Business Commons^™

Fast Track To Direct Cash Flow Reporting, Paul Miller, Paul Bahnson

Paul R. Bahnson

Even though good reasons abound for using the direct method of reporting operating cash flow, almost all managers choose the indirect method. We, and others whose opinions we respect, consider the direct method to be far superior to the indirect because it generates information that's more useful to the capital markets for assessing the amounts, timing, and uncertainty of a company's future cash flows. Contrary to today's conventional wisdom, the direct method isn't hard to apply. In fact, with the system modifications described in this article, it will be easy to provide the information financial statement users want. After applying …

Perfect Storm Prompts Changes In Pension Accounting, Paul Miller, Paul Bahnson

Paul R. Bahnson

Over the first half of the decade, pension and other postretirement benefit plans were hit hard by a perfect storm of economic forces. Investment returns were irregular and often less than expected. Falling interest rates caused employers' obligations to soar. And many old-line industries experienced a cash crunch that encouraged management to offer increased pension benefits in lieu of higher wages. A shift in demographics has resulted in far fewer younger workers and many more who have retired or are about to do so.

Noncontrolling Interest: Much More Than A Name Change, Paul Bahnson, Brian Mcallister, Paul Miller

Paul R. Bahnson

In December 2007, FASB adopted two new business combination standards: Statement no. 141(R), Business Combinations, and Statement no. 160, Noncontrolling Interests in Consolidated Financial Statements. Both culminated years of work directed at improving reporting for consolidated entities. This article summarizes the most important changes created by Statement no. 160, which is effective for fiscal years beginning after Dec 15, 2008. The most visible innovation in Statement no. 160 is the name change from "minority interest" to "noncontrolling interest." A major change affecting income reporting concerns the treatment of the earnings related to midyear acquisitions. Statement no. 160 will require new …

Refining Fair Value Measurement, Paul Miller, Paul Bahnson

Paul R. Bahnson

Financial Accounting Standards Board (FASB) issued a standard in fall 2006 with the understated title Fair Value Measurements. On one hand, FASB Statement no. 157 appears to shake the foundation of historical cost measurement. On the other, it appears innocuous because it does not compel greater use of fair values. CPA's should quickly acquaint themselves with the new rule, since it becomes effective for annual statements for fiscal years beginning after Nov 15, 2007, and for interim reports prepared in that initial fiscal year.

The Top 10 Reasons To Fix The Fasb’S Conceptual Framework, Paul Miller, Paul Bahnson

Paul R. Bahnson

The Financial Accounting Standards Board (FASB) produced most of its Conceptual Framework (CFW) more than 20 years ago in a project that began in the 1970s. It achieved notable positive results, yet it isn't without flaws. These blemishes originate from several sources, including political pressures. But time has yielded a new environment that enables the FASB to fix the shortcomings.

A Penny For Your Thoughts: Sizing Up Manipulative Eps Rounding, Paul Miller, Greg Martin, Paul Bahnson

Paul R. Bahnson

For as long as public companies have been required to report earnings per share (EPS), there probably have been misguided managers who try to nudge it higher.

We’ve written this article to unveil a method of manipulating EPS that, near as we can tell, hasn’t yet been described in print. Because any attempt to manipulate EPS creates uncertainty and uncomfortable risk for investors—which, in turn, could create capital market inefficiencies and produce discounted stock prices—we want to expose this inappropriate and unproductive gamesmanship and then help eliminate it.

Our specific concern is that a troubling number of managers, and perhaps …

Corporate Governance And The Quality Of Green House Gas Emission Disclosures, Janice Hollindale, Pamela Kent, James Routledge

James Routledge

The introduction of the National Greenhouse and Energy Reporting Act 2007 (Cth) legislation is evidence of the importance the Australian Government places on the issue of greenhouse gas emissions (GHG) reporting. Australian corporations’ GHG disclosure information in annual reports is currently unknown as most research has focused on environmental voluntary disclosures in general. We used content analysis to produce an index wherein we assessed the quality of GHG disclosures made in the annual reports of Australian public-listed companies in 2007. Our interest was focused on whether good quality corporate governance influences the quality of GHG emission disclosures. We examined the …

Are Corporate Governance Recommendations Relevant For Small Companies?, Jacqueline Christensen, Pamela Kent, James Routledge, Jenny Stewart

James Routledge

This study examines the extent to which small listed companies in Australia comply with the Australian Securities Exchange corporate governance recommendations, and whether applying these recommendations is associated with benefits in terms of performance and accountability. The results indicate that many small listed companies comply with the recommendations, although the benefits to these companies from doing so appear to be low. We do not find evidence of a positive association between small company compliance with recommendations regarding board independence, diligence and formation of an audit committee and performance. However, we find that compliance with the recommendation against having a dual …

Are Corporate Governance Recommendations Relevant For Small Companies?, Jacqueline Christensen, Pamela Kent, James Routledge, Jenny Stewart

Pamela Kent

This study examines the extent to which small listed companies in Australia comply with the Australian Securities Exchange corporate governance recommendations, and whether applying these recommendations is associated with benefits in terms of performance and accountability. The results indicate that many small listed companies comply with the recommendations, although the benefits to these companies from doing so appear to be low. We do not find evidence of a positive association between small company compliance with recommendations regarding board independence, diligence and formation of an audit committee and performance. However, we find that compliance with the recommendation against having a dual …

Corporate Governance And The Quality Of Green House Gas Emission Disclosures, Janice Hollindale, Pamela Kent, James Routledge

Pamela Kent

The introduction of the National Greenhouse and Energy Reporting Act 2007 (Cth) legislation is evidence of the importance the Australian Government places on the issue of greenhouse gas emissions (GHG) reporting. Australian corporations’ GHG disclosure information in annual reports is currently unknown as most research has focused on environmental voluntary disclosures in general. We used content analysis to produce an index wherein we assessed the quality of GHG disclosures made in the annual reports of Australian public-listed companies in 2007. Our interest was focused on whether good quality corporate governance influences the quality of GHG emission disclosures. We examined the …

The Decision To Outsource Risk Management Activities, Jacqueline Christensen, Pamela Kent

Pamela Kent

This study uses transaction cost economics (TCE) to identify factors influencing Australian Securities Exchange (ASX) companies’ decision to internally generate or outsource activities required to manage risk. Limited research has been conducted applying TCE in a risk management context with most in the accounting discipline concentrating on internal audit. Increasing our understanding of risk management practices benefits organisations, accounting professionals and regulators concerned with governance practice. Using a unique data set obtained from a survey sample of 271 listed ASX companies in 2009 combined with archival data hypotheses are operationalised and analysed using multivariate and logistic regression. Broadly in line …

Family Ownership And The Value-Relevance Of Earnings And Book Value, Tim Hasso, Keith Duncan

Keith Duncan

This study investigates the relation between family ownership and the value-relevance of two primary accounting measures, earnings and book value. We provide theories of the effect of family ownership on the value-relevance of earnings and book value. We contend that current accounting technology does not fully recognise the family firm factors in the earnings or book value of the firm. We find that the value-relevance of earnings and is higher for family firms. We attribute this to the long-term orientation and the higher quality earnings of these firms. In contrast, the value-relevance of book value is lower. We believe this …

In Search Of A Different Accounting Graduate: Entry-Point Determinants Of Students’ Performance In An Undergraduate Accountancy Degree Programme In Singapore, Poh Sun Seow, Shan Chi Gary Pan, Siok Wan, Joanne Tay

Gary PAN

This study investigates the association of prior academic achievement, admission interview, critical thinking, mathematical aptitude, gender and age with successful academic performance in an undergraduate accountancy degree programme at a Singapore university. The purpose of revisiting the determinants of academic performance is twofold: firstly, university accounting education in Singapore has changed greatly since Koh and Koh’s earlier study (1999), so this study examines if determinants previously identified as significant continue to be so in the new setting; secondly, the study tests the usefulness of admission interview in identifying applicants who achieve subsequent academic success. All the data on students’ performance …