Revenue Recognition under IFRS Revisited: Conceptual Models,Current Proposals and Practical Consequences

Since 2002, the FASB and the IASB have been undertaking a joint project on the revision and convergence of US GAAP and IFRS revenue recognition. Even though the outcome of the project is still open, the project's course as well as trends in recently published IFRS and other current IASB projects suggest that existing earnings-based and realisation-based IFRS revenue recognition criteria are likely to be replaced by a radically new approach. This paper demonstrates the inconsistencies in current IFRS revenue recognition that have triggered the project and then presents and discusses three conceptually different revenue recognition models that are internationally debated at present. The paper concludes that a major revision of existing IFRS revenue recognition as proposed by the FASB and the IASB is not required. It is argued that the perceived deficiencies should rather be solved on the basis of current transaction-based IFRS revenue criteria.     

The external validity of giving in the dictator game

We investigate the external validity of giving in the dictator game by using the misdirected letter technique in a within-subject design. First, subjects participated in standard dictator games (double blind) conducted in labs in two different studies. Second, after four to five weeks (study 1) or two years (study 2), we delivered prepared letters to the same subjects. The envelopes and the contents of the letters were designed to create the impression that they were misdirected by the mail delivery service. The letters contained 10 Euros (20 Swiss Francs in study 2) corresponding to the endowment of the in-lab experiments. We observe in both studies that subjects who showed other-regarding behavior in the lab returned the misdirected letters more often than subjects giving nothing, suggesting that in-lab behavior is related to behavior in the field.     

(Non-)robustness of maximum likelihood estimators for operational risk severity distributions

The quality of operational risk data sets suffers from missing or contaminated data points. This may lead to implausible characteristics of the estimates. Outliers, especially, can make a modeler's task difficult and can result in arbitrarily large capital charges. Robust statistics provides ways to deal with these problems as well as measures for the reliability of estimators. We show that using maximum likelihood estimation can be misleading and unreliable assuming typical operational risk severity distributions. The robustness of the estimators for the Generalized Pareto distribution, and the Weibull and Lognormal distributions is measured considering both global and local reliability, which are represented by the breakdown point and the influence function of the estimate.     

Phillips ‘loops’ in South Africa∗

Professor Phillips published his famous Phillips curve article in 1958. In his research, however, he observed that wages were rising more rapidly during the upswing of the business cycle, when unemployment was falling, than during the downturn, when unemployment was rising. When data on the respective variables was plotted, a distinct ‘loop’ was found. In the analysis of South African labour statistics, it was found that such a ‘loop’ existed in the White labour market. However, in the case of the Black labour market, only a weak image of a ‘loop’ was found. The real economic forces producing such a ‘loop’ were almost completely absent. This has implications not only for labour management and economic policy in general, but also for development strategies, because it implies that if Black labour had been left to market forces only, they would have been worse off than they are now.     

A formulation and test of a simple model of world bank behavior

Zusammenfassung Formulierung und Test eines einfachen Modells für das Verhalten der Weltbank. -Um das Verhalten der Weltbank zu analysieren, wird ein einfacher theoretischer Ansatz entwickelt, indem angenommen wird, da? die Weltbank wie eine einzige Person ihren Nutzen maximiert. Die Argumente der Nutzenfunktion sind die Summe der Kredite an die Empf?ngerl?nder, die Einkommen dieser L?nder und der gesamte erwartete Zahlungsausfall beim Schuldendienst. Die Beschr?nkung der Funktion liegt im Gesamtbudget der Bank. Auf dieser Grundlage werden mehrere Hypothesen bezüglich der Kreditpolitik der Weltbank abgeleitet und getestet. Es zeigt sich, da? das Einkommen und Ausfallrisiko zu 37–40 vH die Varianz der Weltbankdarlehen, die 1981 und 1982 gew?hrt worden sind, erkl?ren k?nnen.

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Résumé Une formulation et teste d'un simple modèle du comportement de la Banque Mondiale. -Les auteurs présentent un simple cadre théorique pour analyser le comportement de la Banque Mondiale en utilisant une approche d'acteur-unifié qui maximise son utilité. Les arguments de la fonction d'utilité sont les montants des crédits accordés aux pays destinataires, le revenue de ces pays et la suspension de paiements totale attendue. La contrainte de la fonction est le budget total de la Banque. Les auteurs dérivent et testent plusieurs hypothèses regardant les crédits accordés aux pays développants. Ils démontrent que le revenue et la risque des créances douteuses peuvent expliquer 37–40 pourcent de la variance des crédits de la Banque Mondiale accordés en 1981-1982.

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Resumen Formulatión y test de un modelo simple del comportamiento del Banco Mundial. -En este trabajo se presenta un marco teórico simple para analizar el comportamiento del Banco Mundial, utilizando un modelo individual de maximización de utilidad. La función de utilidad contiene como argumentos el volumen de crédite otorgado a los países receptores, el ingreso de estes países, y el total esperado de crédites vencidos. El presupuesto total del banco constituye la única restrictión. Varias hipótesis sobre el otorgamiento de préstamos a países en desarrollo son derivadas y analizadas empíricamente. Se concluye que el ingreso y el riesgo de que un crédite venza pueden explicar del 37 al 40 por ciento de la varianza de los crédites otorgados en los a?os 1981 y 1982.

     

Drei herausragende Controller mit der Ehrendoktorwürde der European Business School ausgezeichnet

Ohne Zusammenfassung     

Pricing Strategies of Software Vendors

Due to the economic characteristics specific to the software industry, pricing concepts existing in other industries cannot be transferred without adaptation. Therefore, this article provides an overview of pricing models for software. In this context we discuss the six parameters formation of prices, structure of payment flow, assessment base, price discrimination, price bundling, and dynamic pricing strategies. Furthermore, we refer to recent software delivery models, such as Software as a service. The results are based on literature research and empirical studies.     

Web 2.0 Social Networks: The Role of Trust

Online social networks (OSNs) have gained enormous popularity in recent years. Hundreds of millions of social network users reveal great amounts of personal information in the Web 2.0 environment that is largely devoid of security standards and practices. The central question in this article is why so many social network users are being so trusting. The focus is on theory-building on trust as a critical issue in OSNs. A theoretical framework is developed, which facilitates a multi-level and multi-dimensional analysis of research problems related to trust in OSNs. First, the structural and relational underpinnings of trust in OSNs are investigated from a governance perspective that integrates concepts of social network theory, social capital and the role of value in relational exchanges. Subsequently, the focus moves to the individual’s decision to trust and to processes through which trust actually emerges. Different types and sources of trust from the trust literature and their importance for trust-related decisions and behaviours in OSNs are discussed. Several research propositions are presented, which contribute to a better understanding of the role of trust and the relevance of facets of trust and social capital in OSNs.     

Neue Finanztechnologien — Bankenmarkt in Bewegung

Digitalisation opens new channels for financial transactions. Crowdlending and Digital Advice offer additional opportunities for customers to manage their assets. In the banking market, “FinTechs” are the most notable example of what Schumpeter described as “creative destruction”. They could threaten the existence of established banks. Therefore the banks should use the FinTechs as a testing laboratory for customer behavior and testing ground for a more modern marketing policy. This environment gives rise to concerns that there may develop an unregulated area of shadow banks. But it should be considered that a level playing field has to be ensured and that innovative processes and products are not stalled. A potential advantage of Digital Advice is that consumers can have the possibility to access the relevant information they need to make their financial decisions. Consumers, in turn, are only able to benefit from this advantage if competition between financial service providers leads to a supply of clear and comprehensible information about financial products and an appropriate degree of data security. The rise of Big Data analyses in retail banking allows a more precise estimation of creditworthiness risk as well as a consumer’s willingness-to-pay, propensity to switch and responsiveness to marketing offers. This not only impacts on competition, it represents major challenges for policymakers, authorities and consumers alike.