Perceptions of the true and fair view concept: an empirical investigation

If major groups of financial reporting participants differ in their perceptions of standards for financial reporting quality, such as 'true and fair view', 'present fairly' and 'fair presentation', a financial reporting expectation gap may occur. This article reports the results of a survey designed to explore this potential gap by determining New Zealand financial directors', auditors' and shareholders' perceptions of terms associated with financial reporting quality.
The results show that a clear majority of all three groups share similar perceptions of the 'true and fair view'; but perceive 'true and fair view' to be quite different from 'fairly presents' and 'fair presentation', terms the New Zealand Institute of Chartered Accountants' (2005) describes as equivalent to 'true and fair view'. Thus there appears to be a perception gap between the respondents surveyed and the Institute. The findings also support a literal rather than a technical interpretation of 'true and fair view'; that respondents do not perceive 'true and fair view' as compliance with GAAP; and that 'true' ('truth' in accounting), the word separating 'true and fair view' from terms that include only 'fair', may be perceived as a key factor required for financial reporting quality.     

Multinational corporations and economic nationalism: Conflict over resource development in Canada

Faced with rising Third World nationalism, multinational corporations engaged in resource exploitation are turning back to higher cost but apparently politically more secure investments in the industrialized states. To what extent does the dynamic of government– resource industry relations in an industrialized setting differ from the pattern observed in the Third World? To answer this question the article analyses the decision to nationalize the potash industry in the Canadian province of Saskatchewan using models of host government–MNC conflict developed by Vernon, Mikesell and Moran to study Third World cases. The research suggests that the dynamic logic of government-industry conflict in a developed country setting is very similar to the pattern observed in the Third World. The decentralized Canadian federation, the ideology of the party in power in Saskatchewan and the nature of the potash industry combine to structure a situation in which coercive nationalization of a resource industry was seen as the only policy option.     

Does the midpoint of range earnings forecasts represent managers’ expectations?

The accounting literature has used the midpoint of range forecasts in various research settings, assuming that the midpoint is the best proxy for managers’ earnings expectations revealed in range forecasts. We argue that given managers’ asymmetric loss functions regarding earnings surprises, managers are unlikely to place their true earnings expectations at the midpoint of range forecasts. We predict that managers’ true expectations are close to the upper bound of range forecasts. We find evidence consistent with these predictions in 1996–2010, especially in the recent decade. Despite their role as sophisticated information intermediaries, analysts barely unravel the pessimistic bias that managers embed in range forecasts. Furthermore, we find that the upper bound rather than the midpoint better represents investors’ interpretation of managers’ expectations in recent times. Our study cautions researchers to refine their research designs that use management range forecasts and sheds light on the role of financial analysts in the earnings expectations game.     

Wealth Accounting,Exhaustible Resources and Social Welfare

The empirical literature on natural resource accounting uses methods which implicitly or explicitly entail measuring changes in total resource asset value when an exhaustible resource is depleted. In contrast, the growth theoretic literature on saving, social welfare and sustainable development is built upon a central finding, that the change in real wealth (as measured by net or ‘genuine’ saving) is proportional to the change in social welfare. We show that the change in total wealth exceeds the change in real wealth in optimal and non-optimal models of resource-extracting economies. This suggests that the change in social welfare is over-estimated when the change in total resource asset value is used as the measure of depletion. A simple empirical exercise, using World Bank data on ‘adjusted net saving’, reinforces the results from theory.     

Which State Policies Lead to U.S. Firm Exits? Analysis with the Economic Freedom Index

This research investigates the relationship between public policy and firm deaths in the U.S. states. Policies that promote firm births may increase or decrease firm deaths. We use components of the Economic Freedom of North America index as a metric to evaluate the relationship between increased government size and firm deaths for the 50 states during 1989–2004. Elements of economic freedom are significantly related to firm deaths but in conflicting directions. We find that in the relevant range, some increases in state policy lead to firm death more than others. The paper also discusses our results and the implications for both future academic research and public policy.