Accounting, Intangible Assets, Stock Market Activity, and Measurement and Disclosure Policy—Views From the U.K.

This paper considers the impact of U.K. practices with respect to the measurement and disclosure of intangible assets, focusing on R&D activities. We first update prior U.K. work relating R&D activities to market prices. Second, given the clearly identified role of disclosure outside of the financial statements in helping market participants value R&D expenditures, we consider whether market forces are generally sufficient to ensure adequate disclosures with respect to intangibles by considering the cases of two biotechnology firms involved in the issuance of misleading disclosures. Within this context, we consider how disclosure regulation and enforcement mechanisms have evolved in recent years, and how this evolution has likely been affected by our 'scandal' cases. Our conclusions are that the case of the U.K. does not give rise to any wide-scale concerns about the economic ill-effects caused by the current state of recognition and disclosure with respect to expenditures on intangibles. Further, market forces are unlikely to be sufficient in ensuring honest and timely disclosures with respect to intangibles, but the combination of official regulation and voluntary self-regulation appears to have stemmed the tide of any such disclosure scandals in the U.K.     

Accounting Practices and the Market Valuation of Accounting Numbers: Evidence from Indonesia, Korea, Malaysia, the Philippines, Taiwan, and Thailand

This study examines the relation between stock prices and accounting earnings and book values in six Asian countries: Indonesia, South Korea, Malaysia, the Philippines, Taiwan, and Thailand. The analysis is based on a residual earnings model that expresses the value of the firm in terms of book value and residual income. The model holds for any clean surplus accounting system. However, for finite time horizons, biased accounting may affect model estimates. The six countries examined in this study differ in faithfulness to clean surplus accounting as well as bias (conservatism). The study addresses two questions. First, are there systematic differences across countries in the value relevance of accounting, and are these differences related to accounting differences? Second, are there systematic differences in the incremental and relative information content of book value per share (BVPS) and abnormal (residual) earnings per share (REPS) across the countries, and are such differences related to accounting differences? We find differences across the six countries in the explanatory power of BVPS and REPS for firm values. Explanatory power for Taiwan and Malaysia is relatively low while that for Korea and the Philippines is relatively high. These differences are generally consistent with differences in accounting practice; however, since Korean accounting practice is strongly influenced by tax law, we did not expect the high association for Korea. Second, with respect to the incremental and relative explanatory power of BVPS and REPS, we find BVPS to have high explanatory power in the Philippines and Korea but little in Taiwan. In all six countries REPS has less explanatory power than BVPS in most years. Again, the evidence may be interpreted as suggesting accounting practice affects valuation (with Korea again as the exception). Finally, we provide evidence on the sensitivity of the timing of comparisons of stock prices and accounting values. We find that comparing prices at year-end (even though annual accounting information has not been released at that time), in general, provides the highest correlation between market and accounting numbers.     

解析会计计量属性选择对财务分析的影响

由于经济高速发展,企业组织和经济业务日益复杂,根据资产的性质选择不同的计量属性进行计量已经成为现代财务会计的必然选择。因为选择的计量属性不同,财务报告所反映出的结果存在差异,历史成本计量属性,在通货膨胀的情况下,会失去资产计量的客观性,非历史成本计量属性虽然理论上更加符合决策的要求,但是如果没有有力的监管,也会给经营者留下很大的利润操作空间。经过严格监管的非历史成本计量属性的选择可以给使用者提供更加丰富的财务分析指标。     

Bank Relationships and the Value Relevance of the Income Statement: Evidence from Income-Statement Conservatism

Abstract:  This study examines the effects of a firm's debt financing decision on the informativeness of the income statement. This study specifically examines the association between a firm's bank dependence and the value relevance of the income statement by investigating the income-statement conservatism of firms with bank loans. Focusing on relatively small businesses, this study finds that income-statement conservatism, measured as timely loss recognition, is increasing in a firm's bank dependence. This study also finds that the value relevance of the income statement is increasing in a firm's bank dependence. The findings of this paper suggest that the usefulness of the income statement varies with a firm's bank dependence, indicating that the value relevance of the income statement is a function of a firm's debt financing decision. The findings further suggest that bank relationships affect the value relevance of the income statement through their influence on income-statement conservatism.     

'Shopping Around' for Accounting Practices: The Financial Statement Presentation of French Groups

This article illustrates the progressive move away from traditional accounting practices through a study of the presentation of financial statements. Based on a sample of one hundred large French industrial and commercial groups over a ten-year period, and applying a logistic regression method, our survey confirms a trend among French companies, which are increasingly turning their backs on traditional national practices as regards the balance sheet format, the income statement format, the voluntary disclosure of a statement of changes in shareholders' equity and the cash flow statement format. This move towards 'alternative' practices is made possible by the flexibility of French regulation, and can probably be explained by the desire of French firms to attract more investment on international capital markets. However, this trend shows no signs of a clear orientation towards any particular accounting model (IAS, U.S. or U.K.). The behaviour of the French firms observed in our study can be considered as a kind of 'shopping around' for accounting practices.     

所得税会计处理:新准则与旧规范的比较分析

财政部新发布的《企业会计准则第18号——所得税》，摒弃了旧规范中所得税会计处理的应付税款法和纳税影响会计法，规定采用资产负债表债务法进行所得税的会计核算，从而导致新准则与旧规范在会计与税法的差异定义、收益确定、所得税费用计算、亏损会计处理等方面存在着很大的差异。新准则基本实现了与国际会计准则的趋同。     

Accounting for Option–based Compensation: The Economic Cost Approach

The intrinsic value approach amortizes over the life of the option, the difference between the stock price on the date of the grant and the exercise price of the option. The fair market value approach amortizes over the life of the option, the market value of stock options on the date of the grant. These approaches do not reflect the changes in the option–based compensation cost after the grant date. This paper proposes an economic cost approach that not only adjusts for the changes in the value of the options during its life but also records the issuance of the stock at fair market value on the exercise date.     

Interaction between tax and accounting practice: Accounting for stock-in-trade

This paper studies the issue of interaction between tax and accounting practice through an examination of the process followed by the Institute of Chartered Accountants in England and Wales (ICAEW) when formulating Recommendation on Accounting Principles (RoAP) No. 22 as a replacement for RoAP No. 10. We show that the ICAEW had a clear intention of persuading the Board of Inland Revenue of the legitimacy of replacement cost as a basis of stock valuation, and that the preparation and publication of RoAP 22 succeeded, to a significant extent, in achieving that outcome. We also reveal that RoAP 22 appears to have affected the way in which some companies valued their stock and how their bases of stock valuation were disclosed in corporate published accounts.     

Banks' Use of Accounting Discretion and Regulatory Intervention: The Case of European Banks' Impairments on Greek Government Bonds

This paper analyzes troubled banks' use of accounting discretion and its interaction with regulatory intervention in a time of financial distress. We analyze impairment losses that Europe's largest banks recognized on Greek Government Bonds (GGB) during 2011, the time during which GGB were considered impaired. Our findings reveal considerable variation in the impairment ratios across banks. Banks with larger GGB exposures, for which a full impairment would deplete a large share of regulatory capital, recognize significantly lower impairment ratios. Furthermore, we find that troubled banks delay full impairments until state aid is provided. Troubled banks recognize significantly lower impairment ratios in the quarter before they are provided with state aid, but substantially increase their impairment ratios afterwards. This pattern is consistent with the notion that troubled banks initially understate impairments to conceal the full extent of their financial difficulties from less sophisticated non-regulator outsiders (e.g., depositors and the general public), which increases regulators' ability to practice forbearance by not intervening immediately.     

Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?

Abstract:   Unlike US GAAP, accounting principles in Canada and the UK require disclosure of disaggregated components of joint ventures and associates. Using comparative analysis of Canadian, UK and US data, this study investigates the potential loss of forecasting and valuation relevant information from aggregating joint venture and associate accounting amounts. Findings show that aggregating joint venture and associate investment numbers, and aggregating joint venture revenues and expenses, each leads to loss of forecasting and valuation relevant information. Thus, current US accounting principles likely mask information that financial statement users could use to predict future earnings and explain share prices.     

Human Capital and Stock Returns: Is the Value Premium an Approximation for Return on Human Capital?

This study, using a direct measure of the wage growth rate within firms, examines the value premium in relation to human capital. The results suggest that the dispersion in wage growth in value and growth stocks explains a large portion of the differences in stock returns. It appears that value stocks are less exposed to shocks in rents to human capital. Differences in labor force characteristics among value and growth stocks also proved to be an important factor in determining both the impact of future changes in labor income growth rate and firm value. The present findings are understood to mean that the ability of investors to forecast the dispersion in wage growth in firms is limited.