Narrative accounting disclosure: Its role in the gold mining industry on the Gold Coast 1900–1949

Gold mining played a major role in the extraction of surplus value by colonial powers in Africa. The paper examines the role of narrative accounting disclosure in the gold mining industry in colonial Ghana (the Gold Coast) during the period 1900–1949. Narrative accounting disclosure was deployed in the extraction of value by English gold mining companies, in raising capital via a series of “gold booms” and subsequently in defending the companies’ labour policies in the face of trade union resistance. The paper concludes that an accounting disclosure was an important part of the strategy of the gold mining companies in promoting and legitimising themselves.     

An International Investigation of the Factors that Determine Conditional Gold Betas

We investigate the unconditional and conditional gold betas of four country‐based gold industry portfolios. First, we document the similarity of unconditional gold betas across countries. Second, we find that the factors affecting conditional gold betas are different in the Australian and South African gold sectors relative to their North American counterparts. Only the gold bullion return volatility shows a negative association with conditional gold betas in Australian and South African gold mining firms. Moreover, gold price does not appear to play a systematic role in determining Australian or South African conditional gold betas. We discuss possible explanations for these findings.     

The Measurement of Harmonisation and the Comparability of Financial Statement Items: Within-Country and Between-Country Effects

This paper reports on an analysis of accounting policy choices made by European companies with an international shareholding. The accounting policies analysed in depth in this paper comprise the treatment of goodwill and accounting for deferred taxation. In the paper, the van der Tas comparability index is developed by separating the index into two components relating to the within-country (intra-national) effects of domestic standardisation and the between-country (inter-national) effects of harmonisation. It is shown in this paper that the value of the index may be interpreted as the probability that two companies selected at random will report financial information that is comparable, and that the lowest level of comparability exists when the accounting methods are assumed to be distributed equiprobably over the companies, the outcome of a random selection of accounting policies. The paper also considers the problems of non-disclosure, and a comprehensive ‘disclosure-adjusted’ comparability index is proposed.     

The Loser's Curse: Accounting for the Transaction Costs of Takeover and the Distortion of Takeover Motives

Studies for major stock markets of share price movements in the period around a takeover show that target company shareholders typically experience large gains in wealth but that acquiring company shareholders do not. The reasons for this asymmetry–and, in particular, for the absence of gains for the shareholders of the companies which initiate the deal–are imperfectly understood. This note suggests one factor contributing to those results. It argues that accounting practice prescribed by the main standard setters is non‐neutral towards ‘successful’ and ‘unsuccessful’ bidders with respect to reporting the transaction costs of bidding. It shows how the prescribed accounting treatment of these costs affects performance measures used in salary contracts as well as in the markets for executives and for corporate control. The result is that the managers of bidding companies will have an ‘arti ?cial’ incentive to in ?ate their bid price or to go ahead with a bid which offers no bene ?t to their shareholders. Ironically, the main standard setters seem minded soon to prohibit the only accounting technique which does not distort these incentives.     

COMPETING IDEOLOGIES IN THE ACCOUNTING AND INDUSTRIAL RELATIONS ENVIRONMENT

Despite differences in approaches towards ‘accounting and industrial relations’, there have been few attempts to record those differences systematically or to locate them within a conceptual framework. This paper documents the diversity among actors in the accounting and industrial relations environment, situates it theoretically and considers its implications for policy and practice. ‘Differences’ are shown to have persisted across time and to transcend national boundaries. Building on previous studies, a framework is presented to explain observed differences in terms of differences in underlying ideologies, based on varying sets of assumptions about society and organizations. Unitarist, pluralist and radical assumptions are seen to lead to different conceptualizations of the management–labour relationship and different sets of ‘problems’ and conclusions concerning the ends served by the disclosure of accounting information to employees and labour representatives. It is also argued that the ideologies identified incorporate competing knowledge interests and involve distinct modes of rationality.     

Twitter Mining for Discovery,Prediction and Causality: Applications and Methodologies

Twitter has found substantial use in a number of settings. For example, Twitter played a major role in the ‘Arab Spring’ and has been adopted by a large number of the Fortune 100. All of these and other events have led to a large database of Twitter tweets that has attracted the attention of a number of companies and researchers through what has become known as ‘Twitter mining’ (also known as ‘TwitterMining’). This paper analyses some of the approaches used to gather information and knowledge from Twitter for Twitter mining. In addition, this paper reviews a number of the applications that employ Twitter Mining, investigating Twitter information for prediction, discovery and as an informational basis of causation. Copyright © 2015 John Wiley & Sons, Ltd.     

Liberal Fair Value Accounting in Banks: A South African Case Study

Research findings on the role of fair value accounting (FVA) in the global financial crisis suggest that FVA is not applied neutrally by banks. The results of FVA are accepted when they contribute to higher profits and are actively resisted when they lead to losses. The aim of this article is to investigate how FVA is practically applied by banks in detail. The focus is on banks as most of their assets are financial instruments and thus potentially fair valued, and banks’ behaviour is significantly influenced by their regulatory environment. The research objective is pursued by using a case study of two South African banks. One of these is the largest and most systemically important bank in the South African system and the other is on the crossover between systemic and not systemic. It is found that FVA as applied by these two banks is not neutral. Also included is a demonstration of a method to derive the unrealised portion of profit and equity, the identification of the gap between assets and liabilities at fair value as the driver of where in a banking group FVA profits and losses are realised, and the finding that the restatement of comparative figures was used to circumvent the prohibition on reclassifications into and out of the ‘designated as at fair value’ category.     

Predicting the Failure of Developmental Gold Mining Projects

This paper investigates firm‐level financial and non‐financial information and their association with project failure for a sample of pre‐production gold development firms. Pre‐revenue generating ‘single project’ mining companies are chosen, since project failure is synonymous with company failure for these firms. The setting is interesting due to the high information asymmetry and limitations of the GAAP‐based Altman Z‐score in this context. A definition of project failure is applied and both financial and non‐financial predictors are compared. Failure is driven by whether the deposit is open pit or underground, and whether the cash cost of production is disclosed at feasibility completion.     

股权性质、环境不确定性与会计信息的治理效应

已有研究发现会计信息具有治理效应,但没有考虑会计信息治理效应所依赖的经理人侵占动机及外部环境所提供的机会;已有研究虽然考察了国有股权的治理效应,但由于没有考虑经理人谋取私利的可能性而使结论具有偏差。本文研究了股权性质、环境不确定性与会计信息质量对代理成本的交互作用。研究结果表明,低质量的会计信息不仅增加管理层利用公司资源的自利行为,而且还降低公司资产的使用效率,但会计信息的治理作用仅在环境不确定性高的公司中存在,同时,相对于非国有控股公司,会计信息质量在国有控股公司的治理作用较小。研究结果还表明,只有在环境不确定性较高且会计信息质量较低的情况下,国有控股公司的代理效率高于非国有控股公司。本文不仅验证了国有股权和环境不确定性对会计信息治理效应的影响,也验证了环境不确定性和会计信息质量对国有股权治理效应的影响。     

Reporting accountant appointments and accounting restatements: Evidence from UK private companies

In recent years, regulators have exempted an increasing number of companies from the requirement to appoint auditors, yet little is known about the role of the accounting profession in preparing and validating the financial statements of unaudited companies. In this paper, we examine empirically the factors associated with the appointment of reporting accountants. We then provide novel evidence on whether unaudited UK small private companies are less likely to restate their annual accounts when they have been prepared by an external accountancy firm (i.e., a reporting accountant). Based on a cross sectional analysis of a large sample of small private unaudited UK companies, we find that, in accordance with the ‘confirmation hypothesis’, larger companies that voluntarily disclose more financial information are more likely to appoint a reporting accountant. We also find that the accounts of companies with a reporting accountant are significantly less likely to be restated than those without. This result is more pronounced for companies disclosing more financial information and for those employing a larger accounting firm. Given the dwindling number of private companies opting for audits, our findings contribute to debates on the role of the accounting profession in enhancing private company financial reporting quality.     

ACCOUNTING REFORMS: DETERMINANTS OF LOCAL GOVERNMENTS' CHOICES

The introduction of accrual accounting in Italian Local Governments has been mandated in a way that permits, and in fact encourages, a merely formal compliance. Local Governments must produce accrual‐based financial statements, but double‐entry bookkeeping is not mandatory, nor may traditional budgetary accounting be abandoned. Why, then, should they bother to introduce an integrated system of budgetary and accrual accounting? In this paper, we empirically investigate the determinants of Local Government's choices of accounting innovation. According to our results, ‘rational’ elements such as complexity, types of activities performed, presence of surpluses, and access to capital markets are seemingly unhelpful in explaining why a Local Government decides to introduce accrual accounting. What counts are ‘institutional’ and cultural explanations, such as the perceptions of CFOs and the North‐South divide.     

Discretion in accounting for pensions under IAS 19: using the ‘magic telescope’?

We use a panel data set of UK-listed companies over the period 2005–2009 to analyse the actuarial assumptions used to value pension plan liabilities under IAS 19. The valuation process requires companies to make assumptions about financial and demographic variables, notably discount rate, price inflation, salary inflation and mortality/life expectancy of plan members/beneficiaries. We use regression analysis to analyse the relationships between these key assumptions (except mortality, where disclosures are limited) and company-specific factors such as the pension plan funding position and duration of pension liabilities. We find evidence of selective ‘management’ of the three assumptions investigated, although the nature of this appears to differ from the findings of US authors. We conclude that IAS 19 does not prevent the use of managerial discretion, particularly by companies whose pension plan funding positions are weak, thereby reducing the representational faithfulness of the reported pension figures. We also highlight that the degree of discretion used reflects the extent to which IAS 19 defines how the assumptions are to be determined. We therefore suggest that companies should be encouraged to justify more explicitly their choice of assumptions.     

Measuring Compliance with the Golden Rule

The golden rule of public finance is based upon the notin that intergenerational equity requires that the cost of public expenditures be spread over time in a manner that reflects the intertemporal distribution of the benefits generated by those expenditures. This is often translated into a rule that the budget be structurally balanced in accrual accounting terms. This article considers the form of accrual accounting that is most suited to the task of measuring the consistency of fiscal policy with the golden rule. It recommends a combination of the real capital maintenance approach (also known as ‘current purchasing power accounting’) and annuity depreciation. Such an approach differs from ‘current cost accounting’, which has dominated public sector models of accrual accounting in recent years. The meaning of balance-sheet measures is also considered, and it is concluded that the golden rule is more appropriately expressed as an accrual balanced budget requirement than as a requirement for the maintenance of constant net worth. JEL classification: H6, M40.     

Gold mining companies and the price of gold

This paper studies the exposure of Australian gold mining firms to changes in the gold price. We use a theoretical framework to formulate testable hypotheses regarding the gold exposure of gold mining firms. The empirical analysis based on all gold mining firms in the S&;P/ASX All Ordinaries Gold Index for the period from January 1980 to December 2010 finds that the average gold beta is around one but varies significantly through time. The relatively low average gold beta is attributed to the hedging and diversification of gold mining firms. We further find an asymmetric effect in gold betas, i.e. the gold exposure increases with positive gold price changes and decreases with negative gold price changes consistent with gold mining companies exercising real options on gold.     

Accounting,Remuneration and Employee Motivation in the New Organisation

The paper draws upon two detailed case studies of global manufacturing companies to examine the role of accounting in redesigned remuneration systems which are emerging as organisations delayer their structures, change their production methods and move to team-based systems of work and reward. In this way, changes in the content and application of accounting measures are framed within new approaches to rewarding and motivating employees that have been stimulated by efforts to develop alternative, ‘leaner’ manufacturing practices. The focus is principally upon the remuneration of shopfloor employees, but we also consider the implications of team-based reward systems for managerial staff. We argue that despite the recent complementing of financial with non-financial forms of reward (e.g. skill acquisition, improvements to health and safety), and an emphasis upon peer pressure from team members in addition to individual incentives as a source of motivation, the language and calculations of accounting remain central and pervasive in developing, justifying and mobilising support for the new reward system.     

A South African Success Story: Excellence in the Corporate Use of Capital and Its Social Benefits

South African companies have made great progress in improving corporate profitability since the nation became a full democracy in 1994. Using the “Cash Flow Return on Investment” (CFROI) method, the authors demonstrate that South African listed companies have been generating world‐beating levels of inflation‐adjusted return on capital over the past decade. But not all parts of the South African economy have benefited from this corporate success. Despite the impressive corporate returns, economic growth remains lackluster, constrained by confused labor and government policies. The authors recommend that South African policy makers aim to minimize uncertainty for the private sector by refraining from interventions with agendas that have little to do with expanding output or employment growth. Using terminology borrowed from Thomas Piketty's recent book, the two authors argue that what South Africa needs is not some way to limit investors' return on capital (r) but rather sound economic approaches to liberate growth (g). The authors would like to see the country's companies continue to generate high “r” while reinvesting their profits to produce more wealth‐creating “g.”     

The Impact of Search Costs and Asymmetric Information on Current Value Accounting

This paper examines the impact that search costs and asymmetric information would have on financial statements if either of the two main systems of current value accounting were introduced. The significance of search costs is that, although the models which determine the optimal amount of search are becoming more general, they are based on very restrictive assumptions and are of limited practical application. In relation to the second issue, where asset markets are dominated by asymmetric information, the ‘signal’ conveyed by the accounts would be misleading. It is argued that, whilst these two issues can more easily be resolved where the provision of financial information is unregulated, they are likely to be important considerations in the political process which results in an accounting standard.     

The Third Policeman: ‘The true and fair view’, language and the habitus of accounting

This paper explores the role and context of the ‘true and fair view’ (‘TFV’) in accounting and auditing. Utilising the work of Bourdieu as a lens, the paper argues that the world of the TFV is a subjective world with which we think we are objectively familiar. Bourdieu's ‘practical theory’ of habitus suggests that the TFV is shaped by the practice of ‘native virtuosos’ who have a ‘feel for the game’. The paper argues that the conceptualisation of the TFV privileges practice and authenticates the accounting habitus. Hence, whilst language maintains and reinforces social structures, it is in turn created by the routines of practice. By dominating the declaration of the TFV, the auditor effectively reinforces the status quo and the constitution of hierarchy and inequity that exists in the accounting field: the TFV, in Bourdieu's terms, ‘becomes what they are’.     

Benefits Expected by Accounting Firm Partners Selling their Firms to Publicly Listed Companies

In the 1990s and 2000s publicly quoted companies acquired thousands of accounting partnerships in Australia, the United Kingdom (UK) and the United States (US). Little is known of why the partners sold. This study examines the benefits expected by partners who sold their practices to two Australian publicly listed accounting companies. The findings suggest that there were many reasons for selling and a range of expected benefits, with some partners seeing the sale as a ‘silver bullet’ solution to all of the challenges of operating a small to medium‐sized accounting practice.     

Terminal Value,Accounting Numbers,and Inflation

In a 2008 article published in this journal, Michael Bradley and Gregg Jarrell argue that the well‐known Gordon‐Shapiro (henceforth “GS”) model for calculating terminal values does not properly account for the effects of inflation. Bradley and Jarrell suggest modifying the growth factor in the standard GS model by adding an additional term to the nominal growth rate that reflects the positive effect of inflation on the value of existing assets. In this article, the authors support the original Gordon‐Shapiro method for calculating terminal values by showing what they believe to be an oversight of the Bradley‐Jarrell critique. According to the authors, the disagreement stems from the use of fundamentally different assumptions about the effect of inflation on the capital investment required to sustain a business. Although Bradley‐Jarrell agree with the authors that intrinsic value is the discounted value of future free cash flows, their assumptions about capital investment effectively lead them to conclusions similar to those practitioners who attempt to value companies on the basis of discounted future accounting earnings. Despite much common practice, the GS model was meant to be applied to free cash flows, not accounting earnings. And for companies with substantial capital investment, the differences between accounting earnings that involve accruals and free cash flows can be very large.