An International Comparison of Materiality Guidance for Governments, Public Services and Charities

The annual report is promoted and regarded as the primary medium of accountability for government agencies. In Australia, anecdotal evidence suggests the quality of annual reports is variable. However, there is scant empirical evidence on the quality of reports. The aim of this research is to gauge the quality of annual reporting by local governments in Queensland, and to investigate the factors that may contribute to that level of quality. The results of the study indicate that although the quality of reporting by local governments has improved over time, councils generally do not report information on aspects of corporate governance, remuneration of executive staff, personnel, occupational health and safety, equal opportunity policies, and performance information. In addition, the results indicate there is a correlation between the size of the local government and the quality of reporting but the quality of disclosures is not correlated with the timeliness of reports. The study will be of interest to the accounting profession, public sector regulators who are responsible for the integrity of the accountability mechanisms and public sector accounting practitioners. It will form the basis for future longitudinal research, which will map changes in the quality of local government annual reporting.     

Accounting for government guarantees: perspectives on fiscal transparency from four modes of accounting

Government guarantees are increasingly important as a policy instrument in public infrastructure investment and to assist the banking and financial sectors following the global financial crisis. This paper analyses how different modes of accounting characterize such guarantees in the contexts of public sector financial reporting, statistical accounting, budgeting and long-term fiscal projections. Guarantees are difficult to specify for accounting treatment and consistent conceptualization of liabilities. These difficulties make it attractive for governments to treat obligations as off-budget and off-balance sheet contingent liabilities, rather than recognize them in financial statements and statistical accounts. Miller and Power’s territorializing, mediating, adjudicating and subjectivizing roles of accounting are utilized to analyse the reporting of UK government guarantees. Provisioning for guarantees is complex in financial reporting statements and often absent in national accounts, a deficiency which Eurostat has attempted to address by devising the concept of standardized guarantees and by securing more disclosure of contingent liabilities. There is potential for future research especially where there is greater mediation between the four modes of government accounting.     

International financial reporting standards and experts' perceptions of disclosure quality

From 2005, over 7,000 listed firms in the European Union and many more around the world are required to adopt International Financial Reporting Standards (IFRS). The introduction of a uniform accounting regime is expected to ensure greater comparability and transparency of financial reporting around the world. However, recent research has questioned the quality of financial statements prepared under IFRS standards, particularly in the presence of weak enforcement mechanisms and adverse reporting incentives ( Ball et al. , 2003 ). In this paper, we assess the quality of the financial statements of Austrian, German and Swiss firms which have already adopted internationally recognized standards (IFRS or U.S. GAAP). The study makes use of available disclosure quality scores extracted from detailed analyses of annual reports by reputed accounting scholars ('experts'). This work complements other contemporary research on the quality of IFRS financial statements where the properties of earnings are used as an evaluation metric ( Barth et al. , 2005 ). Our evidence shows that disclosure quality has increased significantly under IFRS in the three European countries we analyse. This result holds not only for firms which have voluntarily adopted IFRS or U.S. GAAP, but also for firms which mandatorily adopted such standards in response to the requirements of specific stock market segments. Although we cannot establish direct causality due to the inherent self-selection issues for most of our sample firms, the evidence shows that the quality of financial reports has increased significantly with the adoption of IFRS.     

Performance reporting: a comparative study of British and Irish charities

The concept of accountability seems inextricably linked with the view that accounting should provide information to satisfy the information needs of users. The user-needs model is now well established as a useful basis for a conceptual framework for charity reporting, and annual reports are recognised as key documents in the discharge of accountability to external users. It has been suggested that both financial information and also performance information should be disclosed to aid the discharge of accountability. However, previous empirical work conducted in Britain found that while audited financial information was most frequently disclosed by charities, users viewed wider performance information as being of greater importance. No comparable work has been conducted in Ireland. This paper focuses on information outside the financial statements and seeks to identify the type and extent of the reporting of performance information by charities in both Britain and Ireland. The main findings of the research are: performance reporting by British charities, although limited, is considerably better than that of their Irish counterparts; performance reporting by British charities has increased over time; and large charities (both in Britain and Ireland) provide more extensive performance information than small charities. These findings are discussed in both the context of accountability and in terms of conceivable economic incentives for disclosure. In addition, possible reasons for lower disclosure rates by Irish charities are explored.     

Perpetuating traditional influences: Voluntary disclosure in Malaysia following the economic crisis

Prior research on listed companies in Malaysia, Hong Kong and Singapore during and before the 1997 financial crisis has reported a significant association between ownership structure and the extent of voluntary disclosure in annual reports. We examine data for Malaysia after the 1997 financial crisis to assess whether the regulatory reaction to the crisis increased the awareness of disclosure as a tool of corporate governance and reduced the influence of insider domination on voluntary disclosure. We contrast director ownership and government ownership as determinants of voluntary disclosure in Malaysian company annual reports. Additionally, we include consideration of proprietary costs by testing whether industry competitiveness has an impact on voluntary disclosure.We find that director ownership is significantly associated with the extent of voluntary disclosure while government ownership, new governance initiatives and industry competitiveness are not significant in pointing companies towards greater transparency. We conclude that, despite the upheaval of the economic crisis, traditional influences of director ownership and family domination of the board outweigh the effect of government-backed accountability initiatives in determining the extent of voluntary disclosure.     

XBRL财务报告分类标准评价——基于财务报告分类与公司偏好的报告实务的匹配性研究

XBRL是网络财务报告向高级阶段发展的技术基础,可以改进信息的编报和使用。然而,XBRL财务报告生成和应用的一个关键问题是采用的财务报告分类与公司偏好的报告实务间能否很好的匹配,匹配性差将导致信息损失。本文仅针对财务报表附注项目,将12个行业117个上市公司2005年年报中披露的项目与上交所制定的《中国上市公司信息披露分类》标准中定义的相应标记匹配,发现二者间存在着较大的差异,并且行业间的差异不显著。我们认为XBRL网络财务报告目前还不适宜全面应用,当务之急是进一步修改完善分类标准。     

CEO statements in sustainability reports: Substantive information or background noise?

This paper examines the question of whether corporate sustainability reports can serve as accurate and fair representations of corporate sustainability performance. It presents the results of a sentiment analysis of CEO statements in corporate sustainability reports and corporate financial reports between 2001 and 2010. Making an analogy with corporate financial reporting it is expected that if corporate sustainability reports accurately reflect sustainability performance, then this should be reflected in the rhetoric used. The analysis shows that the rhetoric in the CEO statements of sustainability reports is indicative of impression management rather than accountability, despite increasing standardization of sustainability reporting.     

Perceptions and characteristics of financial statement users in developing countries: Evidence from Iran

We examine the perceptions and characteristics of users of corporate financial statements in Iran. We provide evidence based on a survey of seven different user-groups. Our results suggest that annual reports are regularly used as a basis for making investment and other economic decisions. As in many developing countries, users depend more heavily on information obtained from the published annual reports than on advice from stockbrokers and acquaintances or on tips and rumors. While respondents differed in their rating of the importance of different sections of the annual report, the overall results showed that they ranked the income statement, the auditors’ report, and the balance sheet as the three most important parts of the annual report (in that order). There is a weak level of consensus among bank loan officers, tax officers, and auditor groups about the importance of several information items. Most users believe that a delay in publishing annual reports, lack of reliability of the information, and lack of adequate disclosure are the main concerns with corporate financial reports in Iran. The evidence on Iran is relevant to other developing countries in the Middle East and beyond.     

The Role of Fair Value Accounting in Promoting Government Accountability

A key factor to improve the financial accountability of governments is the existence of a set of generally accepted financial reporting of standards, such as IPSAS issued by the IFAC, which seek to enhance information transparency. This paper examines the capability of fair value accounting to improve, through financial transparency, government accountability, analysing the possible effect of the implementation of this measurement basis on understandability, comparability and timeliness—three qualitative characteristics linked to the relevance of financial reporting. This paper further considers whether the difficulties involved in achieving FV estimations could affect government financial accountability. The findings indicate that FVA implementation could enhance accountability by improving understandability, comparability and timeliness in governmental financial reporting, although the use of objective measures to estimate the FV of assets is fundamental. In addition, the type of assets and the existence of an active market are crucial to improving the comparability of financial statements under FVA, whereas improving timeliness could be limited by the possibility of estimating FV measures in‐house.     

Exploring attitudes to financial reporting in the Australian not‐for‐profit sector

The current level of satisfaction among different stakeholders about the current approaches and practises of financial reporting of not‐for‐profit (NFP) entities is underexplored ( Christensen and Mohr, 2003 ; Lee, 2004 ; Gray et al., 2006 ; Parker, 2007 ). This paper uses content analysis to examine submissions to the 2008 Australian Senate Economics Standing Committee for its inquiry into the disclosure regimes of charities and NFP organisations, which aimed to explore attitudes about financial reporting in the NFP sector. Financial reporting is viewed as an important part of accountability, but the sector identifies deficiencies in the current regime in terms of consistency, efficiency and transparency. Respondents to this inquiry believed that a sector‐specific accounting standard was important. Financial reporting standards, regulations and legal structures should be uniform across the entire sector, but with some variation allowed for smaller NFPs. The cost of complying with standards was a significant issue for smaller NFPs.     

Extended performance reporting: an examination of the Australian mining industry

Recent accounting scandals and a greater focus on sustainable development have highlighted the insufficiency of traditional financial statements in providing information about company value and performance. This study argues for the importance of reporting both IC information and non-economic performance. Based on an Extended Performance Reporting Framework, content analysis was conducted to examine the voluntary reporting practices within the annual reports of selected Australian mining companies. Results show that the sample companies tended to place greater emphases on IC information than non-economic performance information. The study provides a research opportunity, examining why the samples chose to report or not report various reporting elements.     

Risk reporting quality: implications of academic research for financial reporting policy

In this paper, I survey empirical research on the relevance of firms’ financial report information for the evaluation of their risk. I recommend that financial reporting policymakers require or encourage firms to enhance their risk reporting quality in four ways. First, firms should report comprehensive income statements that: (1) use fair value or a similarly information-rich accounting measurement attribute and (2) separate the components of comprehensive income that are primarily driven by variation in cash flows from those that are primarily driven by variation in costs of capital. Such comprehensive income statements would provide users of financial reports with the flexibility to calculate alternative summary accounting numbers and to perform different types of risk assessment analyses. Second, firms should conduct and disclose the results of back-tests of prior significant accrual estimates, indicating any identified trends in and drivers of revisions to those estimates, and describing the effects of those revisions on current or future summary accounting numbers. Third, firms should aggregate and present risk disclosures in tabular or other well-structured formats that promote the usability of the information. Identifying existing best disclosure practices and encouraging new best practices are the most natural way to do this. Fourth, for model-dependent risk disclosures, firms should disclose the primary historical and forward-looking attributes of the models and their implementation in practice, sensitivity of the model outputs, and benchmarking of the models to standard portfolios of exposures.     

The New Business of Government Budgeting: Reporting Non-Financial Performance Information in Victoria

Since the early 1990s the general and financial management of the Victorian public sector has been significantly transformed. This research examines and explains the content, nature and quality of non-financial disclosures, including those related to performance indicators, through a disclosure indicator analysis of reporting practices in recent government budget papers. It reports the results of its application to the last three years' budget papers. The findings highlight the problems in the reporting of non-financial performance indicators in the Victorian budget papers. These results indicate a significant gap between "official" expectations of the type of items required to be reported and actual budgetary reporting practices – some many years after regulation and major financial accountability reforms have taken place.     

The relationship between competition and business segment reporting decisions under the management approach of IAS 14 Revised

This research addresses the relationship between industry competition and managers’ choice regarding whether to separately disclose a business segment following the adoption of International Accounting Standard 14 Revised (IAS 14R) and the management approach to segment determination. Logistic regression reveals a significant negative relationship between disclosure and company returns in excess of the industry average.Prior research indicated a significant relationship between disclosure and abnormal returns under the industry approach to segmentation. Our results provide evidence that this flexibility persists as managers maintain their ability to aggregate segments to protect excess returns under IAS 14R and the management approach. Our findings are timely as the IASB plans to modify its segment reporting requirements as part of the Board's convergence agenda and as thousands of companies worldwide, effective from 2005 onward, are now preparing financial statements using IFRS.     

The New Business of Government Budgeting: Reporting Non-Financial Performance Information in Victoria

Since the early 1990s the general and financial management of the Victorian public sector has been significantly transformed. This research examines and explains the content, nature and quality of non-financial disclosures, including those related to performance indicators, through a disclosure indicator analysis of reporting practices in recent government budget papers. It reports the results of its application to the last three years' budget papers. The findings highlight the problems in the reporting of non-financial performance indicators in the Victorian budget papers. These results indicate a significant gap between "official" expectations of the type of items required to be reported and actual budgetary reporting practices – some many years after regulation and major financial accountability reforms have taken place.     

Statutory Budgetary and Financial Reporting by Australian Universities

A review of reporting practices in 1998 suggested that New South Wales universities were systematically breaching requirements for the publication of budgets in their annual reports, since the coverage of published budget documents did not encompass all financial transactions reported in financial statements. A government funding agency has required universities to present operating statements in a standard format. But the definitions used in these instructions lead to understatement of spending on administration by not counting expenditure incurred in faculties, schools or departments. It is argued that the combination of reporting practices based on government instructions and the failure of NSW universities to comply with state legislation has led to the production of accounts which are of limited usefulness to key stakeholders.     

Private disclosure and financial reporting

This article describes how large UK companies communicate with their institutional shareholders, and investigates how this private disclosure process relates to financial reporting. The article draws from case studies based on interviews with senior executives in 33 UK companies. Four insights into corporate disclosure arise from this case data. Firstly, a private disclosure process to institutional shareholders is outlined. Secondly, the private disclosure activity is recognised as a significant part of a larger corporate decision concerning public versus private voluntary disclosure. Thirdly, a range of factors are identified as encouraging private disclosure. These include the perceived limitations of financial reports (annual reports and interims), both as a disclosure mechanism in their own right and by comparison with private disclosure channels. Finally, despite these limitations, financial reports are recognised as a central component of a larger corporate disclosure system. The article therefore provides a novel insight in the role of financial reports in the larger corporate disclosure process, and ends by exploring new directions for research in financial reporting, including how the wider corporate disclosure system can be reformed in a systematic manner.     

Do conventional financial disclosures matter in alternative financing? Evidence from equity crowdfunding

As a novel form of external financing, equity crowdfunding enables small and early stage firms to raise capital from the public through an online platform. There has been criticism of the benefits and costs of mandating financial statements to promote this alternative form of financing. Using a setting where disclosure of financial statements is optional, this study provides evidence that financial statements influence investors’ decisions and facilitate borderless capital formation. The provision of financial statements appears to enhance how investors view other aspects of disclosure, suggesting a positive reporting externality. These market-wide benefits provide important insights on the role of financial disclosures for market participants, policymakers, and academics.     

Lessons for progressing narrative reporting: Learning from the experience of disseminating the Danish Intellectual Capital Statement approach

The case for the greater use of narrative disclosures within the annual report package continues to attract support from accounting academics. After a decade of comparatively limited attention, the topic of narrative reporting has returned to the accounting research agenda, in part in association with integrated reporting and a growing interest in accounting for business models, as well as a resurgence of intellectual capital research. In the light of a continuing optimism that narrative reporting will eventually assume its rightful place within financial reporting, the paper reports and reflects upon the findings of a study of the outcome of the Danish Guideline Project in the decade following its conclusion in late 2002. This initiative placed a heavy emphasis on the extension of narrative reporting in its principal output, the Intellectual Capital Statement, still widely regarded as a highly promising intellectual capital reporting framework. Based on insights derived from the study, the paper identifies a number of major obstacles that confront the advocates of narrative disclosure practices, the persistence of which is rooted in the contestable jurisdiction that characterises the accountancy profession itself.