Showing papers on "Accounting period published in 2016"

CEO Characteristics, Compensation and Real Activity Management in Manufacturing Companies

Abstract: (ProQuest: ... denotes formulae omitted.)While accounting frauds are the result of unethical behaviors by some executives, accounting results also can be manipulated in less egregious ways. Real activity management refers to changing operating decisions to achieve earnings targets. Managers often engage in this practice because they have incentives to meet earnings targets to receive bonuses and/or maintain a high stock price. While real activity management is not illegal, it is not ethical, especially if the purpose is to misrepresent the financial position of the firm. This study builds on past research that linking ethical behavior to management characteristics to predict and test which CEO characteristics are related to real activity management.This research is critical to get a clearer picture of the intricacies of earnings management. Deceptive earnings results due to real earnings management is difficult to detect without additional financial statement analysis and other in-depth review. Accordingly, defining antecedents to real earnings manipulation allows auditors and investors to isolate the companies most likely to require this additional scrutiny. By determining the likelihood of different forms of earnings manipulations based on CEO characteristics, auditors and investors can focus their analysis to more efficiently evaluate company performance.This paper finds there are different CEO characteristics associated with different real activity management techniques. The paper is organized beginning with a review of the earnings management, followed by hypotheses derived primarily from the management literature. The method to estimate real earnings management follows. The data and regression model used is discussed, followed by the results and conclusions of this study.LITERATURE REVIEWThe idea behind earnings management is that "managers act as if they believe users of financial reporting data can be misled into interpreting reported accounting earnings as equivalent to economic profitability" (Fields et ah, 2001, pg. 279). The reason to manage earnings is normally to increase the firm's stock price and/or increase management compensation, which is often tied to reported earnings or the stock price. While earnings management is not illegal, it reflects a more aggressive interpretation of accounting rules and regulations. In addition, the goal of accounting is to best represent the financial position of the company, so manipulating financial data to distort the economic results is not ethical.There are two basic types of earnings management techniques: discretionary accruals and real activity (earnings) management. Discretionary accruals occur when management makes a series of accounting method elections to manipulate earnings on the financial statements. Real activity management occurs when management changes the period in which activities are undertaken to change the period in which revenues or expenses are recognized. Unlike discretionary accruals, which have been studied extensively in the literature (Mizik, 2010), this paper will focus on real activity management.Real activity management involves changing the timing of an event to move the revenue or expense into a different accounting period. For example, a company may relax credit terms to improve sales in the current year. Similarly, a company may choose to delay advertising or maintenance to move expenses to the next year. Again, these methods are not illegal, but if done strictly to change reported profits in the current year, it can result in deceptive financial results of the firm. This form of earnings management is especially unethical when it jeopardizes company performance in subsequent years.While real activity management has not been as studied as extensively as discretionary accruals, Graham, et ak, (2005) report that these techniques are commonly used in American businesses. Based on surveys of top company executives, the authors found that a majority of executives would employ one or more real activity management methods if their companies were faced with missing an earnings forecast. …

Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements

Abstract: This paper illustrates the effects of using different distributions and summary measures, using New Zealand data for the period 2007–2011. Using an annual accounting period, alternative welfare metrics and units of analysis are investigated. In addition, the sensitivity to assumptions about economies of scale within households is examined, and changes in inequality are decomposed into those arising from population and tax structure changes. When considering the period 2007–2010, all measures agree that inequality fell, although the extent of the reduction varies. For the period 2007–2011 (after the tax reforms of 2010) the answer to the question of whether inequality in New Zealand has risen or fallen depends crucially on the combination of welfare metric, income unit, adult equivalent scale and inequality measure used. In empirical studies, it is therefore important to explore a wide range of alternative approaches, providing information for readers to make their own judgements.

The importance of professional judgement applied in the context of the International Financial Reporting Standards

Abstract: Guidance has always been welcome in terms of applying professional judgement in the context of the principles-based accounting standards – International Financial Reporting Standards. This fact is the result of the complexity and diversity of some situations, which might give rise to difficulties in terms of choosing the appropriate accounting policies and methods (depreciation, inventory valuation on hand at the end of an accounting period, the recognition of revenues and expenses from a construction contract, accounting for lease contracts by the proper determination of the type of lease: financing or operating), and respectively the need to verify if the criteria set by the principles-based accounting standards are met. This “freedom” of choice and disclosure might create problems in terms of accounting information quality. The possibility to select accounting methods based on the Standards’ provisions is meant to generate a true and fair view of the company’s financial position and financial performance. In these cases it is recommended to use professional judgement in order to reach a conclusion which is in accordance with the accounting principles and is not enforced by any accounting rules, since the exercise of individual professional judgement is preferred against the “pure” compliance with prescriptive legal requirements.

Information and communications technology as a poverty reduction tool

Abstract: Fiscal Code has brought many changes in the structure of the expenses used to calculate the results of the exercise and, thus, the profits tax. It treats the three items of expense categories (deductibles, with limited deductibility and non-deductible), bringing numerous changes in the structure of each of them. Expenses is recorded as decreases in economic benefits during the accounting period as outflows or decreases in assets and increases in the value of debt, which is reflected in the reductions of equity, other than those arising from their distribution to shareholders. The Fiscal Code has brought many changes to tax legislation in Romania, all the titles being affected, a particular importance being awarded to the changes regarding to the expenses deductibility, items that are the subject of this material. The basic concept regarding the deduction of expenses has been reformulated in the Fiscal Code, so that - currently - are deductible expenses that are performed for business purposes, unlike the general rule of deductibility valid until 31 December 2015, that were deductible only those expenses incurred in order to achieve taxable income.

Market quality, market reforms and investor familiarity: evidence from the Indian stock market

Abstract: The study looks at the impact of three major regulatory changes that happened on the historic day of 2 July 2001, when badla was banned, rolling settlement replaced accounting period settlement for...