Plant And Equipment Research Articles

APPLICATION OF IFRS WITH DISCLOSURE OF FIXED ASSETS IN THE COMPANY'S FINANCIAL STATEMENTS

Abstract. The aim of this research is to analyze the implementation ofIFRS and its relationship with the comparison of disclosure of fixedassets or now called PPE (Property, Plant, and Equipment) in financialreports. The variable used in this research is the application of IFRSwhich focuses on the comparison of PPE disclosures. This research isbased on previous research conducted by Vergauwe and Gaeremynck(2013). The sample for this research is manufacturing companies listedon the Indonesia Stock Exchange (BEI) in 2019-2022. Data wascollected using a purposive sampling method, observations wereanalyzed. Hypothesis testing in this research uses regression analysisBased on the results of the regression test, the application of IFRS doesnot have a significant effect on the disclosure of fixed assets in financialstatements.Keywords: Implementation of IFRS, Disclosure of Fixed Assets,Financial Reports

A Comprehensive Analysis of the Literature to Determine Whether the Quantity and Quality of Market Inputs Utilized for Valuation Have a Significant Impact on the Accuracy of the Fair Value of PPE

This study researches the impacts of market inputs on the accuracy of Fair Value (FV) assessment for Property, Plant, and equipment (PPE). It aims to address the gaps and limitations in the existing literature by examining the relationship between market inputs and the valuation accuracy of PPE across various businesses and settings. Prior research has focused on FV assessment of specific asset classes or industries. The research goals are to look at the significance of market inputs in FV assessment and decide their general importance in PPE valuation. This study demonstrates the significance of relevant and trustworthy market inputs for valuers in arriving at reliable FV estimates. The main results of the study show that Valuers should use a combination of income-based and market-based methods to value PPE assets for accounting purposes taking into account industry-specific factors that can affect the FV. The study offers suggestions for valuation practitioners, regulators, and accounting professionals to increase the accuracy and dependability of PPE valuations based on its findings. This study supports to improve the credibility of value opinions, encourage consistency and transparency in reporting, and ultimately make it easier for stakeholders to make informed decisions by implementing these recommendations. By examining the significance of market inputs and highlighting inconsistencies in empirical evidence, this study concludes that it contributes to our understanding of FV estimation for PPE.

Earnings management during the COVID-19 crisis: evidence from the Brazilian and American capital markets

PurposeThe main purpose of this study is to evaluate whether the COVID-19 pandemic has stimulated earnings management among publicly traded companies in Brazil and the USA.Design/methodology/approachThe authors analyzed the above-mentioned effects based on 22,244 observations of Brazilian companies and 139,856 observations of American companies from 1998 to 2020. The proxy used to detect earnings management based on discretionary accruals (DAC) was obtained by using the Modified Jones Model (MJM) (Dechow et al., 1995), with adjustments suggested by Kothari et al. (2005). In accordance with previous studies (e.g. Brown et al., 2015; Enomoto et al., 2015; Galdi et al., 2020; Huang and Sun, 2017; Roychowdhury, 2006), the authors also employed a second proxy to detect earnings management through real activities associated with unusual losses for fixed assets (property, plant and equipment (PPE)).FindingsThe study’s findings indicate that the discretionary accruals of Brazilian companies varied in a more accentuated manner during the COVID-19 pandemic, making it possible to deduce that a recent history of economic depression may entail greater incentives for earnings management in an emerging economy. In addition, the authors verified that the effects of the current crisis on earnings management proxies denote a signal that is distinct from previous economic crises, which may be interpreted as an attempt to postpone the effects of the pandemic on financial statements, especially those of the Brazilian capital markets.Originality/valueUnlike previous crises, this pandemic has led to direct restrictions on a wide variety of economic segments rather than indirect contagion due to anomalies in the financial markets, making it a phenomenon with the characteristics of a quasi-natural experiment for studies related to the quality of accounting information. Considering that both Brazil and the USA provide an opportune economic contrast, given their discrepancies in terms of economic growth over the past two decades, the researchers believe that there is an unusual opportunity to understand how earnings management can be an incentive for managers in environments where crises arose from natural causes.

The Implementation of Accounting Standards for Coffee Plantation

Coffee is one of the most prominent agricultural products In Indonesia, besides other commodities such as palm oil, rubber, cocoa, and tea. The International Accounting Standards Board (IASB) regulates the agriculture business in IAS 4. which was issued in December 2000 and prospectively applied worldwide on the 1st of January 2003. The standard encourages coffee plantations to be recorded at their fair value which leads to many contradictions. In 2014, IASB amended IAS 41 specifically for bearer plants because it is used only for production, and it should be treated similarly to property, plant, and equipment (PPE). The main challenge is versatility. As the growth of the coffee plantation industry in Indonesia increases, accountability has become an important issue to deal with. As there are scarce studies regarding the adoption of accounting standards for coffee plantations in Indonesia, this research is intended to give fresh insights from the business owner’s perspective in the implementation of the related agriculture accounting standards. This research employs a qualitative method with a semi-structured interview and triangulation method. Our findings show that coffee farmers already complied with the PSAK 16 and PSAK 69, even though there are still many challenges that the company faced since the coffee plants are high in versatility and uncertainty.

Municipal infrastructure management and its impact on service delivery in the City of Ekurhuleni

Background: Property, plant and equipment (PPE) represent a significant portion of the asset base of any municipality and thus a municipality has a moral and legislative duty to safeguard these assets against damage and/or wilful neglect.Aim: This article explored how infrastructure management within the City of Ekurhuleni (COE), Gauteng province in the Republic of South Africa, can assist in the provision of sustainable services and how the city’s infrastructure can contribute to social and economic development of its communities. This article endeavours to indicate how the COE manages its infrastructure in terms of three service delivery departments as a sample of the entire municipality. This article focuses on the improvement of infrastructure management in general and at the COE, in particular. It further aims to indicate how service departments can go about in employing asset-management guidelines whilst improving governance strategies.Methods: This study followed a mixed-method approach and the system’s theory served as the research methodology. The study covered a 5-year period from 2014/2015 to 2018/2019 financial years and employed benchmarking ratios and calculations to indicate how best the city can improve its management of infrastructure, and measure its performance against those of equally sized metropolitan municipalities.Results: The findings of the study reveal that even though the city is doing well in terms of certain aspects of service delivery, there still remain many issues regarding the management of infrastructure that impede its ability to provide sustainable services that can ultimately lead to economic growth and development.Conclusion: Recommendations to the city include the upskilling of especially the senior management in terms of the critical role they play in maintaining the city’s infrastructure assets. Another recommendation is that politicians do not only think in terms of adding to the city’s current infrastructure whilst not attending to the maintenance of existing assets and most critically, the city does not follow an integrated approach in terms of the comprehensive infrastructure programme.

Municipal infrastructure management and its impact on service delivery in the City of Ekurhuleni

Background: Property, plant and equipment (PPE) represent a significant portion of the asset base of any municipality and thus a municipality has a moral and legislative duty to safeguard these assets against damage and/or wilful neglect. Aim: This article explored how infrastructure management within the City of Ekurhuleni (COE), Gauteng province in the Republic of South Africa, can assist in the provision of sustainable services and how the city’s infrastructure can contribute to social and economic development of its communities. This article endeavours to indicate how the COE manages its infrastructure in terms of three service delivery departments as a sample of the entire municipality. This article focuses on the improvement of infrastructure management in general and at the COE, in particular. It further aims to indicate how service departments can go about in employing asset-management guidelines whilst improving governance strategies. Methods: This study followed a mixed-method approach and the system’s theory served as the research methodology. The study covered a 5-year period from 2014/2015 to 2018/2019 financial years and employed benchmarking ratios and calculations to indicate how best the city can improve its management of infrastructure, and measure its performance against those of equally sized metropolitan municipalities. Results: The findings of the study reveal that even though the city is doing well in terms of certain aspects of service delivery, there still remain many issues regarding the management of infrastructure that impede its ability to provide sustainable services that can ultimately lead to economic growth and development. Conclusion: Recommendations to the city include the upskilling of especially the senior management in terms of the critical role they play in maintaining the city’s infrastructure assets. Another recommendation is that politicians do not only think in terms of adding to the city’s current infrastructure whilst not attending to the maintenance of existing assets and most critically, the city does not follow an integrated approach in terms of the comprehensive infrastructure programme.

The impact of operational stickiness on product quality: product diversification moderation

PurposeThe purpose of this paper is to examine the impact of operational stickiness on product quality. Particularly, it analyzes the moderating effect of product diversification on the relationship between operational stickiness and product quality of exporting firms from China.Design/methodology/approachUsing a sample of 3,567 exporting firms between 2002 and 2012 in China, this paper develops a fixed effect model to demonstrate the nonlinear relationship between operational stickiness and product quality.FindingsResults show that operational stickiness has an inverted U-shaped impact on product quality, while inventory stickiness, property, plant and equipment (PPE) stickiness and labor stickiness are used to measure operational stickiness. Furthermore, the impact of operational stickiness on product quality is found to be moderated by product diversification.Practical implicationsManagers can achieve an optimal level of product quality by adjusting the level of operational stickiness. Firms with excessive operational stickiness should appropriately reduce the degree of stickiness to improve product quality. Besides, managers who focus on product quality should be cautious in adopting the product diversification strategy and be wary of the loss of product quality this strategy may cause.Originality/valueThis paper is the first study that has empirically validated the inverted U-shaped relationship between operational stickiness and product quality, and confirmed the moderating effect of product diversification on the relationship between operational stickiness and product quality. It provides a new idea to improve product quality by operational management.

Capital Market Frictions, Leasing and Hedging

This paper examines the hitherto unexplored effect of lease intensity on hedging. Using a sample of 218 small and large non-financial firms drawn from 2006 to 2010, we find that firms leasing more of their Property, Plant and Equipment (PPE) use less financial derivatives, consistent with the theoretical predictions of Rampini and Viswanathan (2010). Further, using broad market microstructure based measures of information asymmetry, we offer empirical evidence consistent with theory that firms with higher information asymmetry hedge more. These results are robust to several alternative measurements of key variables, different regression specifications, estimation techniques and corrections for endogeneity.

Role of gender and corporate risk taking

PurposeThe purpose of this study is to examine the role of chief financial officers’ (CFOs’) gender in financial risk taking of 58 US companies along with the impact of having women board members.Design/methodology/approachUsing a panel data of 58 selected S&P 500 companies during the period 2012-2016, this paper determines whether the gender of CFOs and having women board members play a role in risk-taking behavior of firms.FindingsFirms led by female CFOs are smaller in size with lower net income and net revenue. The panel data analysis shows that the impact of female CFOs on firms’ financial risk is mixed, depending on risk measures used, whereas increasing female board members reduces that risk.Research limitations/implicationsThe data used is limited to 58 S&P 500 companies, and two of the three risk-taking measures used in the study, specifically investment in property, plant and equipment (PPE) and debt/equity ratio, may not be applicable to some industries.Practical implicationsThe findings provide mixed evidence of risk aversion by females in executive and leadership positions, depending on the measures used and the management responsibilities they undertake (CFO versus board member) with support for the glass cliff phenomenon in which females may be leading financially precarious organizations.Social implicationsFemale CFOs are found to be leading relatively smaller and financially poor-performing firms compared with the male CFO-led firms, thereby giving support to the glass cliff arguments.Originality/valueThe paper examines the role of CFOs’ gender and board diversity in risk taking as measured by the investment in PPE, debt/equity ratio and stock return volatility.

The use of historical cost and fair value for property and plant and equipment measurement: Evidence from the Republic of Serbia

The aim of the paper is to reveal how financial statement preparers in the developing and transition country of the Republic of Serbia, behave in situations where they can choose between the valuation model based on historical cost and the valuation model based on fair value. In that regard, we have analysed the subsequent measurement of property and plant and equipment in Serbia. We find that companies are more likely to choose the historical cost model than the revaluation model (the model based on fair value) for owner-occupied properties and plant and equipment, and the fair value model rather than the historical cost model for investment properties. The willingness to use the revaluation model for subsequent measurement of owner-occupied properties and plant and equipment varies across different categories of companies, and we find a statistically significant relationship between that willingness and the legal form of the company. We also find that in the notes to their financial statements, a significant number of companies in Serbia do not disclose adequate information on the model used for subsequent measurement of property and plant and equipment, although such information is required by the applicable financial reporting standards.

The role of operational stickiness in impacting new venture survival

PurposeThe purpose of this paper is to examine the existence of operational stickiness, and explores the relationship between operational stickiness and the likelihood of survival. Furthermore, the authors investigate this relationship in different manufacturing industries.Design/methodology/approachUsing a large sample of more than 200,000 new manufacturing small and medium enterprises between 2000 and 2013 in China, the authors use the survival analysis method to investigate the non-linear relationship between operational stickiness and the likelihood of survival.FindingsThe authors demonstrate the existence of operational stickiness, such as inventory stickiness, property, plant, and equipment (PPE) stickiness, and labor stickiness. Next, the authors find the inverted U-shaped relationship between operational stickiness and the likelihood of survival. Furthermore, the authors document the differential effect of operational stickiness on the likelihood of survival in different industries.Practical implicationsManagers can improve the firm’s likelihood of survival by maintaining a moderate inventory stickiness and PPE stickiness. However, managers should not adopt sticky labor management in manufacturing industries.Originality/valueThis paper may be the first study to demonstrate the existence of operational stickiness, and confirm the inverted U-shaped relationship between operational stickiness and the likelihood of survival.

Case Study in a Malaysian Public Agency on an Asset Management-Moving Towards the Accrual Basis of Accounting

As part of the strategic reform of Malaysian public services under the Government Transformation Program (GTP), accrual accounting is expected to be fully adopted in public sector financial reporting commencing on 1 January 2015, in order to ensure alignment with the global accounting standards. Consequently, in order to access the government effectiveness of moving towards the accrual basis of accounting, this study is to examine the asset management system in a Malaysian public agency; to evaluate the extent of compliance with MPSAS 17, Property, Plant and Equipment (PPE), IPSAS 26, Impairment of Cash-Generating Assets and IPSAS 21, Impairment of Non-Cash Generating Assets. Using qualitative approach, a preliminary study was conducted via interviews and through obtaining documents. The findings include the following: MPSAS17 has not been strictly adhered to and software is used to monitor the assets; however, the disposal of assets is a manual process and is not automated. The study also discussed any weaknesses pertaining to the said asset accounting system, and suggested recommendations for improvement thereon.

Analysis of the Corporate Behaviors after the Corporate Tax Cuts with Respect to Job Creation: A Preliminary Study of Select Corporations in the United States of America

A preliminary study of the impact of tax cuts on job creation was done by studying a random sample of 12 largest corporations selected from the Fortune 500 companies. The Annual Reports of the 12 sample companies pre-tax cut and post-tax cut periods were downloaded, and figures tabulated for revenues, property, plant, and equipment (PPE) as well as employees reported by those companies for both the periods. We found that the revenue increased by an average of 7.78 percent which showed signs of growth in those companies, but the investment in PPE by the companies during the same period increased at an average of only 0.32 percent, which indicated that the companies did not divert the resources they saved in taxes to add capacity. Therefore, the potential for jobs growth was nonexistent or minimal. Another indicator showed the same outcome as the companies reported their workforce reduced since 2017 by an average of 0.54 percent.

Pengiktirafan Dan Pengukuran Aset-Aset Di Majlis Agama Islam Negeri (MAIN): Amalan Dan Cabaran

Assets are an integral component within each institution including MAIN as a responsible institution for WZB assets in Malaysia. However, previous studies conducted on the accounting practices of State Islamic Religious Councils (MAIN) in Malaysia only focused on the aspect of disclosure. Studies on recognition and measurement of assets are very limited. Apart from being transparent for MAIN in exposing all information pertaining to the assets of waqf, zakat, or baitulmal (WZB) based on the Islamic accounting perspective, it is also very important for MAIN to take a serious look at how these assets are recognized as well as measured in the financial statements from an Islamic perspective. Therefore, the main objective of this study is to review the current practice of MAIN in recognizing and measuring WZB’s assets and identifying the challenges or issues arising from MAIN long-standing practice of accounting. More important is whether this practice is in line with the shariah. Overall, there are six categories of assets investigated in this study: Property, Plant and Equipment (PPE), Investment Property (IP), Inventory, Lease Assets, Intangible Assets (IA) and Agricultural Assets. This study has been using a triangulation method whereby researchers conduct interviews with relevant officers and focus group discussions, as well as reviews on basic documents such as Financial Statements (Financial Year 2016) of the related MAIN. The findings reveal the diversity in the practice of recognizing and measuring the six categories of MAIN assets. Recognition of assets is performed at different points of recognition and value for each MAIN in the sample of the study. This shows that the development of Islamic accounting standards for WZB assets is particularly necessary for the use of WZB entities in Malaysia. Keywords: assets recognition, accounting practices, waqf, zakat, SIRCs

Strength of the association between R&D volatility and firm growth: The roles of corporate governance and tangible asset volatility

We investigate the complementary roles of corporate governance; property, plant, and equipment (PPE) volatility; and intangible asset volatility in improving the returns from R&D volatility. With increasing R&D volatility, corporate governance can help align divergent goals and heterogeneous resources both internally and externally. PPE volatility or intangible asset volatility could help synchronize asset turnover with R&D volatility. The findings show that corporate governance and PPE volatility complement R&D volatility in improving a firm's performance.

Revaluation of Property, Plant and Equipment (PPE) in Bangladesh: Motivations, Value Relevance, and Effects on Audit Fees

Purpose – The purpose of the paper is to identify the characteristics of firms that choose to use revaluation model rather than cost model in Bangladesh. In addition, the paper also tries to understand the reaction of the market given the choice of the revaluation model. Furthermore, the paper tries to figure out the effect of the choice of revaluation model on audit fees. Design/methodology/approach – The paper uses the data from Dhaka Stock Exchange (DSE). Total 65 firms over the period of 2010-2014 were analyzed. Most of the data was collected from S & P Capital IQ database. A small amount of data was collected from the published annual reports of the companies. In order to analyze the data, the paper employs logistic regression model and ordinary least square models. Findings – Hypothesizing both opportunism and efficiency motives, the paper finds that firms with high leverage are not more likely to choose the revaluation model while accounting for PPE, thus rejecting the contracting cost reasons, analogous to opportunistic motivation. Likewise, political cost reason of opportunistic motivation does not appear to be significant. On the other hand, our findings support that efficiency motive is highly significant behind selecting asset revaluation, proving that firms with financial slack or higher percentage of investment in PPE or export sales are highly likely to choose the revaluation model, but firms with growth opportunities, though significant, are not likely to choose revaluation model. Second, given the motivations of managers for choosing the revaluation model, using Ohlson (1995) model, we find that investors do not consider asset revaluation value relevant, proving that investors might perceive the opportunistic motivation of managers. Finally, the paper empirically tests the effects of the use of the revaluation model on audit fees and finds that choosing revaluation model leads to a significant increase in audit fees. This finding supports the hypothesis that the use of the revaluation model involves additional audit effort that merits higher audit fees. Research limitations/implications – Despite the statistical significance of the models, we recognize that there might be some limitations in our study; there might be problem in the specification of variables. In addition, the sample size might not be large enough to give credibility of the findings. Practical implications – The paper helps to identify the firms that are very likely to choose the revaluation model and the implications of such choice in market in an emerging economy. Moreover, the paper also documents the likely costs of such choice. Originality/value – This contribution of the paper adds to audit fee literature and figures out the factors that play role in accounting policy choice in emerging economies.

Aplicación del modelo de revaluación de propiedades, planta y equipo en empresas chilenas del sector energético

The study analyzes 14 Chileans companies from the entire energetic economic sector. The totality of these companies revalued its Property, Plant and Equipment (PPE) and continued to applying this model in the subsequent periods up to 2015, according to the International Accounting Standard16. The methodology used consisted of the review of the financial statements of the companies in the sample. The results show that the use of the revaluation model of PPE had a strong impact on the companies’ equity, where the method used corresponds to a particular methodology adapted to the Chilean energy sector when it comes to regulate rates, known as the New Replacement Value (NRV).

Directly Managing Earnings by Deviating from Clear-Cut Property, Plant and Equipment (PPE) Impairment Rules

Mapping reported PPE impairment amounts (i.e. write-downs and reversals) to only valid directions in legitimate triggers specified under benchmark impairment rules (IAS 36 and SFAS #144), I investigate whether managers’ impairment decisions are justified. Finding evidence of nonconformity to rules, I quantify this as ORAI (i.e. opportunistic reporting of asset impairment) and document that target beating, smoothing, small profits, and other managerial intents drive ORAI while governance mechanisms mitigate it. I find evidence of ‘earnings management (EM) planning’ in jurisdictions allowing both write-downs and reversals such that the write-down tool achieves downward EM in period t but is followed in future periods by upward EM achieved via the reversal tool. I consider this as incremental contribution to literature, but a more novel contribution which this study brings is the linking of managers’ reversals decisions to impairment rules to detect impairment rules deviators.

Motives for property, plant and equipment revaluation according to positive accounting theory

The paper identifies motives for property, plant and equipment (PPE) revaluations according to the three main hypotheses proposed by Watts and Zimmerman. Attempt to lower debt-equity ratio is the main motive for PPE revaluation. The method of inductive inference was applied.

Changes in Non‐current Assets and in Property, Plant and Equipment and Future Stock Returns: The UK Evidence

AbstractWe examine the effect of changes in non‐current operating assets (NCOA) and of changes in property, plant and equipment (PPE) on future abnormal stock returns using a sample of 21,549 UK non‐financial firm observations over the 1990–2012 event period. The results from a matching portfolio procedure and 4‐factor regressions indicate that abnormal returns from investing in a portfolio of low‐minus‐high quintile NCOA and PPE change firms are between 5.5% and 6.1%. This negative association is confirmed by cross‐sectional regressions. The economic significance of mispricing seems weaker than in the US and weaker than the mispricing of working capital accruals adjusted for depreciation in the UK. Changes in PPE drive the predictability of share returns with respect to changes in NCOA. There is no significant evidence that return predictability is stronger in less liquid firms. We find two strands of evidence that lend some support to behavioural explanations of predictability through overreaction to investment. On one hand, fundamental information about investment explains one‐third of the predictability of returns while, on the other, predictability is generally not significantly stronger in firms with high operating leverage as a proxy for risk.