Information Content Of Financial Statements Research Articles

Развитие методики расчета резервов по оплате труда в современных экономических условиях

Recently, significant changes have been made to Russian accounting standards. They are aimed at improving the information content of financial statements and fair valuation of the assets and liabilities of the company. In this regard, the accounting procedure, including settlements with personnel, has become more complicated. All organizations, except small businesses, are required to form estimated liabilities. These include provisions for wages. That is, the financial statements must reflect upcoming payments, the implementation of which cannot be avoided. The author examined the criteria for their compliance with the conditions for classification as estimated liabilities, proposed a classification of approaches for calculating the corresponding reserves, as well as methods for determining the amounts for remuneration for length of service and at the end of the year.

Stock Price Reactions to Publications of Financial Statements: Evidence from the Moscow Stock Exchange

This paper analyses the effects of financial statements on the efficiency of the Russian stock market. Specifically, we analyse the impact of financial reporting on stock prices of the firms listed on the Moscow Stock Exchange. By means of the widely used event study method, which dates back to Ball and Brown [1], we analyse how corporate news publication affects stock prices.
 Our research analyses 1000 samples, each consisting of 30 events, independent of the underlying stocks/firms and analyses the relation between the behaviour of the share prices and the release of the firms’ annual, quarterly, and unscheduled financial statements. We use the daily stock price data of 56 components of the Russia Trading System Index from the years 2014 to 2020 in order to analyse the relation between the behaviour of the shares’ prices and the releases of the firms’ annual, quarterly, and unscheduled financial statements.
 Using an ordinary least squares market model, we estimate the market parameters and especially the so-called normal returns, i.e. benchmark values. With this, we calculate the abnormal returns, i.e. the price changes caused by the events cf. [1; 2]. We perform several statistical tests for non-Gaussian distribution of these abnormal returns and find that there is a significantly non-Gaussian relationship between the publication of financial statements and the prices of the shares, which should not be the case in an efficient market [2].
 Our results indicate that stock price volatility on the publication of financial statements may be caused by some information asymmetry, and demonstrate that the Russian stock market responds significantly to new information. Thus, we discuss recommendations to improve the information content of financial statements in Russia. This means analysts and fund managers can use new information to predict future stock returns and, thus, construct profitable portfolios.

Assessing the Application of International Accounting Standards (IAS) in Jordan: Factors Explaining Non-compliance

The main objective of this study is to assess the application of International Accounting Standards (IAS) in Jordan. The main purposes of this study are to: (1) present an analyzed study of the general concepts of IAS; (2) clarify the suitability of the IAS in Jordan and the possibility of using them as guidelines in adapting local standards; and (3) state the deficiency aspects and difficulties facing Jordanian firms in applying these standards in local businesses. A questionnaire is designed for these purposes. The sample is restricted to accountants, financial executives, and professional members of the Jordan Association of Accountants and Auditors. We used the Statistical Package for Social Sciences (SPSS) to analyze the data and answer the research questions. Descriptive statistics are the main tests used in this study. The results indicate that IASs are necessary to be applied by Jordanian companies, since the advantages of applying IAS in Jordan are seen to be more than its disadvantages, mainly in the scene of improving the information content of financial statements. The results also indicate that the compliance with IAS will be of great benefits to shareholders and the stock market comparing to its benefits to top management and board members. Auditors, accountants, and financial executives argue that government agencies in Jordan should enforce and supervise the implementation of IAS in Jordan.

Enhancing financial reporting: The contribution of business models

The term business model has recently entered discussions on how it might be possible to improve the information content of financial statements. It has done so as part of the rejuvenation of an earlier debate about moving from a corporate reporting to a business reporting model of external reporting. Despite a flurry of interest and exploration about how financial reporting might be enhanced following the publication of the Jenkins Report, the accountancy profession found itself confronted with other, more pressing problems. Current interest in business models marks a return to these earlier concerns. The paper provides further background to the business model concept, as well identifying a number of examples of frameworks capable of illustrating the dynamics of a business model, emphasising their links with the visualisation of value creation and delivery within organisations, viewed as the basis for enhancing financial reporting.

Information content of financial statements, financial plans, and MCS: an integration

This article proposes changes for reforming financial statements. For accounting, these suggestions focus on the measurement of the financial value of the business and of its expected flows of income, funds and cash. The paper also stresses the importance of both 'subjective' and 'objective' type data as being essential for the financial appraisal of an enterprise, and also the deployment of financial and strategic planning, present value, market value and replacement cost.

المضمون المعلوماتي الإضافي لمؤشرات القوائم المالية للشركات الصناعية المساهمة الأردنية = The Incremental Information Content of Financial Statements' Signals of Jordanian Industrial Shareholding Companies

المؤشرات الأساسية | التحليل الأساسي | العائد السوقي للسهم | التحليل القريني | المضمون المعلوماتي | ربحية السهم | Fundamental Signals | Fundamental Analysis | Stock Market Return | Contextual Analysis | Information Content | Earnings per Share

The Information Content of Accounting Reports: An Information Theory Perspective

Is it possible to quantify the information content of financial statements? If possible, then how? This study examines accounting as a classical communication system with the purpose of providing a framework with which to approach these fundamentally important questions. Information theory was established in the early-mid 20th century to describe the properties of classical communication systems. Applying concepts from this theory to an accounting context provides insight into the questions asked above. Specifically, a measure of the information content of a message in general and the financial statements in particular is developed from information theory concepts which originated with Claude Shannon -- the father of modern information theory -- in the 1940's. The measure is able to extract information contained in the financial statement numbers to predict firm performance despite the fact the numbers themselves do not easily admit insight. Thus, there seems to be hidden'' information in the numbers that the measure captures which, in hindsight, helps predict firm price movements. Specifically, as a validity check, I provide evidence that the measure alone explains 10% of the variation in returns for a cross-section of firms.

A study of the relative and incremental information content of financial statements in forecasting stock price: Iranian evidence

The aims of this study is to determine and compare the relative and incremental information content of accounting variables in relation to the stock price or stock return. For this purpose, operating profit variables, net profit and the ratio of debit to stockholders’ equity has been taken into consideration as independent variables and stock return as a dependent variable. Data were collected from Tehran Stock Exchange by accessible information. Statistical population of the study contains listed companies on Tehran Stock Exchange for the period of 2006 to 2010. The results indicate the correlation ratio of net profit and partial correlation of operational profit in relation to stock return and indicate unrelated quotient of debit to stockholder’s equity in relation to dependent variable. The results also indicate that the net profit has information content in proportion to other two variables. Key words: Relative content, incremental content, balance sheet, profit and loss statement.

The value relevance of cash flows, current accruals, and non-current accruals in the UK

Cash flow statements have a longstanding history as mandated financial statement disclosures, having replaced funds flow statements. The usefulness of such disclosures with respect to one of the main purposes of financial statements—providing information relevant to the assessment of future cash flows and their uncertainty, and the market value of firms—is still subject to debate. This study investigates whether various partitions of earnings involving combinations of a cash flow measure of performance and measures of current accruals and non-current accruals improve the ability to explain market values in the UK relative to using earnings alone. Using a valuation model-based methodology, and employing a UK sample of non-financial firms for the years 1993 to 2007, our results suggest strong support for the assertion that cash flows can have incremental value relevance relative to either earnings or funds flows. By implication, cash flows can have separate value relevance from total and, in particular, current accruals. There is slightly less consistent evidence that current and non-current accruals can have separate value relevance but, nonetheless, the results are still strongly in favour in this respect. Generally, the main source of increase in explanatory power for market values is the separate inclusion of our cash flow measure in the estimated regressions. As a consequence, we conclude that the statement of cash flows in the UK provides information useful to UK investors in valuing firms. Further, requiring a cash flow statement, as opposed to a funds flow statement, improves the information content of financial statements in the UK.

The Value Relevance of Cash Flows, Current Accruals, and Non-Current Accruals in the UK

Cash flow statements have a longstanding history as mandated financial statement disclosures, having replaced funds flow statements. The usefulness of such disclosures with respect to one of the main purposes of financial statements - providing information relevant to the assessment of future cash flows and their uncertainty, and the market value of firms - is still subject to debate. This study investigates whether various partitions of earnings involving combinations of a cash flow measure of performance and measures of current accruals and non-current accruals improve the ability to explain market values in the UK relative to using earnings alone. Using a valuation model-based methodology, and employing a UK sample of non-financial firms for the years 1993 to 2007, our results suggest strong support for the assertion that cash flows can have incremental value relevance relative to either earnings or funds flows. By implication, cash flows can have separate value relevance from total and, in particular, current accruals. There is slightly less consistent evidence that current and non-current accruals can have separate value relevance but, nonetheless, the results are still strongly in favour in this respect. Generally, the main source of increase in explanatory power for market values is the separate inclusion of our cash flow measure in the estimated regressions. As a consequence, we conclude that the statement of cash flows in the UK provides information useful to UK investors in valuing firms. Further, requiring a cash flow statement, as opposed to a funds flow statement, improves the information content of financial statements in the UK.

Information Content of IFRS versus Domestic Accounting Standards: Evidence from Finland

This paper compares the information content of financial statements based on IFRS with those based on Finnish Accounting Standards (FAS) using a sample of mandatory IFRS adopters. Finland is particularly well suited for this comparison because it has a high-quality reporting environment, its domestic standards differ significantly from those of IFRS, and it allowed early adoption of IFRS. The results show that earnings under IFRS are no more timely in reflecting publicly available news than earnings under FAS. Furthermore, book values of assets and liabilities measured under IFRS are no more value relevant than they are under FAS. However, additional analyses reveal that IFRS earnings provide marginally greater information content than FAS earnings for predicting future cash flows. Several possible reasons for these results are discussed.

Increasing the Transparency and Information Content of Financial Statements Using Sparklines

Traditional balance sheets and income statements are standardized tables, containing labels and a limited number of annual figures. By embedding small graphical elements (sparklines) in the financial statements, companies can disclose monthly, semimonthly, or even more frequent data, greatly increasing the amount of information available to users. The usefulness of sparklines is demonstrated through four illustrative company examples.

Capital market reactions to earnings announcements: empirical evidence on the difference in the information content of IAS-based earnings and EC-Directives-based earnings

Listing on a foreign stock exchange and the aim to attract international investors usually forces European quoted companies to adapt information supplied in financial statements to different information needs of international investors. Because of the dominance of the American stock market, this adaptation raises especially the question whether Anglo-American-oriented accounting standards (for instance IAS — International Accounting Standards) convey a higher information content for investors than continental-Europe-oriented accounting standards (for instance EC-Directives). The study examines the information content of earnings announcements, i.e. abnormal returns resulting from un-expected earnings, for a sample of Swiss quoted companies which have changed the accounting standard used for presenting Swiss GAAP consolidated financial statements to either EC-Directives or IAS and can therefore contribute to this discussion. The results of the study suggest that IAS-based earnings announce-ments convey a statistically significant higher information content than earnings announcements based on the Swiss GAAP if a variance-approach is used. For investors in the Swiss capital market, the switch from Swiss GAAP to IAS has therefore increased the information content of financial statements. But comparing IAS-based and EC-Directives-based earnings announcements, the results suggest that for investors IAS-based earnings do not possess a statistically significant higher information content than EC-Directives-based earnings. This result has been achieved despite the fact that for Swiss financial analysts financial statements based on IAS convey a significant higher information content than financial statements based on EC-Directives. Avoiding problems in specifying a model for unexpected earnings by standardizing the mean of the abnormal returns of each event window to a positive value does not lead to a different conclusion if the variance approach is used.

Firm Size and the Information Content of Financial Statements

The Capital Asset Pricing Model has been challenged recently by several studies that point to certain anomalies in the capital market related to firm size. Banz [3] reported a nonlinear relation between the aggregate market value of a firm's common stock and the stock's mean return. He found that firms with small market values had large and positive residual returns over a period of at least 40 years. Reinganum [23] found that high earning-price (E/P) stocks had higher returns than low E/P-ratio stocks and that, after controlling for size, the E/P effect largely disappeared. Although they rejected the hypothesis that the anomalies are due to inefficiency in the capital market, the two authors are not able to identify the economic factors that might explain the effect of firm size on the functioning of the capital market.

Some Preliminary Findings from a Laboratory Experiment on the Usefulness of Financial Accounting Information to Security Analysts

Accountants always have been interested in the information content of financial statements that firms periodically release to investors and other interested persons. Increasingly within the past decade, there has been a tendency to look to the user of financial statements for criteria to judge usefulness. This recognition of the user's importance has led to a number of empirical studies of the usefulness of accounting information.2 Our ori-