Value relevance and market valuation of assets measured using IFRS and US GAAP in the US equity market

Purpose Studies show firms reporting using Generally Accepted Accounting Principles in the United States (US GAAP) and International Financial Reporting Standards (IFRS) are similarly valued in the market, however, these studies are limited due to the noise present in international studies from regulatory differences. This study aims to eliminate much of this noise by using a cleaner sample of all listings with the Securities Exchange Commission (SEC). This paper also looks at more detailed book value figures. Design/methodology/approach There have been previous studies on the differences in market valuation of firms reporting using IFRS vs US GAAP. Most of this research is confounded with difficulties due to different regulatory environments and volatile time periods. The study uses cleaner data following the SEC’s acceptance of IFRS financials without a 20-F Reconciliation. The authors use a large sample of non-US firms trading on US exchanges choosing to use either US GAAP or IFRS for SEC reporting purposes. The sample period starts two years after the SEC’s acceptance of IFRS financials without a 20-F reconciliation and is larger than earlier samples. Findings The authors show that there is no difference between IFRS and US GAAP firms’ overall value relevance, however, earnings are more value relevant when measured using IFRS and book value is more value relevant when measured using US GAAP. The authors find that the difference between US GAAP and IFRS can be explained, at least in part, by greater market multiples being placed on inventories and goodwill using US GAAP. This is offset in part by greater multiples being placed on other assets under IFRS. Originality/value The authors replicate earlier studies but also extend with a better sample and more detailed finings.

Empirical results for expected credit losses of G-SIBs during COVID-19. The proof of the pudding is in the eating

This study examines the provision for credit losses and its disclosures for Global Systemically Important Banks (G-SIBs) in connection to the COVID-19 crisis. We find a profound difference in the increase of the provision for credit losses between banks that report under IFRS and US GAAP. For banks that report under US GAAP, the provision for credit losses more than doubles, while it increases by only 32 percent for banks that report under IFRS. This difference becomes even more striking when considering that the increase for IFRS-reporting banks is partly attributable to increased lending activities. This study further finds that European auditors are more likely to issue a Key Audit Matter (KAM), than auditors of US banks, and that these KAMs specifically relate to COVID-19 in the financial year 2020. Furthermore, IFRS-reporting banks disclose more information on expected credit losses than banks that report under US GAAP. Moreover, we find that European banks disclose relatively more information regarding the impact of COVID-19 than banks reporting under US GAAP.

CAPITALIZATION OF MINERAL RESOURCES AS AN INNOVATION ECOLOGICAL STRATEGY

The paper presents issues of evaluation objects of subsoil usage and reflecting information of mineral assets for oil and gas companies. Estimation of the objects in the mineral resources sector is regulated by IFRS 6 «Exploration for and Evaluation of Mineral Resources», Russian Financial Standard, US GAAP and other normative documents. The authors` idea is to capitalize costs connected with the stages of geological exploration process, what is considered as an innovative component. Concepts of natural and environmental capital are overviewed. Different classifications of reserves and mineral resources of various categories of oil and gas are analyzed. The results of the study show that capitalizing reserves as mineral assets in oil and gas companies is possible and economically profitable.

The relational side of intellectual capital: an empirical study on brand value evaluation and financial performance

PurposeThis study aims to validate a direct method to measure relational capital through the estimation of corporate brands. Considering the influence of relational capital management in leading performance and brand development, we consider brand value as a proxy for relational capital. The main research goal is to extend the previous literature on intellectual capital, financial performance and brand management by elaborating and testing an original approach for valuating corporate brands using regression analysis on multiples based on firm-specific accounting data and market information.Design/methodology/approachThe authors propose two econometric models, for both listed and non-listed companies, which consider brand valuations made by primary consulting entities (Interbrand, Brand Finance, BrandZ, European Brand Institute) and multiples derived from accounting and market data of firms. Models were tested on a sample of nonfinancial firms for the period from 2006 to 2019, distinguishing between IAS/IFRS-based and US GAAP-based reporting standards.FindingsThe empirical results show that the identified set of market and accounting multiples proved to be significant information for estimating the value of brands within the IAS/IFRS framework, while a lower explanatory power was assessed for US GAAP firms. Furthermore, the empirical evidence confirm that the direct, relative approach based on multiples is more accurate for valuating listed firms than non-listed firms. Robustness analysis demonstrates that findings do not change significantly when the reference datasets and the main assumptions of the models are altered.Research limitations/implicationsThe statistical significance of the analysis is limited by the non-objective nature of brand value estimates. The use of additional sources for brand valuations might allow for the further assessment of the robustness of the relationships identified.Practical implicationsDue to their efficacy and ease of use, the proposed models represent valid practical tools for managers, investors, analysts and professional evaluators.Originality/valueThis work contributes to the existing literature through the identification of significant, stable relationships between brand values and the main economic, financial and asset characteristics of firms; the identification of those relationships would allow for the extension of the multiples approach also to the evaluation of brands.

Ongerealiseerde resultaten op transacties met deelnemingen: niet elimineren maar verwerken als minderheidsbelang

Verslaggevingsstelsels schrijven voor dat ongerealiseerde resultaten op transacties met deelnemingen moeten worden geëlimineerd. Dit artikel bespreekt de methodes in drie verslaggevingsstelsels (Titel 9, IFRS en US GAAP) voor de eliminatie van ongerealiseerde resultaten, en de bezwaren die daarbij kunnen worden onderkend. De thans voorgeschreven methodes geven de economische realiteit van dergelijke transacties slechts gefragmenteerd weer. Dit artikel stelt een alternatieve methode voor die tegemoetkomt aan de geïdentificeerde bezwaren, en de economische realiteit beter weergeeft, door ongerealiseerde resultaten niet te elimineren, maar te beschouwen als minderheidsbelang, en mutaties te verwerken via de bestemming van het resultaat.

ENTELEKTÜEL SERMAYENİN AKTİFLEŞTİRİLMESİ VE BİR UYGULAMA ÖRNEĞİ

İşletmelerin sahip olduğu entelektüel sermayenin aktif bir değer olarak bilançoda gösterilmesi, dünyada 1990’lardan itibaren giderek artmaktadır. Entelektüel sermayenin muhasebeleştirilmesinde Amerikan Genel Kabul Görmüş Muhasebe İlkeleri (US-GAAP) ve Avrupa kökenli Uluslararası Finansal Raporlama Standartları (IFRS) yaygın olarak kullanılan iki sistemdir. Bu çalışmanın, entelektüel sermaye ilkelerinin belirlenmesi ve örnek bir uygulama ortaya konulması olarak iki temel amacı bulunmaktadır. Makalede önce entelektüel sermayenin aktifleştirilmesine ilişkin kuramsal bilgiler aktarılmış, ardından bir uygulama örneği sunulmuştur. Uygulama örneğinde, ülkemizdeki mevzuatın düzenlenmesi halinde işe alım, eğitim ve sosyal harcamalar gibi pek çok insan kaynağı harcamasının bilançoda piyasa değeri-defter değeri, katma değer entelektüel katsayısı yöntemleriyle nasıl aktifleştirileceği gösterilmiş, bilanço analizleriyle bankaların entelektüel sermaye birikimleri ortaya konmuştur. Örnek uygulama için halka açık iki bankanın verileri kullanılmıştır. Söz konusu verilerin aktifleştirilmesinde IFRS’in benzer ilkeleri esas alınmıştır. Makalenin Türkçe alanyazında entelektüel sermayenin aktifleştirilmesi konusunda kuramsal katkı yapması beklenmektedir. İçerdiği uygulama örneği, işletme yöneticileri için yol gösterici niteliktedir. Yapılan değerlendirmelere göre, incelemeye konu her iki bankanın entelektüel sermayelerinin 2016-2018 yılları arasında, artış eğiliminde olduğu, müşteri sermayesinin ise dalgalı bir seyir izlediği bulgusuna erişilmiştir.

International accounting standards in French companies in the 1990s: an institutionalization contested by US GAAP

PurposeThe paper analyzes four cases of IAS adoption (Aérospatiale in 1989; Usinor in 1991; Coflexip in 1993; and Péchiney in 1995) to better understand the instructional logics behind the use of alternative or additional standards by French companies in the early 1990s.Design/methodology/approachThe study employs multiple case studies to explain how and why the heterogeneity of adoption (IAS versus US GAAP) is a response to institutional complexity.FindingsThis research shows that French companies adopted IAS as long as they were not required to use US GAAP by their financial backers. The results highlight how the companies combine logics to respond to the complexification of the field. The authors outline how endorsement of logics by outside carriers (auditors, financial analysts, stock exchange commissions) and framing of logics by managers evolve in time and space within this complexification process.Research limitations/implicationsThis study contributes to the institutional complexity literature in that it focuses on distinct organizational responses to multiple institutional logics. More precisely, the choice of standards in primary consolidated accounts are viewed as an organizational response to compatible and conflicting demands from several levels: home countries, transnational areas and host countries with the aim of raising funds in the US.Originality/valueThis research makes a distinct link between institutional complexity and international accounting standards and US GAAP.

Regulatory Arbitrage in the Intersection of Accounting Standards and Tax Laws: The Case of Synthetic Leases

This paper focuses on the interplay between accounting standards and tax laws in the context of regulatory arbitrage by examining the development of synthetic leases especially in the USA. In a synthetic lease, the lease remains off balance sheet for financial reporting by the lessee, while depreciations and interest expenses can be deducted for tax purposes. Exploring the evolving structures of synthetic leases over the last 30 years, the paper demonstrates how financial engineers have been able to perpetually re-structure this sophisticated instrument to keep it off-balance sheet instrument notwithstanding regulatory changes. Specifically, it shows that the most recent revision of lease accounting standards in 2016 – that intended to mark the end of off-balance sheet leases under IFRS and US-GAAP – resulted in reviving the demand for synthetic leases as the tax benefits outweigh the structuring costs. Contributing to the debate on the shift towards international accounting convergence (including US-GAAP and IFRS), the paper argues that attempts to limit regulatory arbitrage may also consider the reciprocal linkages between accounting standards and tax laws. For instance, tax laws should be considered as a means to limit regulatory arbitrage in financial reporting.