Reserve Disclosures Research Articles

Compliance with investment account holders’ transparency and disclosure requirement: evidence from the Middle East and North Africa region

PurposeThe purpose of this paper is to construct an investment account holders' transparency and disclosure (IAH-T&D) index based on the new and revised accounting standard for investment accounts of the Accounting and Auditing Organization for Islamic Financial Institutions Standards (AAOIFI) (2020). It also aims to measure and compare the compliance level with IAH-T&D over years and between countries.Design/methodology/approachThis study uses the content analysis method to analyze the content of 270 annual reports across 30 Islamic banks (IBs) in 10 Middle East and North Africa countries during the period from 2010 to 2019.FindingsThis study introduces a new IAH-T&D index which consists of 27 items representing four categories: investment accounts disclosure (11 items), incentive earnings disclosure (1 item), allocations and reserve disclosure (4 items) and general requirements for disclosure (11 items). The analysis shows that the level of IAH-T&D is 51%. The level of compliance varies over the years and across countries.Originality/valueTo the best of the authors’ knowledge, this is the first study that offers an original self-constructed-T&D index that could enhance future research related to determinants and consequences of IAH-T&D practice in IBs.

Impacts of reserve and decommissioning disclosures on value and performance of oil and gas firms listed in the UK

Oil and gas reserves and asset decommissioning are the most significant cash flow indicators of the oil and gas industry. Investors use disclosures by oil and gas firms to estimate future cash flows. Thus, this study examines impacts of oil and gas reserve disclosures and disclosures of decommissioning costs of oil and gas assets on the financial performance and value of listed oil and gas companies in the UK. We survey data from 52 listed firms. We conclude that whilst mandatory and voluntary reserve disclosures negatively impact firms’ performance, they positively impact value. Mandatory decommissioning disclosures are positively related to performance and value. Voluntary decommissioning disclosures negatively correlate with firms’ value, but positively relate with firms’ performance. These findings contribute to the debate around the usefulness and impacts of oil and gas reserves disclosures and disclosures of decommissioning costs of oil and gas assets on companies values and performance.

Equalization Reserves for Reinsurance and Non-Life Undertakings in Switzerland

Equalization reserves is an insurance liability with features of own capital. By law, Swiss reinsurance and non-life undertakings must hold equalization reserves within their statutory accounts. Regarding Swiss solvency modeling, the equalization reserves are set to zero. Swiss reinsurance and non-life undertakings define the upper limit and the corresponding transfer rule to the equalization reserves; however, this information is not disclosed. The goal of the study is to find a relationship between the equalization reserves and the publicly available technical account items, applying a generalized additive model (GAM). Thereafter, we transform the continuous variables into discrete ones, and we apply a generalized linear model (GLM). The study is based on published data from 1997 to 2018, whereby we restate the implicitly published equalization reserves. For reinsurance undertakings, the GAM model captures the relationship better than the GLM one; for non-life undertakings, the GLM model performs better. For reinsurance undertakings, the equalization reserves depend on the equalization reserves of the previous year, on the calendar year, on the legal form, on the technical result, on the administration and commission costs and on other costs. For non-life undertakings, the equalization reserves depend on the net claims payments, on the equalization reserves of the previous year, on the net change in claims reserves without change in equalization reserves, on the calendar year and on the net earned premium. Furthermore, we look at the need for equalization reserves: do the undertakings accumulate and release the equalization reserves? Further, the impact of taxes on the equalization reserves is looked at. The concept of equalization reserves avoids the misuse of tax optimization. We conclude that the discussion about disclosure of equalization reserves will restart. In addition, the definition of the upper limit of the equalization reserves could be widened by linking the equalization reserves to the insurance/reserving risk from the capital modeling.

Disclosure Regulation and Competitive Interactions: Evidence from the Oil and Gas Industry

ABSTRACT We study the effects of mandatory disclosure on competitive interactions in the setting of oil and gas (O&G) reserve disclosures by North American public firms. We document that reserve disclosures inform competitors: when one firm announces larger increases in O&G reserves, competitors experience lower announcement returns and higher real investments. To sharpen identification, we analyze several sources of cross-sectional variation in these patterns, the degree of competition, and the sign and the source of reserves changes. We also exploit two plausibly exogenous shocks: the tightening of the O&G reserve disclosure rules and the introduction of fracking technology. Additional tests more directly focused on the presence of proprietary costs confirm that the mandated reserve disclosures result in a relative loss of competitive edge for announcing firms. Our collective evidence highlights important trade-offs in the market-wide effects of disclosure regulation.

The Informational Effects of Tightening Oil and Gas Disclosure Rules

ABSTRACTWe exploit two regulatory shocks to examine the informational effects of tightening preexisting mandatory disclosure rules. Canadian National Instrument 51‐101 in 2003 and the U.S. rule “Modernization of Oil and Gas Reporting” in 2009 introduced quasi‐identical amendments which effectively tightened the rules governing oil and gas reserve disclosures in both countries. We document significant changes in firms' reporting outcomes when the new regulations are introduced. We also find that the reserve disclosures filed under the new regulations are more closely associated with stock price changes and with decreases in bid‐ask spreads. Our findings are robust to controlling for other confounding factors such as time trends, other information disclosed simultaneously, financial reporting incentives, mispricing, and monitoring efforts.

ИНОЯЗЫЧНОЕ ДЕЛОВОЕ ОБЩЕНИЕ КАК КЛЮЧЕВОЙ КОМПОНЕНТ ПРОФЕССИОНАЛЬНОЙ ПОДГОТОВКИ БУДУЩИХ ЮРИСТОВ

Awareness of the need for future lawyers to master a foreign language as the means of intercultural communication in professional activities in the conditions of numerous political, cultural and sports' events recently held in our country actualizes the problem of developing students' skills of foreign language business communication in the educational process. The application of theoretical and empirical research methods contributed to the solution of the problem. Conceptual and terminological analysis was used to describe the terminological field of the problem. The article proposes the author's definition of the concept “preparation for foreign language business communication of future lawyers”, which allowed to bring together different points of view of scientists taking into account the modern requirements for professional training of future lawyers and the peculiarities of the educational process for the study of foreign languages in a law school. Three components characterizing foreign-language business communication of the future lawyer are revealed: linguistic, legal and sociocultural. Research analysis of pedagogical conditions conducive to the solution of educational tasks and practical experience allowed the authors to identify the complex of pedagogical conditions of successful mastering the skills of foreign language business communication: to include the most typical speech professional situations into the study content, to provide subject-subject interaction in the educational process, to consider the interdisciplinary relations. The novelty and significance of the results lies in the fact that the identified set of pedagogical conditions is considered as a guide to clarify the content and structure of foreign language education at a law school, and contributes to the disclosure of internal reserves of future lawyers to achieve this goal.

Does Tax Disclosure Affect Corporate Innovation? A Cross-Country Examination

In this paper, we analyze the real effect of financial statement tax disclosures on corporate innovation activities. In 2007, the FASB enacted FIN 48, which mandates the separate and more detailed disclosure of reserves for unrecognized tax benefits (UTBs). Using patent applications as a measure of corporate innovation, we employ a difference-in-difference research design with publicly listed U.S. firms as the treatment group and privately held U.S. firms not subject to the disclosure requirements as the control group. We hypothesize and find robust evidence that following the onset of FIN 48, the number of patent applications by publicly listed firms decreased. We also provide evidence that the decrease is attributable to incremental innovation, which is more subject to the UTB disclosure requirements. Our evidence provides support for the real effects of disclosure on innovation activities.

К проблеме формирования социально–психологического климата в служебных коллективах органов внутренних дел

The article deals with the features of the notion of the socio-psychological climate, the urgency of the task of improving the social and psychological climate of the internal affairs staff and the prospects for the degree of its importance growth among other socio-psychological problems of the team. It is shown how the socio-psychological climate is able to influence the build-up, disclosure and use of reserves to improve performance.

Design of universal attractive transport passage Sundarbans over the Bay of Bengal

The purpose of this article is to find new ways to develop the recreational and tourist potential of Bangladesh. One of the methods of solving this problem is the construction of a universal attractive transport passage Sundarbans over the Bay of Bengal, where land transport is poorly developed due to frequent river spills. In this regard, the proposed option of building a modern bridge with developed infrastructure and with the use of modern technologies and materials, which will unite the regions of Chittagong, Barisal, Khulna. The construction of entrance infrastructure facilities and multifunctional transfer centers in the cities of Khulna, Bhola, Barisal, Chittagong, Noakhali, Koh Bazaar will attract additional flows of tourists, which will unite the regions of Chittagong, Barisal, Khulna. Methods. The article deals with the factors influencing the development of recreational and tourist potential of Bangladesh. A review of the main problems encountered in the construction. The search for the disclosure of reserves for development is planned. Conclusion. A rational and economical solution will allow the complex to organize the further operation of the structure, turning it into the main recreational and cultural center of the region, responding to the objectives of the future development of recreational services Bangladesh up to 2030. This requires further development of transport communications in the southern part of the country between the regions of Chittagong, Barisal, Khulna.

The Informational Effects of Tightening Oil and Gas Disclosure Rules

We exploit two regulatory shocks to examine the informational effects of tightening pre-existing mandatory disclosure rules. Canadian National Instrument 51-101 in 2003 and the United States rule “Modernization of Oil and Gas Reporting” in 2009 introduced quasi-identical amendments which effectively tightened the rules governing oil and gas reserve disclosures in both countries. We document significant changes in firms’ reporting outcomes when the new regulations are introduced. We also find that the reserve disclosures filed under the new regulations are more closely associated with stock price changes and with decreases in bid-ask spreads. Our findings are robust to controlling for other confounding factors such as time trends, other information disclosed simultaneously, financial reporting incentives, mispricing and monitoring efforts.

Market impact of proved reserves disclosures by US publicly held oil and gas exploration and development companies

US generally accepted accounting principles (GAAP) permit publicly held oil and gas exploration and development companies (OGEs) to report exploration and development costs under either the successful efforts (SE) or the full cost pool (FC) method, which results in a lack of comparability of financial statements of FC and SE companies. In an attempt to eliminate information asymmetry, OGEs must disclose detailed information about proved reserves, including the discounted present value of future cash flows from proved reserves. This study investigates whether these reserve disclosures enhanced comparability between firms using FC and SE accounting. Quantitative research methods utilising multiple regression analysis techniques examine whether the present value of future cash flows from proved reserves discounted at 10% (PV10) and reserve quantity disclosures predict changes in market capitalisation. Although the various reserve disclosures required by the FASB (2014b) reduce information asymmetry between management and investors, the findings from this research indicate that investors in FC and SE companies use different data to determine the prices they are willing to pay for the companies' stocks. Therefore, these disclosures have not provided investors with a uniform set of criteria that can be used to compare a FC company with an SE company.

Criteria and Procedures for Estimating the Informativity and Feature Selection in Biomedical Signals for their Recognition

Introduction. The issues of features informativity evaluation in biomedical signals portraits according to formal comparison of their probability values, obtained during training of supervised learning recognition systems are being considered. The purpose of this work is to increase the effectiveness of the biomedical signals recognition in diagnostic systems with supervised learning, by choosing rational structure of portraits based on the nature of their elements influence on the quality of pattern recognition.Details. Informativity values are used for feature selection in the formation of truncated portraits. Subsequent exclusion of less informative features from consideration relies in this paper in the basis of disclosure and implementation of reserves to increase the probability of correct recognition in diagnostic systems. Content and efficiency of the proposed signal processing technology is illustrated by the test case in the application to the common task of recognition of QRS-complexes types, useful for recognition system training with its data selection.Conclusions. The use of certain components of biomedical signals portraits, studied in the diagnosis of patients can have a positive impact on the quality of pattern recognition, while others create redundancy of portraits or reducing effectiveness of solving this task.

An empirical study of the determinants of UK oil and gas voluntary disclosures

Significant oil and gas firm market value is derived from their physical reserve quantum, assets which are not recorded on their statements of financial position. This article provides empirical evidence regarding voluntary disclosure of such reserves in line with the previously unresearched UK sector with regard to its unique reporting guidelines. The study considers both the reporting of the reserve quantum and the quality of that reporting. This article seeks to inform the International Accounting Standards Board’s (IASB’s) on-going consideration of mineral resource reporting. Listed companies are considered to evidence forms of reserve disclosure with a logistical regression approach applied to measure determinants of reporting. The risk associated with mineral reporting reserves is hypothesized as the key disclosure driver whilst controlling other relevant variables. The majority of firms disclosed reserve quantities in some form but only a minority disclosed in line with recommended practice, disclosure quality being more variable between companies. The findings indicate that a voluntary disclosure approach is ineffective, partially explained by agency related behaviour. Risk, proxied by the stage of production, drives reserve disclosure showing that producer firms are more likely to disclose reserve quantum balances and of a significantly higher quality.

Does Industry Specialist Assurance of Non-Financial Information Matter to Investors?

SUMMARYPrevious studies in the financial economics literature highlight the value of non-financial information in Internet and telephony stocks (Amir and Lev 1996; Trueman, Wong, and Zhang 2001). Other studies consider the financial and share price performance implications of assurance of non-financial information such as ISO 9000 certification (Corbett, Montes-Sancho, and Kirsch 2005), Total Quality Management awards (Hendricks and Singhal 1997), and non-financial information disclosure (Coram, Monroe, and Woodliff 2009). However, prior studies have occurred in settings where disclosure and assurance of non-financial information is voluntary. We provide evidence on the value of assurance of non-financial information where the assurance of public resource disclosures made under the JORC Code by Australian Mining Development Stage Entities are mandatory. The assurance role undertaken by Competent Persons reporting under the JORC Code bears many close similarities to the financial reporting assurance role undertaken by auditors. Further, the information environment of MDSEs is characterized by high information asymmetry and the reality that the utility of non-financial technical information supersedes financial statement information in firm valuation. We document very weak evidence of greater abnormal returns evident when reserve disclosures are provided by specialist mining consultants. In supplementary analysis, we test for implications of switching mineral consultant and find that clients experience significant positive abnormal returns when the successor is larger. Overall, our findings support the insurance hypothesis, in that mandatory specialist assurance matters little where litigation risk is low.

Whispers in the ear: preschool children's conceptualisation of secrets and confidants

In this qualitative study, semi-structured interviews were conducted with three- to five-year olds (n = 17) in a university-sponsored preschool programme. Analyses using interpretive phenomenology indicated that preschool children view secrets with a sense of intimacy, and they reserve disclosure for a particular person, usually their best friend. There is a sense of ownership surrounding secrets for preschool children, and hence, secrets are regarded as something special to them. Furthermore, secrets are described as something that gives preschool children happiness and are often associated with games or pretend play. Finally, the analysis addresses children's secret hiding places and the types of concepts preschool children consider as a secret.

The "Reliable Technologies" Rule: What Did the SEC Intend?

Summary This paper provides background information on the US Securities and Exchange Commission's (SEC) newly defined term, reliable technology, which plays a prominent role in the SEC's modernized regulations for reporting oil and gas reserves. This background information will include criteria that reliable technology must meet to ensure that it will provide the confidence level required to categorize certain resources as reserves of any category (proved, probable, or possible). The new SEC rules for disclosing reserves no longer require that a limited number of rigidly specified technologies be used to establish the confidence level of reserves that a filer discloses. Reasonable certainty was required in the past because only proved reserves could be disclosed, and, as an example, reasonable certainty of economic production required either flow tests or actual production to the surface except in the deepwater Gulf of Mexico. The new rules allow any technology that has been proved empirically to lead to correct conclusions, including proprietary technology, to be used to determine the proper classification for a given petroleum accumulation. Unfortunately, the industry has been provided with only limited guidance on which technologies will be satisfactory and which technologies will not. This paper will present an analysis of SEC publications for possible insight into its thinking about this important issue. Proper disclosure of reserves will depend vitally on a proper interpretation of reliable technology. Note: The opinions expressed in this paper are the author's alone. They represent the opinions of neither the US SEC nor its staff members.

Market Reaction to Resource and Reserve Disclosures by Development Stage Mining Companies

Market Reaction to Resource and Reserve Disclosures by Development Stage Mining Companies

Did FIN 48 Limit the Use of Tax Reserves as a Tool for Earnings Management?

We utilize new income tax reserve disclosures required under FIN 48 to examine whether managers use discretion over this accrual to manage earnings to meet the consensus analyst forecast. We find that firms with pre-managed earnings (i.e., earnings before the change in the tax reserve) that are below the consensus analyst forecast are far more likely to reduce their tax reserves and thus report higher net income. In fact, we find that 37 percent of firm-years with pre-managed earnings below the consensus forecast meet the forecast when the change in the tax reserve is included in earnings. In contrast, only 9.8 percent of firm-years with pre-managed earnings above the consensus forecast increased their tax reserves to the extent that it caused them to miss the consensus forecast. This asymmetric result is consistent with managers using their discretion over tax reserves to meet consensus analyst forecasts. Using a proxy for changes in tax reserves developed by Blouin and Tuna (2007), we also document a decline in the use of tax reserves to meet the consensus analyst forecast following the adoption of FIN 48. Nonetheless, our results using both estimated and actual changes in tax reserves clearly suggest that managers continue to use their discretion over this account to meet the consensus analyst forecast, although at a lower rate of recurrence than during the pre-FIN 48 time period.

Integrating Reserves Management: Providing Regulatory Compliance and Improving Decision Making

This article, written by Senior Technology Editor Dennis Denney, contains highlights of paper SPE 124168, "Methodology for Integrated Reserves Management: Providing Regulatory Compliance and Im proving Decision Making," by Lev Virine, SPE, Project Decisions, and Doug MacDonald, SPE, Schlumberger Information Solutions, prepared for the 2009 SPE Annual Technical Conference and Exhibition, New Orleans, 4-7 October. The paper has not been peer reviewed. Effective corporate reserves-management systems enable tracking reserves to provide input for reporting to regulators and to serve as a decision-support system. Implementation of such reserves-management systems has challenges. Regulatory bodies, including the US Securities and Exchange Commission (SEC), require proper categorization of reserves on the basis of evaluating whether the volumes can be recovered economically in a timely manner. The reserves-management system should provide technical and economic volumes on the basis of up-to-date prices, capture and analyze uncertainties in the reserves volumes, provide secure data access and data archiving, and implement an approval and audit process. Introduction A method to integrate reserves management was developed that comprises three processes—data management, which ensures fast and secure access to reservoir data; economic and technical volume calculation; and a flexible reporting process. Reservoirs, as well as prospects, are organized within a corporate hierarchy. In accordance with SEC regulations and SPE/World Petroleum Council/American Association of Petroleum Geologists/Society of Petroleum Evaluation Engineers Petroleum Resources Management System (SPE-PRMS) guidelines, the data-management process captures proven, probable, and possible reserves, as well as discovered and undiscovered resources, for different petroleum products and companies with different working interests. Each category of each reservoir is associated with an economic case that contains information about costs, prices, and the fiscal regime. Economic volumes can be calculated on the basis of the results of economic evaluations of the reserves. Uncertainties in reservoir data are captured by use of multiple scenarios for each reservoir and category. A regional-pricing mechanism allows updating prices for all economic cases at a particular level of the corporate hierarchy. All changes to the economic-results data would be recorded and require approval. Challenges. Disclosure of oil and gas reserves is different from disclosure of company financial performance or production. While the financial performance of the company, at least in theory, can be calculated precisely, oil and gas reserves are uncertain by definition. Different proven methods of estimating reserves may yield different results. Moreover, different estimators that use similar methods may determine different numbers. New SEC regulations aim to improve transparency by providing investors with more information about the reserves. In particular, the new regulations permit disclosure of probable and possible reserves. It should be noted that information about probable and possible reserves also includes more uncertainties, compared with proven reserves.

Modernization of the SEC Oil and Gas Reserves Reporting Requirements

This article, written by Senior Technology Editor Dennis Denney, contains highlights of paper SPE 123793, "Modernization of the SEC Oil and Gas Reserves Reporting Requirements," by W. John Lee, SPE, Texas A&M University, prepared for the 2009 SPE Annual Technical Conference and Exhibition, New Orleans, 4-7 October. The paper has not been peer reviewed. Modernized US Securities and Exchange Commission (SEC) rules for reporting oil/gas reserves are now broadly consistent with SPE definitions and generally reflect public requests for specific changes in the previous rules. Disclosure requirements based on the revised definitions use annual average prices and allow wider use of reliable technologies. They also allow broader recognition of nontraditional resources, including those from oil sands, shales, and coal; optional disclosure of probable and possible reserves; and replacement of the "certainty" criterion for some reserves with a "reasonably certain" criterion. Official clarification of some of the new terms may be forthcoming. Here, the author provides his opinion of their intent. Introduction The SEC oil/gas reserves-reporting requirements in effect until the end of 2009 were adopted in 1978, with some associated requirements adopted through 1982. In the three decades since adoption of these requirements, the petroleum industry has experienced many changes. As examples, technology associated with recovery and characterization of petroleum accumulations has advanced dramatically; spot markets and transportation of sales products to market have grown and improved substantially; and economic production of nontraditional resources, such as bitumen from oil sands, has been established. These developments, and others, caused the SEC's reporting requirements to lag increasingly behind the capabilities of the petroleum industry. In 2007, the SEC created the position of "Academic Engineering Fellow" to help the commission's staff examine the need for modernizing its rules and to help the staff coordinate a project to propose modifications. In October 2007, the author was retained to fill this position. After review of public comments, the SEC approved and released final rules in December 2008. The new rules were published in the Federal Register of the National Archives and Records Administration on 14 January 2009. Official guidance clarifying the intent of unclear phrases that appear in the rules may come, eventually, from the SEC. Below are comments on some possible interpretations of these guidelines, although final interpretations lie only with the SEC. See the full-length paper for references and Web addresses to view them. Major Rules Changes These rules include revised reserves definitions, which are broadly consistent with the SPE/World Petroleum Council/American Association of Petroleum Geologists/Society of Petroleum Evaluation Engineers-Petroleum Resources Management System (SPE-PRMS) definitions (although important differences remain). Disclosure requirements based on the revised definitions include the following.