Impairment of Goodwill and Deferred Taxes Under IFRS

This article discusses the effect of deferred tax liabilities (DTLs) on an impairment test of goodwill. While IAS 12.66 acknowledges that DTLs arising in a business combination influence the amount of goodwill an entity recognises, International Financial Reporting Standards are silent on the implications of this rule, in particular that DTLs trigger a ‘day one’ impairment of goodwill. To avoid this impairment charge, the professional literature suggests deducting DTLs from the carrying amount of the cash generating unit. This method appears contentious conceptually and is unable to shield the entity from an impairment in subsequent periods. The article discusses four proposed solutions to the problem, but recommends a conceptual re‐think of the mechanical recognition of deferred taxes in a business combination.     

Factors influencing participation in the Nova Scotia Environmental Farm Plan Program

There is growing interest in Nova Scotia's Environmental Farm Plan (NS EFP) program among farmers and policy makers because of several reasons. First, effectiveness of standardized or uniform beneficial management practices in mitigating the negative environmental impacts from agriculture is limited by inherent heterogeneities in agricultural production systems. In addition, there is heightened interest in farmers generating ecological goods and services to society. This study investigates the determinants of participation in the NS EFP program. A discrete choice model of NS EFP participation was applied to a sample of 83 farmers (representing a 31% response rate). To increase relevance of the study to program administrators, the study also examined farmers’ use of various channels and sources of information on farm conservation practices. The most used sources of information on farm conservation practices include a mix of interpersonal sources and government agencies. Although online information (especially those available for free) appears to be gaining popularity in usage, overall, electronic and computer channels of information (especially radio and television) were used less compared with traditional channels of communicating farm conservation information (such as newsletters and agricultural magazines). Regression analysis suggests that farm characteristics (i.e., farm type, farm size, farm income) and farmer capacity variables (i.e., specialized training and knowledge from EFP program information sessions and workshops, and on-farm stewardship demonstrations) were significant determinants of environmental farm planning.     

Rethinking the effectiveness of asset and cost retrenchment: The contingency effects of a firm's rent creation mechanism

This paper posits that the efficacy of different retrenchment strategies depends upon the firm's core rent creation mechanism. We focus on two distinct mechanisms of rent creation: Ricardian rent creation based on the exploitation of resources and Schumpeterian rent creation based on explorative capabilities. We argue that cost retrenchment may have detrimental effects on firms with a relatively high Schumpeterian rent focus. On the other hand, asset retrenchment may erode the basis for future rent creation for firms with a higher Ricardian rent focus. Our findings based on a sample of large nondiversified Japanese firms highlight the differing degrees of fragility and recoverability of the two rent creation mechanisms in the context of different retrenchment strategies. Copyright © 2012 John Wiley & Sons, Ltd.     

Environmental transparency and investors' risk perception: Cross-country evidence on multinational corporations' sustainability practices and cost of equity

We explore whether a greater amount of environmental disclosure can reduce a firm's ex ante cost of equity. This could occur because the quantity of environmental information changes investors' risk perception of the company, thereby influencing its ex ante cost of equity. Our study is a cross-country analysis of 1481 multinational corporations (MNCs) across 43 countries and territories from 2013 to 2019. Firstly, we measure investors' risk perception as a firm's ex ante cost of equity by employing five different valuation models, all based on equity analysts' forecasted data. We then investigate whether large quantities of environmental information disclosed by an MNC affect its ex ante cost of equity. We find evidence that investors price the amount of environmental disclosure. More environmental disclosure decreases a firm's ex ante cost of equity because it lessens investors' information asymmetry. However, this relationship is non-linear. Once the amount of environmental disclosure data exceeds a certain threshold level, a firm's ex ante cost of equity will rise again. Our empirical results also suggest that non-financial factors at the country level play a role in shaping how investors perceive a firm's riskiness. Locating the firm in a country with better environmental performance and a higher score of the human development index can reduce investors' risk perception and result in a lower ex ante cost of equity. A policy implication of our findings is that a global standardised and effective corporate sustainability reporting is needed to provide investors a more holistic view for evaluating the riskiness of their investments.     

The evolution and strategic management of new technology-based sectors: the case of computerized business systems

Accepted paradigms of strategic management can be expected to be adapted for new technology where inter alia, the pace of technological change is rapid, uncertainty intense, and product life cycles short. It is argued that there are generic drivers of the euolutzon of such new technology sectors, and that the early identification of anticipation of and adaptatzon to these general forces can in theory provide businesses with a strategic advantage. Businesses, however, are often possessed of considerable inertia whilst the managerial perception of such sector trends can be affected by inter alia earlier commit-ments and experiences. This paper analyses such issues of strategic management with reference to the computerized business systems sector i n which the authors have conducted extensive empirical research over a two-year period.     

Transparency and trust in the European pharmaceutical sector: outcomes from an experimental study

Many European pharmaceutical regulators have committed to a more open, inclusive, and transparent model of regulatory decision-making in recent years. Yet, based on little empirical evidence, they have overwhelmingly adopted ‘fishbowl’ transparency measures, ‘the full disclosure of information without explanatory information or contextualization’ (e.g. heightening access to raw data). This paper conveys recent findings from an open-ended questionnaire with 200 face-to-face interviews carried out in the UK and the Netherlands. The study provides evidence on how members of the public are likely to react to ‘fishbowl’ transparency policies and receiving decontextualized data. After showing respondents raw data from a periodic safety update report that regulators are proposing to proactively release, the survey found they were shocked, concerned, and more worried, while many said they would reconsider taking their medicines and seek further advice. Based on these findings, the authors argue that enhancing ‘transparency’ needs to be integrated with effective, evidence- and science-based benefit/risk communication.     

Ma(r)king memories: exploring embodied processes of remembering and forgetting temporal experiences

Based on in-depth interviews with nine tattoo consumers, participant observation at a tattoo studio, a tattoo consumption diary, and photography, we investigate embodied processes of remembering and forgetting temporal experiences. We unpick participants’ experiences of combatting the fragility of memory, negotiating which temporal experiences to remember or forget, and constructing temporal order through their tattooed bodies. These insights are enriched theoretically with reference to Ricoeur’s ideas concerning time, narrative, and memory. By focusing upon the embodied dimensions of memory work, we contribute fresh insights into the underexplored relations between bodies, time, and consumer culture. Furthermore, we indicate the continuing significance of temporal continuity, durability, and the past in accelerating Western cultures. Finally, we elucidate the importance of also attending to “absences” in consumer research. We conclude by considering the wider implications of our findings for better understanding an accelerating, liquid, and unstable consumer culture, beyond the context of tattooing.     

The effect of international tourism on economic development: An empirical analysis

The expansion of international tourism in developing countries is generally considered to promote their economic development. In this paper, the impact of international tourism on economic development is modelled using an aggregate production function framework. It specifically investigates intersectoral externalities and marginal factor productivity differences between the international tourism sector and the rest of the economy. The net effect of international tourism on GDP per capita is examined via an empirical analysis of 37 developing economies. The results indicate that international tourism may positively affect economic development in these countries.