes accurate financial reporting, safeguards against mismanagement, and supports sustainable business growth in a complex and interconnected global economy. SPSS (Statistical Package for the Social Sciences) is a comprehensive software tool used for statistical analysis and data management. It offers a user-friendly interface for researchers and analysts to conduct various statistical tests, create visualizations, and explore data relationships. SPSS facilitates tasks such as data cleaning, descriptive statistics, hypothesis testing, regression analysis, and more. It's widely employed in research, social sciences, and business for its ability to process and interpret data, aiding in evidence-based decision-making and insights generation. Financial Statement Analysis, Budgeting and Forecasting, Tax Compliance, generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) Knowledge, Financial Software Utilization. Cronbach's Alpha Reliability analysis. The collective Cronbach's Alpha coefficient for the model stands at .537, indicating a reliability level of 49%. Drawing from the literature review, the model with the aforementioned Cronbach's Alpha value of 53% is deemed suitable for further analysis.

CRYPTOCURRENCY AS AN OBJECT OF ACCOUNTING: PROBLEMS OF RECOGNITION

The economic essence of cryptocurrencies and digital technologies were substantiated in the article. Also the article defines their role and significance in global economic processes. It has been established that the reason for the rapid growth in the popularity of cryptocurrencies lies in their advantages over traditional money, in particular, in decentralization, speed and ease of transactions, a high level of security through the use of cryptographic technologies, etc. At the same time, it has been established that the use of cryptocurrencies poses threats associated with the risk of stability of the global financial and economic system, significant volatility in the value of cryptocurrencies, the uncertainty of their legal status, insufficient controllability of transactions, etc. It is substantiated that the widespread use of cryptocurrencies in business processes and their use as an investment object requires proper legal regulation of operations with digital assets. The current state of the regulatory framework for the circulation of cryptocurrency and approaches to its recognition as an object of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) and International Accounting Standards (IAS) are analyzed. It has been established that the enterprises, when recognizing cryptocurrency as an object of accounting, assessing its value and subsequently displaying information in the system of accounting accounts and financial statements, are guided by various accounting standards that are currently available, and therefore there are threats of inconsistencies or distortions of information about the financial condition of the enterprise, its liquidity and solvency, net asset value, etc. To solve this problem, the expediency of developing the special accounting standards by the regulatory authorities that define the generally accepted methodological foundations for displaying information about cryptocurrencies in the accounting system of enterprises is substantiated. Taking into account the specific properties and characteristics of cryptocurrencies, it is recommended to introduce a separate category of assets for cryptocurrencies and disclose information about them in the company’s balance sheet before the item «Cash and its equivalents» in order to maintain the order of liquidity of asset allocation.

Offsetable Derivatives and Investor Risk Assessment

U.S. generally accepted accounting principles (GAAP) allows banks to offset derivative assets against derivative liabilities with the same counterparty and report only the net amount on the balance sheet. Derivative offsetting under international financial reporting standards (IFRS) is much more restrictive, resulting in the single largest difference in balance sheet presentation between U.S. GAAP and IFRS. Two important factors dominate the standard-setting discussion on this issue: (1) whether these derivatives are informative about bank risk and (2) whether disclosing them substitutes for recognition on the balance sheet. Using a hand-collected global sample of banks, we first show that offsetable derivatives are positively associated with bank risk, based on multiple risk measures, suggesting that these derivatives are informative about bank risk. Next, exploiting the differential accounting treatment across U.S. GAAP and IFRS banks, we find that disclosure versus recognition of offsetable derivatives matters for the risk assessment of equity investors but not for that of (more sophisticated) credit default swap investors. Additional tests corroborate the inference that investor sophistication helps explain the differential investor assessment of recognized versus disclosed offsetable derivatives. Collectively, our findings suggest that offsetable derivatives convey information about bank risk and that, for less sophisticated investors, disclosing them may not substitute for recognizing them. This paper was accepted by Eric So, accounting. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4831 .

Regulatory enforcement, foreignness, and language negativity: Evidence from SEC comment letters

In this paper, we demonstrate that negative language is employed as a mechanism through which regulators express their differentiated level of concern and pass on stronger messages to riskier reviewees. We investigate the language tone employed by the internationally-influential United States (US) Securities and Exchange Commission (SEC) in comment letters to foreign firms, which are considered riskier in comparison with their US domestic counterparts. We find a significantly greater level of language negativity in comment letters addressed to foreign registrants. We further show that the negativity of language is more intense when foreign firms are domiciled in strong-law countries and when they do not apply US Generally Accepted Accounting Principles (GAAP). We offer implications for regulators, managers, and market participants.

Article: Pillar Two and the Accounting Standards

Global minimum taxation under Pillar Two establishes a link to financial statements, in particular with regard to the revenue threshold, to the calculation of the effective tax rate (ETR), and to carve-outs. This article discusses in detail these links and possible incentives, adverse effects and opportunities for improvement. It suggests that Pillar Two incentivizes multinational enterprises (MNEs) to prepare their individual and consolidated financial statements for tax purposes by using the discretionary leeway inherent in accounting standards. In particular they may use such discretion to report lower revenues to avoid falling within the scope, to report profits at the lower margin and tax expense at the higher margin to show a sufficiently high ETR and to adapt their financial accounting measurement to keep the top-up tax low by using tangible asset carve-outs based on financial statements. In consequence, the quality of financial reporting and capital allocation may be impaired. In addition, the acceptance of almost all common accounting standards under Pillar Two incentivizes generally accepted accounting principles (GAAP) competition between countries. The authors conclude that connecting Pillar Two to financial statements has adverse effects from both a tax and an accounting perspective. An improvement of existing tax rules to combat tax avoidance, as started with the Base Erosion and Profit Shifting (BEPS) project, seems preferable. Pillar Two, GloBE, Minimum Taxation, Accounting Standards, IFRS, Financial Statements

Non-fungible token valuation exposed: US Generally Accepted Accounting Principles Compliance and artificial intelligence’s disruptive role

The ascent of non-fungible tokens (NFTs) has recently garnered significant attention, prompting the need for effective methods to appraise these digital assets. An examination was conducted to ascertain the efficacy of the US Generally Accepted Accounting Principles (GAAP) in valuing NFTs, considering their unique attributes, notably their indivisibility and blockchain-based ownership. With a two-fold aim, this study conducts a comprehensive evaluation of GAAP’s suitability for NFT valuation while pinpointing the constraints inherent in the existing accounting framework. The proposed remedies encompass the development of industry-specific guidelines (ISG), refinement of NFT categorization and evaluation techniques, timely resolution of valuation complexities, and integration of artificial intelligence (AI) based solutions. Preliminary findings reveal that conventional GAAP procedures offer only partial alignment with the intricacies of NFT valuation, primarily because of the unprecedented nature of NFTs and swiftly evolving market dynamics. This investigation contributes significantly by delving into the subtleties of implementing established accounting principles within this nascent digital asset class. Furthermore, it underscores the importance of interdisciplinary collaboration between the accounting and technology sectors to adeptly navigate the ever-transforming domain of blockchain technology and digital assets. This research provides a resource for professionals, regulators, and scholars engaged in the dynamic realm of NFT valuation and accounting.

Financial reporting for cryptocurrency

This study compares and contrasts US and international accounting and financial reporting practices for cryptocurrency. We analyze the financial statements of 40 global companies that have exposure to cryptocurrencies, including cryptocurrency purchases, mining, payments, trading, and investments in ICOs and early-stage blockchain ventures. We document inconsistency between Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), as well as distortions that can mislead users in assessing asset value, liquidity, profitability, and cash-generating abilities across firms. In particular, firms receiving cryptocurrencies in revenue-generating activities account for cryptocurrencies as intangibles using different measurement bases and classify the associated cash inflows differently. Some firms place cryptocurrencies in the usual long-term location of intangibles, while others consider intangibles as liquid, short-term assets. Limited guidance about crypto-assets from both IFRS and GAAP lets companies choose which existing standard to apply and how to apply it. Understanding the financial and valuation implications of these new virtual assets is vital for future accounting research and professional practice.

The Role of the Effectiveness of Accounting Information Systems in the Relationship between the Earnings Management and Financial Performance

The effectiveness of the Accounting Information System (AIS) is expected to strengthen mechanisms leading to the efficient functioning of capital markets. AIS provides information that flows from the firm to stakeholders continuously. This flow of information forms the basis for the decision-making of the stakeholders. Therefore, the published periodical financial reports are expected to be relevant, faithfully represented, comparable, verifiable, timely, and comprehensible (Qatawneh, 2022). Additionally, international financial reporting standards provide management with a wide scope for choosing from different alternatives to treat the same transaction or event. Management can misrepresent the timing, amount, or intent of transactions and events related to revenues or expenses without being involved in fraud or falsification of the records (Gul et al., 2013; Kwon et al., 2020). Moreover, management can take advantage of generally accepted accounting principles (GAAP) to select from various methods when computing earnings and other financial measures, which could lead to lower-quality financial information (Fields et al., 2018). This discretionary room allows management to report the desired profit, achieving its goals in the interest of other parties. As a result, phrases such as earnings management and manipulation have emerged. Management can manage earnings by classifying good (bad) news, smoothing income, practicing big bath accounting, and choosing from different accounting methods (Brad et al., 2020), which is known as accruals-based earnings management. Keywords: Accounting, AIS, Earning Management, Financial Performance. DOI: 10.7176/RJFA/13-24-07 Publication date: December 31 st 2022