Statement Impact Research Articles

DOES FIRM VALUE MATTER? EMPIRICAL EVIDANCE FROM INDONESIA

The COVID-19 pandemic has hurt the entire government and corporate financial system, making it difficult for businesses to distribute dividends. During the COVID-19 epidemic, this study examines the possible impact of financial statements on firm value by considering dividend policy as a moderating factor. This research employs a quantitative methodology, utilizing purposive sampling techniques and secondary data. The sample data includes all public companies listed on the Indonesia Stock Exchange between 2020 and 2022. There are 127 sample data. We conducted the test using SmartPLS software. Researchers looked at three financial parameters: profitability, leverage, and liquidity. The research results show that leverage and profitability, not liquidity, can influence firm value. The impact of dividend policy on the relationship between profitability and company value is evident, while it does not affect leverage or liquidity. To identify this problem accurately, the researchers used signal theory to get accurate results in identifying this problem. We hope the research results will alert investors to exercise caution when purchasing shares, particularly in manufacturing companies.

Current Patterns of Probiotic Use in U.S. Neonatal Intensive Care Units: A Multi-Institution Survey.

Probiotic supplementation is associated with health benefits in preterm infants. The 2021 American Academy of Pediatrics (AAP) statement on probiotic use advised caution, citing heterogeneity and absence of federal regulation. We assessed the impact of the AAP statement and current institution-wide patterns of probiotic use across neonatal intensive care units (NICU) across the United States. A cross-sectional web-based institutional survey using REDCap was emailed to 430 Children's Hospital Neonatal Consortium (CHNC) and Pediatrix Medical Group institutions. The survey captured data on probiotic formulations, supplementation, initiation and cessation criteria, reasons for discontinuation, interest in initiating, and AAP statement's impact. Ninety-five (22.1%) hospitals, including 42/46 (91%) CHNC and 53/384 (14%) Pediatrix institutions, completed the survey. Thirty-seven (39%) currently use probiotics. Fourteen different probiotic formulations were reported. The common criteria for initiation were birth weight <1,500 g and gestational age <32 weeks. Parental consent or assent was obtained at only 30% of institutions. Five hospitals (11%) with prior probiotic use discontinued solely due to the AAP statement. Overall, 23 (24%) of hospitals indicated that the AAP statement significantly influenced their decision regarding probiotic use. Nineteen of 51 nonusers (37%) are considering initiation. Probiotic use in preterm infants is likely increasing in NICUs across the United States, but significant variability exists. The 2021 AAP statement had variable impact on NICUs' decision regarding probiotic use. The growing interest in adopting probiotics and the significant interhospital variability highlight the need for better regulation and consensus guidelines to ensure standardized use. · Probiotic use in preterm infants is likely increasing in U.S. NICUs, but clinical variability exists.. · The AAP statement on probiotic use in preterm infants had a modest impact on current practices.. · There's a need for better product regulation and consensus guidelines to ensure standardized use..

Discrepancies in Website Accounting: Non-compliance with ISAK 14

This scientific article presents a qualitative research study aimed at examining the recognition and accounting treatment of websites as intangible assets. Focusing on the case of the Ricosta website, the research demonstrates that the current practice of categorizing the website as other expenses in financial statements contradicts the guidelines outlined in ISAK 14. By utilizing narrative data and descriptive analysis, the study unveils the misalignment between the recognized accounting treatment and the stipulated requirements. The results highlight the need for adherence to proper recognition and accounting practices for websites as intangible assets, offering implications for companies and standard-setting bodies in promoting accurate financial reporting.&#x0D; Highlights:&#x0D; &#x0D; Non-compliance with ISAK 14: The research uncovers the misalignment between the recognition and accounting treatment of websites as intangible assets and the guidelines stated in ISAK 14.&#x0D; Financial statement impact: The study reveals that the current practice categorizes website expenses as other expenses, contrasting with the potential recognition of websites as intangible assets, which can significantly affect the financial statements of companies.&#x0D; Implications for accurate financial reporting: The findings emphasize the importance of adhering to proper recognition and accounting practices for websites as intangible assets, suggesting implications for companies and standard-setting bodies to ensure accurate and transparent financial reporting.&#x0D; &#x0D; Keywords: website recognition, accounting treatment, intangible assets, ISAK 14, financial statements.

Are key audit matter disclosures useful in assessing the financial distress level of a client firm?

This study examines the usefulness of new expanded audit report key audit matters (KAM) disclosures in assessing the level of financial distress present at a client firm. Using six years of KAM disclosures for U.K. Premium-listed firms beginning in 2013, we investigate the relation between firm financial distress and the number, risk level, financial statement impact, and individual nature of auditor-disclosed KAMs. We expand on literatures examining audit report disclosures in gauging financial distress assessments as well as the utility of expanded audit reporting. We find the greater the number of KAMs disclosed, the higher a firm's financial distress level. Additionally, results show entity-level KAMs, account-level KAMs with a primary impact on profitability and solvency, and certain types of individual KAMs are more likely to be disclosed when client firms face higher levels of financial distress. The results are robust to alternative measures of financial distress and to endogeneity tests. Our findings also indicate KAMs have predictive ability in assessing subsequent periods' financial distress levels. In all, evidence from this study suggests a way financial statement users can use independent auditor disclosures to assess one of the main risks associated with a firm - the risk of failure.

Preparer Opposition and Strategic Implementation of Governmental Accounting Standards: Evidence from Public Pension Accounting Reform

Widely acknowledged as one of the most controversial standards in governmental accounting, Governmental Accounting Standards Board (GASB) Statements 67/68 radically altered both the recognition and measurement for defined benefit public pensions. The standards require the recognition of previously only disclosed unfunded pension liabilities and increase the magnitude of reported pension liabilities by requiring the partial incorporation of a market-based discount rate. Although the recognition proposal was unaltered from its initial conception to the final standards, the discount rate proposal was significantly attenuated after the initial proposal met with unanimous preparer opposition. Accordingly, we examine what incentives drive preparer lobbying positions, whether such lobbying is aligned with user interests, and how such lobbying affects ex post implementation of the final standard. Our results suggest a misalignment between preparer lobbying and a user interest perspective. In particular, although state opposition for liability-increasing proposals is positively associated with expected financial statement impact, economic constraints, and political ramifications, user lobbying exhibits the opposite relationship, suggesting that users demand greater transparency in the states most likely to eschew it. We further find that state governments consistently opposed to the market-based discount rate are more likely to maintain status quo higher discount rates that lower reported liabilities after the implementation of GASB 67/68. Examining the mechanism, we find that opposing states avoid the market-rate trigger by increasing required contributions from employees rather than by increasing government funding or implementing benefit cuts. The evidence taken together contributes to our understanding of the development and implementation of the landmark GASB 67/68 standards. This paper was accepted by Brian Bushee, accounting. Funding: The authors acknowledge financial support from Brigham Young University and Georgetown University. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4515 .

Revenue Recognition and Sales Return Issues at Medicis Corporation

ABSTRACTSales returns are often considered a simple financial accounting topic, but in this case, accounting for sales returns led to a significant lawsuit and the largest fine ever imposed against a CPA firm by the PCAOB at the time. This case study is designed to aid instructors in teaching accounting for sales with right of return under ASC 606 and is suited for an intermediate financial accounting course or a graduate course in accounting research. Students are required to exercise higher-order skills, such as professional research and analysis, as they research and understand the following: (1) the FASB's prior revenue recognition guidance when a right of return exists (ASC 605) and the FASB's new revenue recognition guidance ASC 606; (2) the financial statement impact of alternative methods of accounting for sales returns; and (3) how to account for unique return policies, such as a return for expiration.

A transparent transition? An investigation of firm disclosure regarding the expected impact of the new lease standard

AbstractThe Securities and Exchange Commission (SEC) requires firms to provide disclosures on the expected financial statement impact of newly issued accounting standards that have yet to be adopted. In this study, we explore the extent, nature, and timeliness of disclosures regarding the expected impact of the new lease standard in the transition period (2016–2018). We find that 62% of sample firms provide no firm‐specific disclosure regarding an expected increase in lease liabilities in the first year of the transition, which is unexpected given the clear balance sheet impact of the new lease standard. We investigate the determinants of timely disclosure and find a positive association with operating lease activity. Given concerns that firms will seek alternate vehicles for off‐balance‐sheet (OBS) financing under the new lease standard, we investigate changes in lease activity and disclosures for a sample of firms with extreme decreases in operating lease activity. We find a downward trend in operating lease activity around the passage of the new lease standard, but find few firms disclosing expected changes to their leasing activity. Our evidence suggests that information in early transition period disclosures, or lack thereof, may provide important signals for assessing lease liabilities and overall debt levels under the new lease standard.

COVID-19 and deferred tax reversals

Purpose This paper aims to examine the financial statement impact resulting from the tax depreciation on buildings that was reinstated on 25 March 2020 as part of the New Zealand Government’s coronavirus (COVID-19) tax support package. The COVID-19 pandemic and the tax relief created an accounting response to map the environment to accounting reports, reversing previously recognized deferred tax liabilities and increasing reported income as a result. Design/methodology/approach This is an exploratory and descriptive study to understand the accounting response and impact on companies’ financial statements following a COVID-19 tax relief to support businesses in a dire financial situation as the effects of COVID-19 took hold. Findings First, the accounting response provided the appropriate mapping from the COVID-19 environment to accounting reports. Second, the financial statement impacts are material, especially for companies with extensive holdings of buildings that are held for use. Third, while the accounting relief was immediate, the economic (cash flow) support does not occur until a year later. Research limitations/implications The financial statement impacts are based on a subset of NZX 50 companies with the available information at the time of writing. However, they do not compromise the external validity of the findings because the tax depreciation relief applies to other listed companies, unlisted public and private companies, trust, partnerships and individuals. Practical implications The New Zealand Government could have been more helpful to businesses by allowing an immediate depreciation deduction in the 2020 year as opposed to implementing it from 2021. Further, it could have legislated a backlog depreciation deduction from 2010 – when the depreciation on buildings was disallowed – to 2020. Originality/value This paper documents the evolution of the accounting for deferred taxes when the New Zealand Government withdrew the tax depreciation in 2010, how NZ IAS 12 evolved as a result of that event and now the reversal effect with the reinstatement of the tax depreciation during COVID-19. The paper also blends in the accounting responses and considers whether they are opportunistic or efficient.

Real Effects of Governmental Accounting Standards: Evidence from GASB Statement No. 53 - Accounting and Financial Reporting for Derivative Instruments

GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, (GASB 53) significantly altered U.S. governmental sector accounting of derivative instruments by mandating the recognition of hitherto off-balance sheet derivative instruments in the government-wide statement of net assets and requiring that ineffective hedges be clearly identified. These requirements have an unfavorable financial statement impact for municipalities with net negative fair value derivative positions and municipalities holding ineffective hedges. Using a hand-collected, comprehensive dataset of municipal derivatives, we examine whether the level of U.S. municipal derivative holdings changed following the adoption of GASB 53. Consistent with GASB 53 affecting municipal officials’ derivative decisions, we find a significant post-GASB 53 reduction in derivative holdings for municipalities with net negative fair value derivative positions and ineffective hedges. Our findings suggest that governmental accounting regulations could affect real decisions of municipal officials and therefore could potentially have public policy implications beyond the provision of information to stakeholders.

Real effects of governmental accounting standards: Evidence from GASB statement No. 53 – Accounting and financial reporting for derivative instruments

GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, (GASB 53) significantly altered U.S. governmental sector accounting of derivative instruments by mandating the recognition of hitherto off-balance sheet derivative instruments in the government-wide statement of net assets and requiring that ineffective hedges be clearly identified. These requirements have an unfavorable financial statement impact for municipalities with net negative fair value derivative positions and municipalities holding ineffective hedges. Using a hand-collected, comprehensive dataset of municipal derivatives, we examine whether the level of U.S. municipal derivative holdings changed following the adoption of GASB 53. Consistent with GASB 53 affecting municipal officials’ derivative decisions, we find a significant post-GASB 53 reduction in derivative holdings for municipalities with net negative fair value derivative positions and ineffective hedges. Our findings suggest that governmental accounting regulations could affect real decisions of municipal officials and therefore could potentially have public policy implications beyond the provision of information to stakeholders.

TMS 17 Kiralama İşlemleri Standardından TFRS 16 Kiralamalar Standardına Geçişte BİST Şirketlerine Yönelik Sektörel Etkilerin Karşılaştırmalı Analizi

IFRS 16 (TFRS 16), prepared by the International Accounting Standards Board (IASB) to replace the IAS 17 (TMS 17) leases standard as part of the project to improve financial reporting for leases, has been effective as of January 1, 2019. With the renewed standard, the distinction between financial leasing and operating leases has been eliminated, allowing information users to make more accurate decisions and allow financial statements to reflect the current situation of the businesses more realistically. With the implementation of the standard, significant changes are expected to occur in the financial statements of companies with operating lease transactions. With this study, the level of impact of financial statements after the new leases are classified on a sectoral basis by the companies operating in Borsa Istanbul in Turkey with the sector averages included in the impact report published by the IASB compared. Consequently, it was found that retail, aviation and health were the most affected sectors, while sectoral impact levels in Turkey differed from time to time with the IASB study.

Impact of financial statements for financial decision-making

The study aimed to know the effects of analysis of financial statements on financial decisions, and the degree of benefit from them, and to identify what financial statements, what is its importance for the institutions within the framework of the Kingdom's Vision 2030 of ideas and trends, and to identify the contribution of financial statement analysis to financial decision-making. The study was based on the descriptive and analytical approach, and the study population consisted of all financial decision makers. The study was based on a simple random method (70) of financial decision makers. The study was based on the questionnaire and consisted of the following axes (financial statements in companies, financial decision-making, the effects of analysis of financial statements on financial decision-making). The study came out with a number of results, the most important of which are: There is approval by the respondents to all paragraphs of the first axis "financial statements in companies", with a relative weight of 82.8%. There is an agreement by the respondents on all paragraphs of the second axis "making financial decisions in companies", with a relative weight of 81.3%. There is strong approval by the respondents on all paragraphs of the third axis "the effects of analysis of financial statements on financial decision-making", with a relative weight of 86.4%. The financial statements are a key tool to know the financial position of the company, so they must be accurate and reliable before being published by management. The lack of credibility in the financial statements leads to mistrust in the company by investors, and does not give them the possibility to diagnose and make sound decisions. In light of the previous results, the study recommended the following: • Organizing several forums, conferences and forums to clarify the mechanism of preparing the financial statements and how to analyze them, and the need to raise awareness of financial decision makers about the importance of financial statements in the financial decision-making process.

Pediatric anesthesiologists' attitudes about neurotoxicity and the FDA drug safety communication.

The 2016 Food and Drug Administration (FDA) Drug Safety Communication states that brain development in children under 3 years old may be affected by "repeated or lengthy use of general anesthetic and sedation drugs" and advises healthcare providers to "discuss with parents, caregivers, and pregnant women the benefits, risks, and appropriate timing of surgery or procedures requiring anesthetic and sedation drugs." This preliminary study's aims were to explore 1) pediatric anesthesiologists' attitudes regarding the FDA statement, 2) the statement's impact on informed consent practices, and 3) whether institutional policies pertaining to disclosure of neurotoxicity risk exist.

Impact of Guidelines Regarding Brief Resolved Unexplained Events on Care of Patients in a Pediatric Emergency Department.

This study aimed to determine if the 2016 clinical practice guidelines regarding brief resolved unexplained events (BRUE) impacted our institutional approach to infants with BRUE. We sought to determine the statement's impact on admission rates, emergency department (ED) length of stay, and return ED visits or readmissions. We conducted a retrospective chart review of patients who presented to the ED at a tertiary pediatric hospital from January 2014 to June 2019. Diagnostic workup (laboratory testing, imaging, monitoring) in the ED was recorded. Cohorts of patients presenting pre- and post-2016 guideline were compared using χ2 and t tests. Subanalysis of higher-risk and lower-risk infant groups was also performed. The demographics of the 2 cohorts were not significantly different. Comparison showed significant reductions in invasive testing after the guideline, both overall (P = 0.005), and specifically regarding comprehensive metabolic panel, blood culture, urine culture, and chest x-ray. Infants meeting higher-risk criteria also showed decreases in invasive testing (P = 0.02). Admission to the hospital and ED lengths of stay decreased in the post-American Academy of Pediatrics statement cohort (P < 0.001 and P = 0.007, respectively). There were no increases in readmissions or repeat ED visits. This study revealed significant reduction in invasive testing, shorter lengths of ED stays, and lower admission rates at a tertiary care children's hospital after the release of the American Academy of Pediatrics BRUE guideline with no increase in return ED visits or readmissions.

Are Key Audit Matter Disclosures Useful in Assessing Financial Distress?

This study examines the usefulness of new expanded audit report key audit matters (KAM) disclosures in assessing the level of financial distress present at a firm. Using KAM disclosures from a hand-collected sample of UK Premium-listed firms for 2013 to 2018, we explore the association between firm financial distress and the number, risk level, financial statement impact, and nature of disclosed KAMs. Our study expands on recent literature examining the use of audit report disclosures on financial distress prediction models as well as literature examining the utility of expanded auditor reporting. We find the greater the number of KAMs disclosed, the higher the financial distress level of a firm. Results also show the usefulness of KAMs in assessing financial distress levels increases when considering the level and nature of KAM(s) disclosed. Specifically, certain types of entity-level and individual account-level KAMs, as well as KAMs with a primary impact on a firm’s profitability and solvency, are more likely to be disclosed when firms face higher levels of financial distress. Our findings also suggest KAMs have predictive ability in assessing subsequent period financial distress levels. In all, evidence from this study suggests expanded auditor reports can help financial statement users assess and predict one of the main risks associated with a firm - the risk of failure.

Are the stock prices influenced by the publication of the annual financial statements? Evidence from the Dow Jones Industrial Average

The impact of financial statements on the stock prices of listed companies after its publication has been reported and analyzed in several studies. On the basis of financial reporting, the evaluation of a company’s financial performance requires taking into account a plurality of indicators, which are related to profitability, liquidity and managerial performance. In this paper, we investigate whether the publication of the annual financial statements can influence the stock prices of listed companies. Empirical time series data of companies listed on the Dow Jones Industrial Average (DJIA) are used adopting a regression approach. From a different perspective of other papers the regression model proposed considers stock returns measured from the publication of the form 10-k to the disclosure of the quarterly financial statements in May. The obtained results confirm that stock prices are affected by the publication of the financial statements. Finally, the performed analysis also provides some useful guidelines to managers and investors.

The Magnitude and Accuracy of Companies’ Estimates of the Immediate Financial Statement Impact of the Tax Cuts and Jobs Act

We use the Tax Cuts and Jobs Act as a setting to offer new insights into companies’ tax accruals and disclosures. Specifically, we examine the properties of companies’ estimates of the transition tax on foreign earnings and related voluntary disclosures. We exploit the one-year measurement period during which companies could adjust their initial transition tax estimates. We find companies with political access record smaller measurement period adjustments and provide more extensive voluntary disclosures. Companies whose auditors had more capacity at year-end record smaller adjustments. However, we find no difference in adjustments or disclosure for companies that previously disclosed an estimated tax on foreign earnings compared to companies that claimed the calculation was impracticable. Finally, we find companies with incentives to manage external perceptions that they pay their “fair share” of tax are more likely to overstate their initial transition tax estimates.

IFRS Adoption and Financial Reporting Quality: A Review of Evidences in Different Jurisdictions

Conventional and commonly held wisdom with respect to the adoption of International Financial Reporting Standards (IFRS) is that they lead to improved financial reporting quality and comparability and thereby favorable economic consequences. There are however contradicting evidences disproving this conventional wisdom or rejecting its gross generalization over the entire jurisdictions harmonizing on IFRS. Driven by this fact, quests for knowledge about the dynamics and contexts that lead to differential effects of IFRS get momentum. In an attempt to explore the insight into the effects of international accounting harmonization by way of IFRS adoption, this paper reviews selected literatures on the consequences of IFRS adoption. This review discusses some empirical evidences that have been reported in various countries that include Europe, USA, United Kingdom, Germany, Spain, Norway, Greece, Poland, Belgian, France, Italian, Turkey, United Arab Emirates (UAE), Kuwait, Jordan, China, Malaysia, Australia, Hong Kong, New Zealand, Kenya and Nigeria. Our review focuses on the aspects of value relevance, disclosure quality, cost of capital, earning management and financial statement impact due to the IFRS adoption. This review reveals that the economic consequences of IFRS adoption is significantly different though its impact reported to be positive in majority of cases. There are also notable number of studies that report indifferent and or negative effects of IFRS adoption. When IFRS studies report mixed evidence with respect to value relevance of book value of equity and earing, book value of equity supersedes the earning parameters. IFRS are found to supersede many other domestic financial reporting standards in terms of amount and the quality of disclosures in financial statement. This review also obtains that IFRS’s impact on the reduction of cost of capital depends on financial reporting incentives, law enforcement, types of legal systems and various other country-specific and capital market characteristics. Further, though there are some evidences to the contrary, the quality of earnings reported under IFRS has been established to be superior to other local standards.

The Southern Manifesto: Massive Resistance and the Fight to Preserve Segregation

On March 13, 1956, ninety-nine members of the United States Congress promulgated the Declaration of Constitutional Principles, popularly known as the Southern Manifesto. Reprinted here, the Southern Manifesto formally stated opposition to the landmark United State Supreme Court decision Brown v. Board of Education, and the emergent civil rights movement. This statement allowed the white South to prevent Brown's immediate full-scale implementation and, for nearly two decades, set the slothful timetable and glacial pace of public school desegregation. The Southern Manifesto also provided the Southern Congressional Delegation with the means to stymie federal voting rights legislation, so that the dismantling of Jim Crow could be managed largely on white southern terms. In the wake of the Brown decision that declared public school segregation unconstitutional, seminal events in the early stages of the civil rights movement--like the Emmett Till lynching, the Montgomery bus boycott, and the Autherine Lucy riots at the University of Alabama brought the struggle for black freedom to national attention. Orchestrated by United States Senator Richard Brevard Russell Jr. of Georgia, the Southern Congressional Delegation in general, and the United States Senate's Southern Caucus in particular, fought vigorously and successfully to counter the initial successes of civil rights workers and maintain Jim Crow. The South's defense of white supremacy culminated with this most notorious statement of opposition to desegregation. The Southern Manifesto: Massive Resistance and the Fight to Preserve Segregation narrates this single worst episode of racial demagoguery in modern American political history and considers the statement's impact upon both the struggle for black freedom and the larger racial dynamics of postwar America.

Management Credibility and Investment Risk: An Experimental Investigation of Lease Accounting Alternatives

ABSTRACTThis paper examines how users' understanding of the financial statement impact of accounting alternatives and the disclosure choices management has made jointly influence users' assessments of management credibility and investment risk. Specifically, in a lease obligation setting, management's reporting choice (i.e., recognition versus disclosure), the presence of a supplemental reconciliation from disclosure to recognition, and the source of that reconciliation (as company management or an independent analyst) are manipulated. As predicted, the findings indicate that users assess a management credibility deficiency only when they understand both the financial statement implications of an incentive-consistent reporting choice and that management has not been forthcoming about that choice. In contrast, users' understanding of the financial statement implications of the reporting choice is sufficient to influence their investment risk judgments. This research extends the literature on managerial reporting by documenting necessary knowledge conditions for users to make differential assessments of managers.