Provisions Of SFAS Research Articles

PENGARUH CORPORATE GOVERNANCE TERHADAP KINERJA PERUSAHAAN MANUFAKTUR

Introduction: This study aims to determine the effect of insider ownership, audit committees, leverage, firm size, the number of independent commissioner on the performance of manufacturing firms in the Indonesian stock exchange. Methods: The type of data used in this research is quantitative data. This study uses a tool to answer the hypothesis in the form of multiple linear regression. The number of samples taken by the sampling technique as many as 50 companies listed in Indonesia Stock Exchange. Results: From the test results indicate that there is insider ownership, audit committees, leverage significant positive effect on the performance of manufacturing companies in Indonesia Stock Exchange. firm size and the number of independent commissioners no significant positive effect on the performance of manufacturing companies in Indonesia Stock Exchange. Conclusion and suggestion: The implication of these findings is that insider ownership, audit committees, and leverage it will be able to produce a good performance. Although firm size and the number of independent commissioners has no effect, but still must be considered, because if the firm size and the number of independent commissioners are not in accordance with the provisions of SFAS may result in the presence of certain interests that are not in accordance with the company's goals.

The Deferred Tax Asset Valuation Allowance and Firm Creditworthiness

ABSTRACTIn this study, I provide evidence that the valuation allowance for deferred tax assets helps predict the future creditworthiness of a firm. Under the provisions of SFAS No. 109, a firm records a deferred tax asset provided it expects to generate sufficient taxable income to realize the asset in the form of tax savings in the future. If a firm does not expect to generate sufficient taxable income to realize the asset, then a valuation allowance is created to reduce the balance. As a result, the valuation allowance indicates management's expectation of future taxable income, which could be informative in predicting the ability of the firm to make future interest and principal payments on debt. Alternatively, the valuation allowance may not be informative regarding creditworthiness if it is a result of overly conservative accounting practices or if it is used as an earnings management tool. I document a negative association between material increases in the valuation allowance and contemporaneous and future changes in credit ratings, evidence that is consistent with the valuation allowance providing a summary measure of a decline in firms' creditworthiness.JEL Classifications: G29; H25; M41.Data Availability: Data are available from sources identified in the paper.

The Deferred Tax Asset Valuation Allowance and Firm Creditworthiness

In this study, I provide evidence that the valuation allowance for deferred tax assets helps predict the future creditworthiness of a firm. Under the provisions of SFAS No. 109, a firm records a deferred tax asset provided it expects to generate sufficient taxable income to realize the asset in the form of tax savings in the future. If a firm does not expect to generate sufficient taxable income to realize the asset, a valuation allowance is created to reduce the balance. As a result, the valuation allowance indicates management’s expectation of future taxable income, which could be informative in predicting the ability of the firm to make future interest and principal payments on debt. Alternatively, the valuation allowance may not be informative regarding creditworthiness if it is a result of overly conservative accounting practices or if it is used as an earnings management tool. I document a negative association between material increases in the valuation allowance and contemporaneous and future changes in credit ratings, evidence that is consistent with the valuation allowance providing a summary measure of a decline in firms’ creditworthiness.

The DOW 30s Compliance with the Provisions of SFAS 159 and 157 for Investments in Equity Securities

Although, SFAS 159 has raised the bar for disclosure requirements and improved investors, analysts, and financial statement users understanding of managements’ rationale for implementing the Fair Value Option (FVO) for equity securities, it has been criticized to prospect entities to structure transactions that are intended to lever a specific accounting effect. Companies by appointing the fair value option for underwater investments in certain securities can move those securities from the available-for-sale and held-to-maturity categories into the trading category and record the unrealized losses as an essential portion of the cumulative-effect adjustment to retained earnings without reproducing any losses on the securities in the income statement even if the securities subsequently are sold. This study examines how the thirty companies that comprise the Dow Jones Industrial Average (Dow 30) complied with the provisions of SFAS No. 157 and 159 to record their investments in equity securities. The results indicate that the sample of companies complied with the qualitative guidelines outlined in the pronouncement. A surprising finding was that a large number of the sample companies reported that they don’t currently believe adoption would have a material impact on their consolidated results of operations and financial condition.

THE IMPORTANCE OF SFAS NO. 1 APPLICATION AND ITS EFFECT TOWARD LIABILITIES OF FINANCIAL STATEMENT PREPARATION

The financial statements will be considered reasonable if its presentation had been in accordance with Financial Accounting Standards which is generally accepted or commonly referred as SFAS compiled by IAI and the characteristics of those financial statements should be understandable, relevant, reliable, and comparable. In preparing the financial statements there are rules for recording transactions, which are the pairs bookkeeping system (double entry), this recording system is a common and commonly used in the preparation of the financial statements. The preparation of financial statements that was often still used is the single bookkeeping system (single entry), when the records did not show a complete overview of the transaction, then in order to preparing the financial statements that would be considered be reasonable will meet the difficulties, other than there is no direct way to know whether the balances was right, so the company is faced the danger of deviation, inaccurate, which those financial statements are not in accordance with accounting standards. In achieving the purposes of this study, then financial statements that has been adapted to the provisions of SFAS No. 1 will be restated based on the data that obtained from the company by using the pairs bookkeeping system (double entry), and secondly to determine the effect that raised when the financial statements are in accordance with provisions of SFAS No. 1. For this discussion, the researcher was restated the financial statements of the company in 2012. From the results of those financial statements presentation it will seem easier to be read by the parties who need financial statements to make economic decision-making in the present and in the future. Researcher has suggested that the company's financial statements presentation was able to present in accordance with SFAS No. 1 by using the pairs bookkeeping system (double entry).

Auditing and Accounting for the Consolidation of Variable Interest Entities

AbstractIn 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. (SFAS) 167 (ASC 810), which broadens the number of entities that will consolidate formerly unconsolidated offbalance sheet assets and liabilities, and otherwise greatly changes the framework for consolidated financial statements. While the literature provides some examples of accounting for Variable Interest Entities (VIEs), little discussion examines how to audit such VIEs, which is important in light of some related audit failures. In this article, the authors summarize the provisions of SFAS 167 and discuss the auditing implications. They also discuss how recent International Financial Reporting Standards affect how entities should account for and audit VIEs. © 2013 Wiley Periodicals, Inc.

An Evaluation Of Agency Theory Influence In Pension Accounting

The Financial Accounting Standard Board Standard No. 87 supersedes all other methods of accounting for pensions. However, many accountants think that this statement will also be superseded eventually since it contains several theoretical inconsistencies. The purpose of this article is first to apply agency theory to the determination of pension benefits, in order to show that pension costs represent a sharing of future cost savings in the employee-employer relationship. Some implications of the derived model are then applied to the provisions of SFAS No. 87. This model can thus be used to develop a consistent economic theory for pension accounting.

The Impact of SFAS 160: An Investigation of the Economic Consequences of the Reclassification of Minority Interest

We examine firms’ behavior around the adoption of SFAS 160 to provide evidence on the costs and benefits associated with mandated accounting changes. The reclassification of minority interest to equity mandated by SFAS 160 can result in a wealth transfer from bondholders to stockholders. However, lenders can limit this transfer by renegotiating agreements. Consistent with these conjectures, we find that the abnormal returns surrounding the release of SFAS 160 are increasing with the level of minority interest, but decreasing for firms in the highest tercile of long-term debt. To provide direct evidence of re-contracting, we examine lending agreements for exclusions of minority interest from net worth but do not find an increase in new exclusions after SFAS 160. We also examine whether firms’ choice to include minority interest as a liability prior to SFAS 160 is related to firms’ stock returns at the release of SFAS 160. We expect and find a negative relation between the decision to classify minority interest as a liability and the stock return, but the relation is not statistically significant. We find that firms with minority interest following IFRS exhibit higher stock returns suggesting these firms benefit from increased congruence with U.S. GAAP. Finally, we examine post-160 changes in merger activity and find that firms did not exploit the provisions of SFAS 160 to increase debt covenant slack by engaging in a higher proportion of partial acquisitions ex post. We conclude that existing shareholders of firms with minority interest benefited from SFAS 160, but wealth transfers from bondholders were not sufficient to warrant alteration of debt contracts nor were such benefits sufficient to alter the structure of acquisition transactions.

Creating a Bigger Bath Using the Deferred Tax Valuation Allowance

Abstract: The provisions of SFAS No. 109 allow US companies to make an earnings big bath even bigger through the establishment of a deferred tax valuation allowance. At the time a firm recognizes a non‐cash charge, it also recognizes a deferred tax asset to represent the future tax benefits of the charge. Recognition of the deferred tax asset partially mitigates the negative earnings impact of the special charge. However, if the firm does not expect to have sufficient future taxable income to utilize the future tax benefits of the charge, SFAS No. 109 requires the firm to establish a deferred tax valuation allowance, effectively eliminating the recognized deferred tax asset. Thus, the establishment of the valuation allowance amplifies the negative earnings impact of the non‐cash charge. We use a valuation allowance prediction model to identify firms that create a larger‐than‐expected valuation allowance; these firms may be creating a large valuation allowance as a reserve to be used to manage earnings in a subsequent period. We find that the vast majority of these larger‐than‐expected valuation allowances apparently reflect informed management pessimism about the future in that these firms actually do have poorer operating performance in subsequent periods. We do not find any evidence that subsequent reversals of valuation allowances are used to turn a loss into a profit. However, we do find a very small number of firms that appear to have used a valuation allowance reversal to meet or beat the mean analyst forecast.

SFAS No. 123R: the controversy and its economic consequences

Purpose – To review the evolution of SFAS No. 123R, “Accounting for Share Based Compensation,” and examine the economic consequences of the standard for the first group of filers impacted by its provisions.Design/methodology/approach – The sample was the population of firms in the Russell 3000 having June 30, fiscal year‐ends.Findings – The study's findings suggest that the provisions of SFAS No. 123R remain controversial and that compliance with the standard had significant economic consequences for the sample of companies.Originality/value – This study provides evidence that SFAS No. 123R had significant economic consequences but that some of the standard's effects differed from earlier predictions.

Transparent financial disclosure and SFAS No. 142

PurposeThis paper seeks to examine whether companies are providing transparent financial disclosures in compiling with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”, and to determine whether the adequacy of these disclosures is impacted by firm size.Design/methodology/approachThe authors conducted a random sample of companies that reported goodwill impairments for the first year of adoption of SFAS No. 142. The firms were then stratified into three groups according to asset size. Subsequent analysis consisted of assessing the financial transparency of companies' goodwill reporting practices in total and by firm size, utilizing an approach suggested in Adams.FindingsThe study's findings suggest that many companies are not willing to provide additional voluntary disclosures to improve financial transparency, despite having the necessary information easily accessible. It also found that compliance with the provisions of SFAS 142 was sporadic and unpredictable.Originality/valueThis study provides evidence that companies are not providing transparent financial information.

Earnings management: evidence from SFAS No. 142 reporting

PurposeTo examine whether the provisions of SFAS No. 142 allow for the earnings management technique termed “big bath” and whether firm size plays a role in earnings management.Design/methodology/approachA random selection of companies with December 31, 2002 fiscal year‐ends yielded 120 firms that reported goodwill impairments in 2002 and 82 firms that did not. The firms are then stratified into two groups. Analysis consists of measuring the magnitude of the 2002 goodwill impairment loss, comparing financial metrics of impaired and non‐impaired firms, and calculating the proportion of firms with negative versus positive earnings.FindingsThe results suggest that SFAS No. 142 adoption allowed companies to engage in earnings management. Findings indicate that small firms experienced a significantly greater negative impact and were much more likely than large firms to take big bath charges.Originality/valueThis study provides evidence on the use of newly issued accounting standards to manage earnings.

Stock Market Valuation of Deferred Tax Assets: Evidence from Internet Firms

Abstract: We use the provisions of SFAS No. 109, Accounting for Income Taxes, to examine the extent to which stock prices of Internet firms were associated with expectations of future profitability before versus after the ‘market correction’ in early 2000. We find that the valuation of deferred tax assets of firms with business models reliant on the level of web site traffic was significantly greater after the market correction. In our view, this evidence is consistent with pre‐correction mispricing.

The disclosure of information on derivatives under SFAS No. 133

Statement of Financial Standards No. 133 (SFAS No. 133), “Accounting for derivative instruments and hedging activities” became effective for all publicly held companies for fiscal periods starting after 15 December 2000. Consequently, 31 December 2001 was the first reporting date for most companies under its provisions. This study examines the annual reports of the 30 companies that comprise the Dow Jones Industrial Average to determine the extent to which these companies complied with the provisions of SFAS No. 133. A surprising finding was that a large number of the sample companies reported that the effect of their hedging activities was immaterial. The study also found that the information disclosed about the derivatives held by the sample of companies was scattered throughout their annual reports, hard to understand, difficult to follow and lacked uniformity. It was concluded that it would take a great deal of effort for even a reasonably informed reader of the financial statements to gather and analyze the information relating to a company's use of derivatives, and as a result the desired level of financial transparency on the use of derivative financial instruments is not being achieved. It is recommended that a more uniform reporting format be developed and used.

The Deferred Tax Asset Valuation Allowance and Earnings Quality

Extant research examining the determinants of deferred tax asset valuation allowances finds that the evidence provisions outlined in SFAS 109 explain a significant portion of both levels of and changes in recorded valuation allowances. In addition, there is evidence of a stock price reaction around the time of announcements of valuation allowance information. The present study extends existing research in two ways. First, extant research on determinants of valuation allowance changes does not incorporate the asymmetry in the evidence provisions of SFAS 109. Accordingly, we separately examine the determinants of increases versus decreases in valuation allowances and find that the evidence provisions of SFAS 109 explain a much greater portion of valuation allowance increases than decreases. Second, we examine the association between annual stock returns and reported earnings resulting from valuation allowance changes. While the earnings effect of valuation allowance changes is found to be significant in the expected direction, the stock price reactions do not occur in the period the earnings effect is reported. This is consistent with low earnings “quality” under SFAS 109.

Accounting for the impairment of long-lived assets: A review and update

Recent marks by SEC Chairman Arthur Levitt and Chief Accountant Lynn Turner have put new attention on certain provisions of SFAS No. 121. In light of the SEC concerns, the authors review and update the issue of asset impairment for readers. The authors also present the results of their review of note disclosures for 48 Fortune 500 firms. © 1999 John Wiley & Sons, Inc.

Accounting for the impairment of long‐lived assets: A review and update

Recent marks by SEC Chairman Arthur Levitt and Chief Accountant Lynn Turner have put new attention on certain provisions of SFAS No. 121. In light of the SEC concerns, the authors review and update the issue of asset impairment for readers. The authors also present the results of their review of note disclosures for 48 Fortune 500 firms. © 1999 John Wiley & Sons, Inc.

A Survey on Accounting for Derivatives and Other Financial Instruments

In response to the recent growth in the use of derivative financial instruments, the Financial Accounting Standards Board (FASB) recently required all companies to make certain classifications and disclosures for such "complex" financial instruments. Yet, the Securities and Exchange Commission (SEC) and the FASB now demand even further reporting requirements - including requiring companies to recognize the "fair value" (and resultant gains and losses) of their financial derivatives as well as make other "qualitative disclosures" of the potential risk of holding such financial securities. The provisions of the current and proposed standards will affect significantly virtually all types of companies, especially those using derivative instruments. Hence, those preparing and evaluating financial statements under this emerging set of standards must comprehend these new provisions. The paper first discusses the current standards relating to financial derivatives and other financial instruments; it then provides examples of "leading" disclosures of such financial instruments. Then, based upon the responses to a mail questionnaire, the paper discusses how key groups view potential SEC changes in accounting for derivatives. All four of the groups generally agree with the provisions of SFAS No. 119 and most favor the recently passed, increased reporting standards.