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To
Match or Not to Match Revisited
--
Steve
Yu Shuo Su
While
the use of matching principle in accounting has long been
established, there has been very little research on the
scientific and theoretical rationale of its use. Recent
research in accounting (Gibbins and Willett 1997, Su 2005c)
has shown that matching principle or accrual accounting
can induce a smoother income effect (measured by the volatility
of accounting earnings) as compared to cash flow accounting.
This result was demonstrated theoretically in Su (2005c)
which presents approximation formulae to calculate the Expected
Sample Variance (ESV) to measure the volatility of matched
and unmatched earnings. The approximation formulae were
used as a conservative test to examine the benefit of matched
earnings over unmatched earnings in terms of long-term profitability
estimation. However, the approximation formulae developed
there tend to overestimate, and this paper discusses and
corrects the overestimation biases by deriving the exact
formulae for the ESV of matched and unmatched earnings.
©
2006 IUP . All Rights Reserved.
Analysis
of Corporate Voluntary Disclosure Practices: A Study of
Indian Companies
-- Padmini
Srinivasan
Investors
need information for assessing the future cash flows and
for decision-making. Management, on the other hand, can
supply the information voluntarily to meet the demands of
the investors. Listed companies disclose both the mandatory
and voluntary information. Voluntary disclosures are disclosures
in excess of the required disclosures. Many accounting researchers
began to focus on the voluntary disclosures in the recent
times. In this context, this paper examines the factors
influencing the voluntary disclosures contained in the annual
report. The size of the firm, the nature of the industry
and the ownership structures are also examined. This paper
finds that the size of the firm affects the disclosure levels
positively and the ownership structures affect the overall
disclosure levels negatively. Industry and foreign ownership
also affect certain types of voluntary information to some
extent.
©
2006 IUP . All Rights Reserved.
Accounting,
Prudential Regulation and Financial Stability: Elements
of A Synthesis
-- Claudio
Borio and Kostas Tsatsaronis
What
information about the financial condition of firms is conducive
to efficient and stable operation of the financial system
and of the economy more broadly? In this essay, we outline
the contours of an ideal set of such information, identify
existing gaps and propose a way forward to fill them. We
argue that an ideal set should comprise two dimensions.
As regards financial characteristics, it should cover three
different types, viz.: estimates of the current financial
condition ("first-moment information"); estimates
of risk profiles ("risk information"); and measures
of the uncertainty surrounding both kinds of estimate ("measurement
error information"). As regards the object of the analysis,
it should cover information about both the individual firm
("micro information") and, suitably aggregated,
the "system" as a whole ("macro information").
So far, efforts have been mainly focused on micro information
and, within it, on estimates of the current financial condition;
by contrast, risk information has drawn attention only more
recently and measurement error information has been largely
neglected. The authors also note that, as regards micro
information, significant differences in perspective between
accounting standard setters and prudential supervisors have
come to light. They examine the reasons for these differences
and propose ways in which they could be reconciled. The
authors propose a strategy based on two principles: first,
in the long-term, the "decoupling" of the objective
of accurate financial reporting about the firm from that
of instilling the desired degree of prudence in its behavior;
and second, a "parallel" process towards that
objective so that at all points the prudential authorities
can neutralize any undesirable implications for financial
stability of changes in financial reporting standards. They
stress that close cooperation between accounting standard
setters and supervisory authorities is called for both in
developing the final set of information and in implementing
it.
©
2005 Bank for International Settlements (www.bis.org). This
full publication is available for free on the BIS website.
Reprinted with permission.
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