THE SUBJECTIVITY OF THE FASB'S CONCEPTUAL FRAMEWORK: A COMMENTARY ON BRYER

Bryer argues that the FASB's conceptual framework is inherently subjective because it is based on the concept of “economic value”, or the anticipated net cash inflows attributable to presently owned assets. By contrast, Marxist economics is based on objective facts that can be measured to a “socially required level of accuracy”. The objective facts of a Marxist conceptual framework rest on the theory that capital circulates in three forms: money, commodities to be sold, and commodities to be used in production. Capital, and, therefore assets, are essentially physical (or technical) in nature rather than monetary in nature. Measurement of assets is objective because Marxist theory emphasizes management stewardship and requires historical cost and a strict realization criterion for recognition of revenue. Bryer's argument that the FASB's conceptual framework is “unacceptably subjective” because it is based on “economic value” is misplaced. A careful reading of the FASB's concepts statements suggests that assets represent service-potential, or “use-value” in Marxist terms, and that economic-value is never advocated as a conceptual basis for the measurement of assets. The reason the FASB's conceptual framework is “subjective and vague” is that the FASB lacked the political will to advocate a conceptual preference for any particular measurement method.     

Measurement Model or Asset Type: Evidence from an Evaluation of the Relevance of Financial Assets

This study focuses on the operation of the Level 1, 2, and 3 measurement uncertainty hierarchy embedded in the SFAS 157 accounting for financial assets. Prior studies conclude the SFAS 157 fair value measurement model and prevailing financial market conditions are causal factors for the lower value relevance of the Level 3 financial assets. The contribution of our paper is to provide evidence on an additional, hitherto undocumented source of measurement uncertainty impacting the relevance of SFAS 157 financial assets to investors: the type of asset appearing in Level 3 financial assets as a result of asset securitizations and SFAS 140 securitization accounting. The paper also presents evidence that suggests the SFAS 166 amendments were unable to fully address informational transparency for financial assets arising from securitizations. The key contribution is evidentiary insights suggesting the prescribed measurement model has a relatively lower impact on measurement uncertainty and relevance of financial assets compared to the effects of the asset type.     

论环境会计核算中的环境资产确认问题

环境资产是环境会计的一个重要会计要素,对环境资产的确认是研究其计量、记录与报告的基础。本文在依照会计确认标准对环境资产和环境成本的内涵进行研究的基础之上,提出只有符合资产确认标准而被资本化的环境成本才构成环境资产的主张,并围绕其相关问题进行了讨论。     

资产减值会计计量问题研究

本文研究的目的在于探讨资产减值会计计量的基本问题,即可收回金额的确定。本文从公允价值和现值两个方面展开研究,提出了资产减值会计中公允价值和现值计量的指导性框架,并从完善主体预算制度的角度探讨了现值技术在资产减值计量中运用的可行性。     

Asset use and the relevance of fair value measurement: evidence from IAS 41

This study investigates whether asset use influences the relevance of fair value measurement. Specifically, I examine whether fair value is more relevant when it is applied to in-exchange assets than when it is applied to in-use assets. I test the framework on a sample of international firms that adopt International Accounting Standard 41. Using a difference-in-differences approach, I find that earnings information is significantly more relevant when firms measure in-exchange biological assets at fair value, but book value and earnings information is significantly less relevant when firms measure in-use biological assets at fair value. Consistent with these results, in cross-sectional analyses I find that investors discount the fair value of in-use biological assets and their associated unrealized gains and losses relative to the fair value of in-exchange biological assets. At present, the Conceptual Framework provides little guidance on asset measurement, resulting in inconsistencies across measurement standards. Thus, my findings may provide insight to standard setters and those interested in conceptually based asset measurement.     

Do asset impairments and the associated disclosures resolve uncertainty about future returns and reduce information asymmetry?

The objective of this study is to provide insights into how Australian listed firms are implementing AASB 136 Impairments of Assets. Our first concern is whether uncertainty about future returns and information asymmetry motivates the recognition of asset impairments. We find no evidence that the recognition of asset impairments is associated with higher uncertainty about future returns. Furthermore, we find no evidence that the recognition of asset impairments is associated with higher information asymmetry. Our second concern is whether asset impairments and the associated disclosures provide information that reduces uncertainty about future returns and information asymmetry. While we find some evidence that asset impairments are associated with decreases in information asymmetry before the financial crisis, during the financial crisis, asset impairments are associated with increases in both measurement uncertainty and information asymmetry.     

Business-model (intent)-based accounting

We discuss how basing financial reporting on an entity's business model is, in effect, basing financial reporting on management's intent with respect to the use, transfer or other disposition of an asset or liability. We provide several examples of existing International Financial Reporting Standards and US Generally Accepted Accounting Principles that permit or require intent-based accounting. We describe the meaning and consequences of basing the accounting for financial assets on management's intentions for realising value from those assets. We analyse the positive and negative features of intent-based accounting in the context of the Financial Accounting Standards Board's and International Accounting Standards Board's conceptual frameworks, specifically, the qualitative characteristics relevance and comparability and the objective of financial reporting, and apply that analysis to existing and proposed guidance for measuring financial assets. We also discuss evidence from academic research on the measurement of financial assets.     

Do negative interest rates affect bank risk-taking?

We offer early evidence on the impact of negative interest rate policy (NIRP) on banks’ risk-taking. Our primary result shows banks in NIRP-adopter countries reduce holdings of risky assets by around 10 percentage points following implementation of NIRP in comparison to banks in non-adopter countries. We augment this result by identifying NIRP’s impact on other aspects of banks’ risk-taking behaviour; NIRP is associated with reductions in banks’ loan growth and average loan price (by 3.7 percentage points and 59 basis points) and a rebalancing of asset portfolios towards safer assets. Secondly, we find the NIRP-effect is heterogeneous; post-NIRP risk-taking increases at strongly capitalised banks and at banks operating in less competitive markets that exploit market power to insulate net interest margins and profitability. Our robust empirical evidence supports the “de-leverage” hypothesis which suggests that banks acquire safer, liquid assets to bolster their capital positions rather than searching for value by acquiring riskier assets. We base our evidence on a sample of 2,584 banks from 33 OECD countries across 2012 to 2016, and from models that employ a difference-in-differences framework.     

Modelling household finances: A Bayesian approach to a multivariate two-part model

We contribute to the empirical literature on household finances by introducing a Bayesian multivariate two-part model, which has been developed to further our understanding of household finances. Our flexible approach allows for the potential interdependence between the holding of assets and liabilities at the household level and also encompasses a two-part process to allow for differences in the influences on asset or liability holding and on the respective amounts held. Furthermore, the framework is dynamic in order to allow for persistence in household finances over time. Our findings endorse the joint modelling approach and provide evidence supporting the importance of dynamics. In addition, we find that certain independent variables exert different influences on the binary and continuous parts of the model thereby highlighting the flexibility of our framework and revealing a detailed picture of the nature of household finances.     

The Impact of Regulatory Changes on the Risk-Taking Behavior of State Chartered Savings Banks

This study investigates changes in the risk-taking behavior of state chartered savings banks resulting from three types of regulatory changes: the expansion of asset investment powers contained in the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn–St Germain Depository Institutions Act (DIA) of 1982, the authority to change organizational structure from mutual to stock form contained in the Financial Institutions Regulatory and Interest Rate Control Act of 1978 and DIA, and the change in intensity of regulatory oversight contained in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Using data for New York state chartered savings banks for the period 1986 to 1991, the analysis found mixed results for the asset deregulation hypothesis that institutions eventually placed on the problem bank list invested more in deregulated assets. Strong support was found for the organizational structure hypothesis that stock savings banks have greater incentives to pursue value-maximizing levels of risk by using more leverage, growing at faster rates, and increasing credit risk. This finding suggests that the regulatory changes that permitted mutual to stock conversions may have had a significant negative impact on the severity of the thrift crisis. The results also suggest that increased regulatory scrutiny limited the risk-taking of New York state chartered savings banks after 1988.     

Management incentives to recognise intangible assets

The paper examines whether the introduction of the international financial reporting standards (IFRS) in Australia changed management incentives to recognise intangible assets. We examine post‐IFRS changes in managerial opportunism and economic benefits associated with the recognition of intangible assets. We find evidence after IFRS of significant change in intangible asset recognition concurrent with share issues. We also find that the association between economic benefits and intangible assets changed following IFRS. Evidence is provided that the economic benefits associated with goodwill were enhanced by IFRS, whereas IIA and E&E asset information became less useful to financial report users.     

Should More Internally Generated Intangible Assets Be Recognized? A Commentary

This study analyzes whether financial statements should recognize more internally generated intangible assets with particular reference to China. This issue is significant because of the increasing importance of the ‘new economy’ and R&D investment, including in China. We present the current accounting requirements for intangible assets and illustrate that the failure to recognize internally generated intangible assets leads to a high ratio of unrecognized value to market capitalization, known as the asset light phenomenon among firms. We discuss and compare international and Chinese views supporting and opposing the recognition of more internally generated intangible assets. We identify and analyze the major issues in general, and in China particularly, that standard setters and their stakeholders have to consider if more internally generated intangible assets are recognized. We focus on areas of recognition, initial and subsequent measurement, and user reaction. We find that the most critical issues are the separability and measurability of internally generated intangible assets. Based on the issues identified, we discuss initiatives on non-financial disclosure in relation to unrecognized intangible assets and firms’ value creation. The study elucidates the consequences of current accounting standards on internally generated intangible assets and, by identifying the critical issues, contributes to the debate on whether it is best to adopt recognition of internally generated intangible assets or a disclosure-only approach.     

Recovery of hidden state participation effects on oil and gas asset values

Commodity price shocks are shown to cause shifts in both the quantity and timing of risk in natural resource assets. We provide evidence that static risk measures understate the periodicity of price risk implicit in depleting assets. Risk measurement is demonstrated to be asset specific and to vary heterogeneously in response to the combined effects of state participation and market factors. We use a global sample of oilfield assets to demonstrate that oilfield participation terms cause corporate asset cash flows, volatility horizons and minimum variance hedge ratios to vary in response to oil price. We provide additional insights into movements in the timing of physical oil and gas asset risk, a hidden effect not recoverable from market oil prices. Temporal variance for physical assets is shown to be a hidden dimensional outcome of the effects of market factors and state participation.     

Asset reliability and security prices: evidence from credit markets

We assess the relation between asset reliability and security prices. Concerns about asset reliability are increasing with the move to fair value accounting in general purpose financial reports. We provide pertinent evidence from credit markets. A key benefit of using credit market data to explore the capital market implications of asset reliability is the theoretical basis of Duffie and Lando (Econometrica 69(3):633–664, 2001). They show that asset reliability (measurement) concerns should be concentrated in short-term credit spreads. Thus a focus on credit term structure can facilitate a cleaner identification of the impact of asset reliability on security prices. We find that asset reliability issues, attributable to SFAS 157 disclosures of Level 2 and, especially, Level 3 financial assets for a set of US financial institutions over the period of August 2007 to March 2009, are a significant determinant of short-term credit spreads and the shape of the general credit term structure. Our findings are robust to a variety of control variables and research design choices.     

A perfect storm in the financial market

This study provides a model explaining how small changes in asset prices may disrupt an entire financial market. Based on the capital asset pricing model (CAPM), our model implies that during a market crash, asset price changes affect the relative distribution of the CAPM betas of individual assets and force all tradable assets to co-move. Using US stock market data, our empirical results are consistent with the model’s predictions. Overall, the study aids understanding of the price patterns of assets during substantial market downturns, such as financial crises.     

Regime switching based portfolio selection for pension funds

This paper shows how a mean variance criterion can be applied to a multi period setting in order to obtain efficient portfolios in an asset and liability context. The optimization model allows for rebalancing activities, transaction costs, stochastic volatilities for both assets and liabilities. Furthermore, a general framework for the projection of pension fund liabilities as well as for the generation of asset returns is given. In a further step the dynamics of the liability maturity structure is modeled as customized index, whose volatility and correlation with asset returns become integral components of the applied regime switching approach. The numerical results illustrate the diversification of the assets and its risk return pattern in dependency of the liability dynamics.     

建立中国财务会计概念框架的总体设想

本文围绕在我国建立财务会计概念框架的基本问题,系统探讨了财务会计目标、财务报告信息的质量特征、财务报表的要素、要素的确认与计量、财务报告的列报等问题。本文在借鉴国外既有研究成果的基础上着重探讨了资产要素的定义,结合收入要素探讨了确认问题,在财务报告列报部分还具体探讨了财务报表确认、财务报表附注及其它财务报告的披露问题。     

Determinants of asymmetric return comovements of gold and other financial assets

Using conditional time-varying copula models, we characterize the dependence structure of return comovements of gold and other financial assets (stocks, bonds, real estate and oil) during economic expansion and contraction regimes. We also investigate which key macroeconomic and non-macroeconomic variables significantly impact the asset return comovements using a two stage Markov Switching Stochastic Volatility (MSSV) framework. Our results show that the non-macro variables have significant influence on the return comovements. We find that gold is an inappropriate hedge against interest rate changes for real-estate and oil-based portfolios, while for bond portfolios, gold offers a good hedge against inflation uncertainty. We also provide evidence that the “flight to safety” phenomenon is due to the implied volatility of the stock market, rather than the observed stock market uncertainty. Finally, we forecast the asset return comovements and examine their economic significance. We show that a dynamic MSSV model which includes the macroeconomic and non-macroeconomic variables yields superior forecast of future asset return comovements when compared with a multivariate conditional covariance model.     

On the characteristics of dynamic correlations between asset pairs

Recent research provides considerable evidence that correlations between assets change significantly over time and diversification benefits of correlations may vary substantially based on the time-varying measure of correlation used for different asset types. Our study evaluates and compares alternative time-series correlation modeling techniques according to both statistical and economic metrics, focusing specifically on individual asset pairs. We identify the moving correlation structure that best tracks the dynamic conditional correlation estimates using a large set of different financial time series encompassing 467 asset pairs in nine different asset classes. Results from our direct, statistical loss function based, and indirect, portfolio mean-variance based, forecast evaluations provide optimal window-length ranges for 36 asset-class pairs which should help in portfolio construction as well as risk management. Furthermore for robustness tests, we implement the model confidence set approach which, without a benchmark specification, produces a set of models constructed to contain the best models with a given level of confidence among competing forecast evaluations.     

Disagreement,tastes, and asset prices

Standard asset pricing models assume that: (i) there is complete agreement among investors about probability distributions of future payoffs on assets; and (ii) investors choose asset holdings based solely on anticipated payoffs; that is, investment assets are not also consumption goods. Both assumptions are unrealistic. We provide a simple framework for studying how disagreement and tastes for assets as consumption goods can affect asset prices.