Suchergebnisse

An important line of international accounting research is the comparative quality of earnings across various jurisdictions. Several studies use earnings thresholds as a measure of earnings quality (e.g., Bhattacharya et al. 2003; Lang et al. 2003; Barth et al. 2005; Lang et al. 2005; Peasnell et al. 2005). An implicit assumption in these studies is that firms in all countries are managing earnings towards the same objective (Land and Lang 2002). We argue that international research ought to consider the possibility of an earnings threshold relating to dividend cover. Given that firms are reluctant to reduce dividends (DeAngelo and DeAngelo 1990; DeAngelo et al. 1992), the dividend-cover earnings threshold is economically important. We examine earnings distributions for the dividend-cover earnings threshold for a sample of 2,264 observations from New Zealand firms over the period 1986 to 2002. We find an asymmetry in the distribution of earnings associated with the dividend-cover earnings threshold. We also find that this asymmetry disappears after a change in legislation that removed the nexus between earnings and dividends. Similar to prior research, we find that an asymmetry exists for the zero earnings threshold, but it is not as pronounced as that found in U.S. data. An implication of our results is that research using international data ought to consider country-specific institutional settings when considering earnings thresholds.

Prior studies have indicated the problem of ignoring the impact of environmental considerations when undertaking ratio analysis. This paper shows how the intercorporate ownership structure of Japan can influence financial ratios. It also presents two adjustment procedures to increase the comparability between U.S. and Japanese financial statements. The treasury stock method has its roots in Western consolidation principles, but is difficult to calculate for the typical Japanese Keiretsu. The preference share method is based on the stable shareholding structure of Japanese corporate ownership and is relatively easier to implement.

The Matrix Format Income Statement case study allows you to explore the issue of earnings management and its impact on the transparency and understandability of reported financial results. Part A of the case demonstrates the impact of a commonly used accounting treatment for available-for-sale investments (presentation in the statement of changes in equity and recycling of fair value changes) on users' ability to extract decision-useful information. Part B investigates the effect on transparency and understandability of the same financial information when a different presentation and measurement approach, known as the matrix format income statement, is used.