The Adaptation of German Accounting Rules to IFRS: A Legislative Balancing Act

The accounting strategy of the EU Commission for the last ten years, which reached one of its goals with the Regulation on IAS, is challenging all EU Member States. This article gives an analytical insight into the way the German legislator has confronted this challenge. It explains the statutory changes introduced to adapt the accounting regime in Germany, against the background of arguments for reform and proposals which have been put forward in the German accounting literature and by influential interest groups. The major characteristics of the government's accounting strategy are analysed: an increasing focus on the macroeconomic benefits of adequate accounting regulations, a perception of accounting as a material part of the corporate governance regime, greater weight given to the notion of public interest and the information function of accounting, a focus on consolidated accounts for the revision of existing rules, and, at the same time, considerable reluctance to change any recognition and measurement rules for individual entity accounts. In general the accounting reform strategy of the German government can be characterized as being slow, conservative and reactive, following a marginal step-by-step approach.     

Estimating Current Cost Depreciation Expense Using Numerical Analysis and the STAPOL Technique: A Pedagogic Exposition

Current cost accounting (CCA) recommendations have led to complex measurement problems. This paper aims to provoke discussion of the use of numerical analysis and the STAPOL technique as a method for measuring current cost depreciation expense. The measurement method analysed has a scientific foundation, is simple to apply, and yields accurate results. With slight modification, the method analysed is also applicable to other areas of CCA characterized by intractable measurement problems. Unlike other papers which have used differential calculus to analyse the use of numerical analysis in accounting, the exposition in this paper depends on only a rudimentary knowledge of algebra.     

关于会计计量的几个理论问题

随着当代财务会计试图把越来越多的所谓“资产负债表外业务”纳入表内核算和试图在会计报表中反映资产、负债价值的变化,会计准则中已经越来越多引入了公允价值等除历史成本以外的其它会计计量基础,从而对现行的历史成本会计模式产生了很大挑战。不仅如此,由于过去的财务会计概念框架没有考虑这一新的会计计量发展趋势,也使得会计准则与概念框架之间、会计准则与会计准则之间因为会计计量问题而产生了诸多的不一致,十分不利于会计信息质量的提高和国际会计的趋同。为此,本文以现行国际财务报告准则中存在的会计计量问题为出发点,系统研究了当前会计计量问题的实质、理论基础、未来发展趋向及其国际努力,并进而提出了我国的因应对策。     

Politics, Processes and the Future of Australian Accounting Standards

The perspective of public interest and interest group theories of regulation is adopted to consider the future of Australian accounting standards following major reforms proposed by the Australian Commonwealth government as part of its 1997 Corporate Law Economic Reform Program (CLERP). Interest groups in the Australian environment are identified. Their lobbying had influenced the initial proposals; and their reactions when the CLERP proposals were published resulted in substantial modifications to the CLERP proposals, which had initially recommendedthat International Accounting Standards (IASs) be adopted as national standards from 1 January 1999.
The role of accounting standards and the structure of standard setting are explored. The political nature of standard setting is illustrated through a review of the CLERP proposals, submissions of various interest groups and the government's responses to them. The central arguments are that key assumptions underlying the CLERP proposals are flawed, and that the CLERP proposals could not achieve the outcomes desired of them.
It seems inevitable, however, that international standards eventually will supplant domestic standards. In the longer term, Australian standard setters seem destined to have a diminished role in the international standard setting arena.     

Earned Economic Income—A Theory for Matching

The paper presents a novel ex post income concept, called Earned Economic Income (EEI), which would provide periodic accounting signals that are consistent with those derived from Net Terminal Value (NTV) analyses. EEI assigns interest adjusted NTV to the periods in which it is earned. The allocation is made via the apportionment of interest adjusted original cost. Inflation adjusted and monetary EEI figures are identical, so that the concept provides an integrating framework for interest adjusted inflation accounting and historical cost matching approaches. In developing the model the paper discusses the significance of conceptual models and of Economic Income (EI).     

Domestic Practice, Comparative International Analyses and Accounting Discretion—Italian Savings Banks' Pension Cost Accounting

In countries where the use of financial statements is minimal and relative accounting debate less intense, domestic practices may gain benefit from being consistently applied. Comparison with foreign experience is crucial. It leads to questioning of the appropriateness of practices that might otherwise never be discussed, particularly where they are developed in such a way as to favour the stakeholders controlling the accounting process. A salient example evidencing the above claims is to be found in the Italian savings banks (hereafter 'banks') accounting for the cost of defined benefits pension plans. The Italian financial system is credit-based. While banks play a predominant role, the financial industry itself enjoys significant autonomy in setting its accounting standards. This is especially so in respect of the accounting for the cost of pensions as savings banks have offered the most significant and almost unique example of employees' defined benefit pension plans in Italy.
  The present article compares some aspects of the long debated international and Anglo-Saxon standards' recommendations with the infrequently questioned Italian domestic practice. The substantial deviations that emerge in the Italian system favour particularly management and proprietorship by allowing a significant degree of discretion regarding the labour cost figure, thereby enhancing the banks' salary bargaining strength.     

Procyclicality of U.S. Bank Leverage

In light of the current debate about the link between accounting and financial stability, we investigate the determinants of procyclical book leverage for U.S. commercial and savings banks. We find that total asset growth and GDP growth are both positively related to book leverage growth. Our evidence is not consistent with the notion that fair value accounting contributes to procyclical leverage or that historical cost accounting reduces procyclicality. Overall, the business model of banks is more important for procyclical leverage than accounting or regulatory risk weights.     

Distinguishing between loans and equity investments: Substance over form

The distinction between debt and equity is critical in determining both the issuer's and investor's incomes. In the past, financial institutions frequently accelerated income by reporting interest income on financing arrangements even when the financial institution retained substantially all of the risks of ownership. Regardless of the terminology used in the financing agreement, current accounting standards do not permit accrual of interest on such transactions. Financial institutions are required to report such arrangements as equity investments unless the risks and rewards of ownership are transferred to the developer. This case uses an acquisition, development, and construction arrangement between a developer and savings and loan to allow students to evaluate the following issues: (1) the timing of income from lending activities contrasted with the timing of income from equity investments; (2) the party to which the risks and rewards of ownership accrue; and (3) accounting pronouncements as responses to previous reporting practices that failed to portray accurately underlying economic events.     

公允价值与当代会计理论反思

公允价值计量产生的真正根源是物价变动对会计计量的持续冲击。公允价值会计的核心是按照各个报告时点上的现行市价调整账面记录,通过动态反映使账面价值与真实价值始终保持一致,目标是追求真正意义上的真实反映,是"会计的重心是计量"的回归。它与按"目标导向"路径构建的当代会计理论在会计本质(信息系统)、会计目标(决策有用)、会计信息质量特征(相关和可靠)等各个方面是冲突、矛盾的。构建于信息系统论和历史成本原则之上的当代会计理论,与公允价值会计着眼于真实反映的思想相悖。公允价值会计的出现是对传统会计理论的颠覆,因此必须系统反思和重构当代会计理论。     

A Reconsideration of Consolidation Accounting Requirements and Pre‐acquisition Dividends

This article considers the consolidation accounting consequences of the International Accounting Standards Board's decision to replace the cost method of accounting for investments in subsidiaries with a new model that requires the recognition of dividend revenue for distributions received or receivable from pre‐acquisition profits. The article shows that the recognition of pre‐acquisition dividends as revenue with a potential indication of impairment causes problems to consolidation accounting procedures and may reduce the information content of consolidated financial statements. The highlighted problems relate to the elimination of the investment asset against the equity of the subsidiary and the definition and measurement of non‐controlling interest. A review of the due process relevant to the replacement of the cost method indicates that the standard setter may have paid insufficient regard to accounting concepts and principles.     

Fair Value Accounting and Stewardship*

Current standards define fair value as the market price at which an asset could be sold or a liability could be settled in the normal course of business. Setting aside measurement issues, assessing the relevance of exit values has intensified in recent years as fair value becomes a pervasive component of accounting regulation. The current debate about accounting measurement is framed in terms of making a choice between fair value and historical cost. In this article I argue that this is not a correct framing of the issues; knowledge of fair value alone cannot help investors to evaluate stewardship, because they would not know how much resources the management had sacrificed to obtain that fair value. To properly evaluate stewardship, investors need both types of information, historical cost and fair value.Using this information, a rate‐of‐return‐like index of stewardship quality is proposed. This commentary concludes with a statement about three significant drawbacks of relying solely on fair value accounting.     

An intuitive appeal for the correct calculation of Present Value-Based Measurements in Accounting

Most introductory and intermediate textbooks in accounting provide a discussion of the time value of money and include a presentation of the calculation of bond values as an example. The bond valuation model is needed primarily for the valuation of debt on the firm's balance sheet when the issue is placed in the market at an amount other than its face value. Often, however, these texts present this information in an incorrect or confusing manner. The errors arise from improperly determining the appropriate discount rate to use when interest payments are other than annual. This paper briefly summarizes prior efforts to correct this problem and offers a consolidated and intuitive approach for accounting instructors to use in presenting this information to students. Examples are provided which can be used in the classroom to explain differences in the alternative techniques, as well as explain the types of errors caused by use of incorrect procedures under different assumptions. Present value concepts play an important role in the recognition and measurement of many accounting transactions, including those in such areas as corporate bonds, long-term notes, long-term investments, capital leases, pension cost components, and capital budgeting. The importance of present value issues is also evident from a Discussion Memorandum entitled “Present Value-Based Measurements in Accounting,” issued by the Financial Accounting Standards Board (FASB, 1990). Given the importance that time-value-of-money concepts play in accounting, and the scope of the current FASB agenda project dealing with present-value measurements, it is important for the accounting instructor to correctly understand and present this information.     

Authors’ Reply: Building Better Retirement Income Models - Discussion by Robert J. Myers; Anna Rappaport,January 1997

Abstract

In recent decades, as the use of derivatives by financial institutions has expanded, the shortcomings of historical cost accounting approaches have become increasingly apparent. Since derivatives can create large exposures to risk that go unnoticed under historical standards, the accounting industry has focused on how to change the standards so that these risks are reflected appropriately in a company’s accounting statements. New standards such as SFAS 115 and SFAS 133 have been adopted in part to achieve this goal. However, both of these standards use a piecemeal approach to risk measurement that may be adding to the problem rather than creating a solution. This paper will use a simple equity-indexed annuity to illustrate the problem with historical cost accounting and with the standards that have been adopted to correct it. The paper then argues that the only legitimate means of reflecting risk properly on a company’s accounting statements is to adopt full fair value accounting for all assets and liabilities on the company’s books.     

A Critical Look at SFAS 34: Capitalization of Interest Cost

In 1974, the Securities and Exchange Commission (SEC) noted that an increasing number of companies were capitalizing interest costs, and that this practice was not being adequately disclosed (FASB, 1979, par. 26). In light of the alternative practices concerning the accounting for interest and lack of adequate disclosure by companies that were already capitalizing interest, the SEC recommended that the Financial Accounting Standards Board (FASB) consider the issue of accounting for interest cost. As a result of the SEC's initiative, in 1979 the FASB issued Statement of Financial Accounting Standards [SFAS] No. 34, Capitalization of Interest Cost, which mandated uniform interest capitalization rules in accounting for interest costs associated with the acquisition of qualifying non-current assets. The purpose of this article is to examine SFAS 34 in terms of its financial statement impact, the congruence of its assumptions with economic behaviour, its effect on subsequent standards related to interest capitalization, and its implications on financial accounting standard setting. To explore these issues we first illustrate the extent to which interest capitalization affects financial statements. We then empirically analyse the measure employed in SFAS 34 for the capitalization of interest cost in cases where debt is not directly linked with the acquisition of qualifying non-current assets. In addition, we critically examine the treatment accorded interest cost in subsequent FASB standards. Our research suggests that SFAS 34′s rationale for interest capitalization is incompatible with firm behaviour, and that the rules for interest capitalization as reflected in various accounting standards are inconsistent. These findings suggest that in the case of interest capitalization the benefits of comparability in financial reporting are not realized. A policy recommendation is then offered to alleviate some of these difficulties. The recommendation is to disallow the capitalization of interest cost in the absence of a direct link between the debt and the acquisition of qualifying assets.     

Research Note: Revisiting Fair Value Accounting––Measuring Commercial Banks' Liabilities

IAS 39, Financial Instruments: Recognition and Measurement (IASB, 2000), requires assets to be marked to fair value if held-for-trading, available-for-sale purposes, or if they are derivatives; held-to-maturity securities, originated loans and originated securities are measured at amortized cost, providing they are not held-for-trading. Financial liabilities are measured at amortized cost except those that are held-for-trading or derivatives. A proposed amendment would accommodate improved fair value measurement of financial instruments. Commercial banks are greatly affected by any accounting standard concerning the recognition and measurement of financial instruments, whether related to assets or liabilities. This article demonstrates that the existing and proposed standards perpetuate the mismeasurement of interest rate risk for commercial banks. Under IAS 39 banks that have a balanced position, that is, no interest rate risk, counterfactually could show large changes in income through interest rate changes. An alternative accounting treatment, full fair value reporting of financial assets and liabilities, including all loans and deposits, is offered. Presently fair value data are mandated as footnote disclosure.     

《金融工具确认和计量》准则对基金投资的影响

现行会计准则体系中《金融工具确认和计量》准则首次对金融工具的确认和计量做出了相关规定。本文分析了该准则对基金投资可能产生的影响，认为一方面公允价值计量模式将引起基金估值的变化，另一方面公允价值变动可能引起基金分红规模的扩大，这对基金投资者的影响是显而易见的。本文结合这两方面的影响对基金投资提出了相关建议。     

Modeling RBRT adoption and its effects on cost of capital

In the capital market, firms compete to obtain capital at a lower cost than their rivals. In order to do so, firms may try to increase their information disclosure by adopting new information technologies, such as a real-time business reporting technology (RBRT). The financial accounting literature has empirically provided positive evidence of increased transparency (e.g., resulting from RBRT adoption). We attempt to link the transparency and cost of capital literatures and extend organizational innovation adoption theory.We adapt some constructs from existing innovation adoption theory, as well as contribute some that apply to a RBRT context, to develop a mathematical model on the relationship between RBRT adoption and the cost of capital. The model considers both micro-(firm) level factors and macro-level factors that affect the adoption decision. We argue that cost of capital savings, uncertainty, risk aversion, transaction and transformation costs, and governmental policy affect a firm's decision of whether and when to adopt a RBRT. A number of propositions are derived, based on our model, which may help firms formulate their adoption strategy. Our model also provides a basis for further empirical study on this new issue.     

The proposed introduction of current cost accounting in the U.K.: Determinants of corporate preference

This paper examines the corporate reaction to a major U.K. accounting proposal, the 1976 exposure draft which called for the introduction of current cost accounting as the primary accounting convention. Written submissions to the U.K. rule-making body are analyzed and four categories of preference identified. Probit analysis reveals that the expected cost of compliance is the most significant factor in shaping corporate preference. In addition, firms at risk of government investigation are more likely to support and service sector firms are more likely to oppose the proposed standard.     

资本管理会计:现代企业会计的理念创新

国际会计准则理事会的《财务报告概念框架》基于资产负债观,间接计量权益,声明财务报告的设计不反映企业价值,传承以期初资本余额界定资本保全和利润计算参照点的粗略不当概念。有鉴于此,本文发掘论证了《簿记论》的资本损益观,创新提出了资本管理会计的资本成本损益观;建议以企业期末资本的原值,即应回收历史成本,精准科学地界定资本保全概念和损益计算参照点;建议以管资本为主,系统、科学、全面地区别和运用历史成本会计与现时价值会计;建议健全现代企业会计与财务会计和管理会计的一体化协同机制,并以企业资本管理作为转型升级的核心目标;建议基于企业期末资本的净值原值比,设计资本成本回报率,作为企业会计评价的主要核心指标。