Statement Of Financial Accounting Standards Research Articles

ANALISIS IMPLEMENTASI GOOD CORPORATE GOVERNANCE DAN PENERAPAN PSAK 109 TENTANG AKUNTANSI ZAKAT PADA LEMBAGA AMIL ZAKAT DOMPET DHUAFA CABANG SULAWESI SELATAN

This study aims to: (1) analyze the implementation of Good Corporate Governance at the Institute Amil Zakat Dompet Dhuafa South Sulawesi branch; (2) describe the application of SFAS 109 on accounting for zakat Amil Zakat Institution Dompet Dhuafa Branch South Sulawesi This study used a qualitative approach to the type of research is a field research. This study was conducted from November 2015 to January 2016. Data were analyzed using descriptive analysis The results of this study indicate that: (1) Implementation of the Principles of Good Corporate Governance (GCG) has applied to the Institute Amil Zakat Dompet Dhuafa Branch South Sulawesi: (2) Statement of Financial Accounting Standards (SFAS) 109 has been applied both in Amil Zakat wallets Dhuafa Branch South Sulawesi

ANALISIS PENERAPAN AKUNTANSI PERSEDIAAN BERDASARKAN PSAK NO.14 PADA PT. GATRACO INDAH MANADO

Inventories are assets owned by the company that are available for sale or goods that will be used in the production of the company’s product. With inventory, the company can sustain their sustainability. Companies often experienced problems in recording and assessment the inventories itself. Aim to make this observation on PT Gatraco Indah is to determine the suitability on the application of the inventory recording method and inventory valuation method of manufacture inventory in the PT Gatraco Indah with Statement of Financial Accounting Standards (SFAS) 14 about Inventory. PT Gatraco Indah is a company engaged in food and beverages for airline companies in Indonesia, especially in North Sulawesi. The Methods that was used in this research is descriptive research method with qualitative analysis techniques outline, describe and compare the data. The Result of this research shows that the company has applied the PSAK No.14 on their inventories.

The Accounting Treatment of Goodwill, Idiosyncratic Risk, and Market Pricing

We study the relationship between goodwill and future returns by considering how the information content of goodwill before and after Statement of Financial Accounting Standards (SFAS) 142 affects idiosyncratic return volatility ( IVOL). Contrary to expectations, previous research has documented that stocks with high IVOL have low future returns ( IVOL anomaly). We build on research that shows that high IVOL is a function of low information on future earnings and define goodwill as a growth option that could be priced through IVOL. Our results show that, during the goodwill amortization period, IVOL is high and the IVOL anomaly is strong. In contrast, nonamortized and tested for impairment goodwill is informative and corrects the IVOL anomaly. We find evidence that SFAS 142’s recognition of goodwill as an asset with indefinite useful life results in value-relevant information about firm growth options and future earnings, thus reducing IVOL, eliminating the IVOL anomaly, and creating an environment of more efficient market pricing of risk.

Accounting for derivatives and risk management activities

Purpose – The lessons and merits of changes in the recognition and disclosure of derivative instruments and hedging activities are still debated and are a major policy issue. Prior studies provide mixed evidences on the economic consequences of mandatory derivative instruments ' recognition and disclosure. This paper aims to provide empirical evidence on the impact of mandatory derivative instruments ' recognition and disclosure on managers’ risk-management behavior. More importantly, this paper aims to investigate the role of product market competition on the impact of mandatory derivative instruments ' recognition and disclosure on managers’ risk-management behavior. Design/methodology/approach – This paper tests the author ' s hypotheses using the fixed-effects estimation technique, where it includes firm dummies in all the regressions. This approach enables to control for unobserved firm effects (fixed effects) on firms’ risk-management behavior that are assumed to be constant through time but vary across firms. Findings – The author finds that mandatory recognition and disclosure of derivative instruments and hedging activities, on average, decreases firms’ market rate risk exposure. This finding suggests that after the implementation of the recognition and disclosure of derivative instruments and hedging activities required by Statement of Financial Accounting Standards No. 133 (SFAS 133), firms engage in more prudent risk-management activities to mitigate the potential cost of earnings volatility imposed by the standard. However, the decrease in market rate risk exposure is lower when the level of product market competition is higher. This finding is consistent with the idea that the recognition and disclosure of derivative instruments and hedging activities required by SFAS 133 unintentionally forces firms in competitive industries to engage in significant risk-taking. The result suggests that more disclosure in risk management may change risk-management incentives in undesirable ways if firms face the threat of entry in their product markets. Practical/implications – The results provide a new understanding on the role of product market competition on the effectiveness of mandatory derivative instruments ' recognition and disclosure. The findings imply that standard setters should take product market competition into consideration before making derivative instruments and hedging activities ' recognition and disclosure mandatory for all firms. Originality/value – The paper contributes to the accounting literature by providing a new insight into the moderating role of product market competition in the accounting recognition and disclosure regulation and firms’ reporting behavior relation. Moreover, the paper extends the current literature on the effects of SFAS 133 on risk-management activities and sheds light on the impact of accounting regulations on firms’ real economic behavior.

The Information Content of Commercial Banks’ Fair Value Disclosures of Loans Under SFAS No. 107

This dissertation utilizes empirical methods to shed light on the current debate over whether to adopt fair value accounting for loans held for long term. Proponents of fair valuing loans argue that reporting loans at their fair values enhances the overall transparency of financial reporting. In contrast, opponents are against applying fair value accounting to loans because fair values cannot be measured reliably in the case of loans held for long term. Therefore, the key question here is whether loan fair values are sufficiently reliable to provide more relevant and transparent information compared to traditional measurements of loans. To explore this, I compare fair value disclosures of loans under Statement of Financial Accounting Standards No. 107 (SFAS 107), Disclosures about Fair Value of Financial Instruments, with traditional measurements of loans reported on balance sheets. More specifically, this study asks two research questions; (i) whether loan fair values provide more relevant information about future loan losses compared to traditional measurements of loans and (ii) whether banks intentionally manage their fair value estimates of loans when they are financially distressed. SFAS 107 mandates the disclosure of fair values for financial instruments with the objective of providing investors with more relevant information about firms' future cash flows. However, the results show that fair value measurements of loans explained variation in future loan losses, which capture cash flows from loans, less than traditional cost-based measurements of loans. In addition, I find evidence suggesting that financially distressed banks overstated the fair values of their loan portfolios and that fair values of loans in the aggregate lagged considerably behind the market values of loans during the recent credit crisis. Overall, my results suggest that fair value disclosures in bank loan portfolios contain relatively less information about future cash flows because they are measured unreliably and they suffer from a similar lack of timeliness as reported carrying values.

Towards the Usefulness and Implications of Segment Reporting Standards

The paper examines the usefulness and implications of segment reporting standards based on the review of extant literatures. Segment reporting provides information about an entity’s operations which enables users of financial reports to assess and make informed decision on the true position and performance of the business and geographical segments a diversified entity is operating. The advocacies to make companies disclose adequately segment information resulted in the issuing of various segment standards such as Statement of Financial Accounting Standards (SFAS) 14 and 131, International Accounting Standards (1AS 14) and IAS 14R and lastly International Financial Reporting Standards (IFRS) 8.The amendments to, and/ or replacement of the standards were due to the reported deficiencies and/or criticisms by users of financial statements and other stakeholders. Following the convergence project of the IASB and US FASB, the IFRS 8 which was a replica of SFAS 131 was adopted for reporting segment information. Although IFRS 8 has been found to result in increased disclosure of segment information, there are various concerns and criticisms of the standard. These concerns and criticisms are significant enough to undermine the usage of IFRS 8 and render it less relevant. Therefore the paper recommends more post implementation reviews by the IASB and academic researches into the IFRS 8 in order to address these concerns and improve the quality of segment reporting standards. DOI: 10.5901/mjss.2015.v6n6p30

Understanding the evolution of SFAS 141 and 142: An analysis of comment letters

This study analyzes the evolution of the Financial Accounting Standards Board (FASB)'s Statement of Financial Accounting Standards (SFAS) 141 and 142, through a detailed analysis of comment letters submitted to the FASB on Business Combinations Exposure Drafts 201 and 201 (Revised). Comment letters, an integral part of the standard-setting process, contain valuable insights on the views of parties affected by FASB's pronouncements – issuers, professional accountants and auditors, securities analysts, and others. The content analysis indicates that a majority of corporate respondents opposed the abolition of the pooling-of-interests method, not on theoretical grounds, but on the grounds that abolishing pooling would bring adverse economic consequences to their firms and industries. Letters also show strong differences in views across various groups of respondents. On the question of how goodwill should be treated once recognized, the amortization-with-impairment approach garnered significantly more support from the entire pool of respondents than the impairment-only approach, and the dominant view among most respondents, particularly audit firms, was that an impairment-only approach would not be reliable enough to be feasible in practice. These views are in sharp contrast to the FASB's eventual adoption of the impairment-only approach in SFAS 142, Goodwill and Other Intangible Assets, which suggests that the evolution of this standard was subject to forces not fully evident from, or reflected in, the comment letter process.

Market Value Signal Extraction and the Misapplication of SFAS 133 in the U.S. GSE's

The misapplication of the Statement of Financial Accounting Standards 133 in the U.S. Government-Sponsored Enterprises had obscured the first signals of trouble in mortgage securities. Still, regulators should have detected signals using their market value of equity measure, after statistical modification of related balance sheet accounts. The nonlinearity in this measure would imply that any implementation by management would significantly understate the exposure of portfolio equity to interest rate changes.

Market Reaction to Goodwill Impairments

This paper examines the information content of goodwill write-downs under International Accounting Standard (IAS) 36 (Impairment of Assets) and Statement of Financial Accounting Standards (SFAS) No. 142. We investigate whether the informational value depends on the reliability of the news. Using a sample of 564 goodwill write-down announcements issued from 2005 to 2009, we find a negative capital market reaction to announcements of unexpected goodwill write-offs. Our results indicate that investors react more negatively when a country's level of legal protection is low and allows more management discretion. We further report that market reaction is associated with managers explaining the write-down decision and depends on the verifiability of these explanations. Investors react more negatively when an unverifiable internal explanation is given and less negatively when a verifiable external explanation is provided. We do not find significant differences between write-down announcements under SFAS 142 and IAS 36.

Market pricing of banks’ fair value assets reported under SFAS 157 since the 2008 financial crisis

We investigate how investors price the fair value estimates of assets as required by Statement of Financial Accounting Standards No. 157 (SFAS 157) since the financial crisis in 2008. We observe that Level 3 fair value estimates are typically priced lower than Level 1 and Level 2 fair value estimates between 2008 and 2011. However, the difference between the pricing of the different estimates reduces over time, suggesting that as market conditions stabilize in the aftermath of the 2008 financial crisis, reliability concerns about Level 3 estimates dissipated to some extent. Next, we examine whether Level 3 gains affect the pricing of Level 3 estimates because managers have discretion to use Level 3 gains to manage earnings and asset values upwards. We find that differences in Level 3 gains do not lead investors to price Level 3 estimates differently. Finally, we find evidence that the pricing of the Level 1 and Level 2 fair value estimates of assets is lower for banks with lower capital adequacy. Overall, our study contributes to an improved understanding of the relation between valuation and fair value information.

FX Cash Flow Risk Management: Financial Reporting Issues and Practical Implications

Companies having foreign sales can avoid large fluctuations in earnings and cash flows caused by changes in foreign exchange (FX) rates through the use of foreign exchange derivatives (FXDs). FXDs used to mitigate the effect of FX rate changes on forecasted transactions can qualify as cash flow hedges under Statement of Financial Accounting Standards No. 133 (SFAS 133). According to SFAS 133, the mark‐to‐market (MTM) gains/losses on effective cash flow hedges are reported in other comprehensive income on the balance sheet, instead of on the income statement. This article explains how CFOs and treasurers may benefit from understanding the strategic and practical implications of reporting foreign‐exchange hedges, including the disclosure of hedge ratio data (i.e., the extent of cash flow hedge use).

The influence of disclosure policy on analyst behavior: The case of segment data

More transparent disclosure reduces the effort required to process reported information. The adoption of Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, increased the transparency of segment information reported by diversified firms. Using a long sample window (1988–2007) and a difference-in-difference design, this paper examines the association between corporate diversification and analysts' efforts—as reflected in analysts' idiosyncratic information precision and analyst consensus—across the old SFAS No. 14 and the new SFAS No. 131 segment reporting regime. Results indicate that SFAS No. 131 has improved segment reporting such that analysts need to invest relatively less effort generating idiosyncratic information when issuing forecasts for diversified firms. Given that analysts' information gathering efforts are costly, these findings are of interest to policy makers when assessing whether the intended reporting objectives of SFAS No. 131 are being met in a cost effective manner.

Stock option modification under SFAS 123(R)

Purpose – The purpose of this paper is to examine the motivations for and variations in terms of stock option modifications under Statement of Financial Accounting Standards (SFAS) 123(R). Stock options are used to motivate and retain employees. Unfortunately, when stock prices decline, existing options lose their incentive value. In response, firms look for ways to re-incentivize their employees. Their choices include issuing additional options and/or modifying existing grants. Design/methodology/approach – We investigate the economic determinants of stock option modification post SFAS 123(R), such as financial reporting cost, shareholder/political cost and employee incentive and retention. Our analysis is based on 67 sample firms that modify their stock option plans from 2005 to 2008 and 67 control firms constructed based on size, industry, year and stock price performance for the prior five years. Findings – The results show that loss firms are more likely to modify their options, which supports the argument that financial reporting costs influence the decision to modify. We find support for the shareholder/political costs hypothesis, as the overhang ratio is positively associated with the decision to modify. However, we find no evidence that modifications substitute for additional option grants. We find that politically sensitive larger firms are more likely to incorporate more shareholder friendly measures such as excluding executives from modification or providing shareholders the opportunity to vote on modification. Originality/value – This is the first paper examining the economic determinants of stock option modification under SFAS 123(R). Our findings provide some insights regarding economic determinants of SFAS 123(R) for accounting policy-makers and investors.

KONVERGENSI IFRS DI INDONESIA: PENGARUH PENERAPAN STANDAR PENGENDALIAN MUTU KANTOR AKUNTAN PUBLIK TERHADAP KEMAMPUAN AUDITOR DALAM MENDETEKSI SALAH SAJI MATERIAL

Convergence of International Financial Reporting Standards (IFRS) in Indonesia requires certified public accountant (CPA) for update their knowledge on Statements of Financial Accounting Standards (PSAK) all the time. Auditors’ knowledge on PSAK is very important for performing high quality audit. CPA firm is trying to maintain the audit quality by applying auditing standards on quality control established by the Indonesian Institute of Certified Public Accountant (IAPI). This study examined the relationship and effectiveness of the policies and procedures for each component of quality control standard on the auditors’ ability to detect material misstatement in the financial statements applying PSAK from IFRS convergence. The study presents that quality control standard contributes 65% of auditors’ knowledge on PSAK whereby policies and procedures of inspection provide strongest contribution compared to the policies and procedures related to the independence, consultation, supervision, professional development, and promotion. The study also presents that the professional development in the form of class-training or on-the-job training is the most effective way to improve PSAK knowledge.

Stock option expense management after SFAS 123R

Purpose – The purpose of this paper is to examine whether firms manage the total value of stock option grants downward after the implementation of Statement of Financial Accounting Standards (SFAS) 123R to reduce their reported option expenses. Design/methodology/approach – All Standard & Poor’s (S&P) 1500 firms with available stock option data in 2004 and 2006 are included in the analysis. The authors analyze if the total value of options granted, the per share fair value of options granted, the number of options granted as well as each individual input assumption have changed from the pre-SFAS 123R (i.e. 2004) to the post-SFAS 123R (i.e. 2006) period. We compare post-SFAS123R option pricing assumptions and per share fair value of options granted with their respective expected values to verify the results. We also analyze whether SFAS 123R has differential effects on firms which chose to disclose option expense only in footnotes (“disclosing firms”) versus firms which voluntarily recognized option expense (“recognizing firms”) prior to SFAS 123R. Findings – The results show that after SFAS 123R, the total fair value of stock options granted for disclosing firms declined significantly. The decrease appears to result from managerial discretion over volatility and dividend yield assumptions as well as the reduction in the number of options granted. The evidence suggests that firms engage in not only assumption-based manipulations but also real activities to lower reported stock option expenses. It was also found that disclosing firms lower the total fair value of stock options granted to a greater extent than recognizing firms. Originality/value – This study adds to prior literature that examines the opportunistic incentives for managers to use discretion in reporting stock option expenses. This study contributes to the earnings management literature by providing another example of manipulating earnings through real activities. Finally, our study should be of interest to regulators and investors.

Corporate governance, SFAS 157 and cost of equity capital: evidence from US financial institutions

This study examines the association between fair value measurements and the cost of equity capital under different fair value valuation methods, and assesses the impact of corporate governance on this relationship for US financial firms. We find that firms’ cost of equity capital is negatively associated with more verifiable fair value assets and positively related to less verifiable fair value assets. Furthermore, the positive association between less verifiable fair value assets and the cost of equity capital is mitigated under better corporate governance. The differential impact between more and less verifiable assets becomes smaller for firms with stronger governance. Our findings contribute to the ongoing debate on fair value regulation by investigating the economic consequences of adopting Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157) and the importance of audit committee financial expertise on fair value reporting. We also provide evidence on the importance of board independence, internal control strength, auditor industry specialists, and audit committee financial experts in fair value reporting.

Does Income Statement Placement Matter to Investors? The Case of Gains/Losses from Early Debt Extinguishment

ABSTRACTDoes the placement of a line item in the income statement matter to investors? The passage of Statement of Financial Accounting Standards (SFAS) No. 145 (Financial Accounting Standards Board [FASB] 2002) affords a quasi-experimental setting to answer this question, because pre-SFAS No. 145, gains/losses from early debt extinguishments were reported below the line, while post-SFAS No. 145, they were reported above the line. After controlling for other identified changes that occur during our sample period, we find that, pre-SFAS No. 145, the market does not respond to these gains/losses, whereas post-SFAS No. 145, it does. This suggests that the market response to gains/losses is associated with their placement in the income statement. Our findings contribute to the literature on the importance of income statement presentation by demonstrating that a line-item position in the income statement has important valuation implications.JEL Classifications: G12; G14; M41.

Improving the Disclosure Basis of Pension Accounting

In response to criticisms of U.S. pension accounting standards, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards 158 in 2006. However, the authors say more needs to be done, and they propose a gross recognition approach in which gross pension assets and liabilities are reported and prior service costs and actuarial gains/losses are recognized as they are incurred. An implication is that auditors should apply the same auditing standards to disclosed pension information as to recognized information, and regulators should consider moving pension information to the statements to improve reliability.

ANALISIS PENERAPAN PSAK 50 DAN PSAK 55 ATAS CADANGAN KERUGIAN PENURUNAN NILAI

The application of the new accounting standards that are influential in the banking convergence with International Financial Reporting Standards and International Accounting Standards discussed in (IAS) 39 on recognition and measurement of financial instruments. Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) 50 and 55 of the Presentation, Recognition and Measurement of Financial Instruments will be effective on January 1, 2012. Allowance for Impairment (Impairment Loss) is derived from the value of the amount to be recorded at recoverable value of the asset. This research was conducted at PT. Bank Mandiri Unit 1 Datulolong Lasut Manado (Persero) Tbk . The purpose of this study was to determine the extent of the application of SFAS 50 and SFAS 55 to the recognition, measurement and presentation of the allowance for impairment losses PT. Bank Mandiri Unit 1 Datulolong Lasut Manado (Persero) Tbk. The results suggest the application of SFAS 50 and SFAS 55 top Allowance for Impairment Losses by PT Bank Mandiri Tbk. compliance with applicable standards.The process of recognition of Allowance for Impairment Losses at amortized value using the effective interest rate. Measuring the level of collective impairment for financial assets is calculated based on the loss historical collectively. Presentation of receivables in the financial statements is the value after deducting the allowance for impairment losses.

ANALISIS PERLAKUAN AKUNTANSI ASET TETAP PADA PT. MASSINDO SINAR PRATAMA MANADO

The rapid implementation of development in various industry sectors, supported by advances in technology and the globalization of international markets will have an impact on the onset of intense competition among enterprises, especially those engaged in the industry. PT. Massindo Sinar Pratama is a private company which is in Manado, North Sulawesi engaged in manufacturing. To be able to support and facilitate the operations of the company's fixed assets required. The role of fixed asset accounting is required by the decision. The purpose of this study was to assess the extent to which the company has applied the theory in accordance with Statement of Financial Accounting Standards (SFAS) no. 16. This study used a descriptive - comparative method of analysis. In this study only focused on fixed assets engines. The results showed that the recognition, measurement, after the acquisition of fixed assets expenses, depreciation of fixed assets and fixed asset presentation, PT. Massindo Sinar Pratama Manado applying accounting policies that have led to to the Statement of Financial Accounting Standards (SFAS) No. 16