Search Results (16)

This study explores how corporate governance reforms can enhance financial reporting quality and organizational transparency, focusing on Greece’s transition from Law 3016/2002 to Law 4706/2020. The legislative reform aimed to modernize governance structures, align national practices with international standards, and strengthen investor protection in a post-crisis economic environment. Moving beyond a simple legal comparison, the study examines how Law 3016/2002’s formal compliance model contrasts with Law 4706/2020’s more substantive accountability framework. We hypothesize that Law 4706/2020 introduces substantively stronger governance mechanisms than its predecessor, thereby improving transparency and investor protection, while compliance with the new law imposes materially greater administrative and financial burdens, especially on small- and mid-cap firms. Methodologically, the research employs a narrative literature review and a structured comparative legal analysis to assess the administrative and financial implications of the new law for publicly listed companies, focusing on board composition and diversity, internal controls, suitability policies, and disclosure requirements. Drawing on prior comparative evidence, we posit that Law 4706/2020 will foster governance and disclosure improvements, enhanced oversight, and clearer board roles. However, these measures also impose compliance burdens. Due to the heterogeneity of listed companies and the lack of firm-level data following Law 4706/2020’s implementation, the findings are neither fully generalizable nor quantifiable; future quantitative research using event studies or panel data is required to validate the hypotheses. We conclude that Greece’s new framework is a critical step toward sustainable corporate governance and more transparent financial reporting, offering regulators, practitioners, and scholars examining legal reform’s impact on governance effectiveness and financial reporting integrity. Full article

Due to tough economic conditions, more retailers are relying on lay-by agreements to maintain revenue. Lay-by agreements are thus part of their business models and are included in their forecasting and budgeting strategies. As part of financial planning, decisions need to be made based on financial information to achieve organisational goals. A recent South African income tax amendment regarding lay-by agreements resulted in three possible income tax interpretations. This study analysed and evaluated the implications of these amendments for South African deferred tax. The study utilised a doctrinal approach in an interpretive paradigm. The results show that the amendment in the South African Income Tax Act relating to lay-by agreements has an impact on deferred tax calculations, depending on the tax interpretation used. The resulting ambiguity and diversion in the practice of the deferred tax treatment may potentially lead to less useful financial information, contrary to the objectives of the International Accounting Standards Board for effective decision making. This study recommends that the National Treasury should clarify this ambiguity, through either legislative amendments or an interpretation note. This will create the necessary certainty for organisations to plan their finances. Full article

This study explores the relationship between Environmental, Social, and Governance (ESG) practices and the market value of companies, with a focus on Brazil’s largest corporations. Recognizing the limitations of existing research tools for analyzing the impact of ESG factors, we introduce an innovative, open-source Dictionary of ESG Terms. This tool is designed to classify news content into the detailed categories established by the Sustainability Accounting Standards Board (SASB), thereby facilitating a nuanced analysis of ESG-related news and its subsequent effects on stock prices. Our analysis reveals that stock prices exhibit significant positive reactions to favorable ESG news and negative reactions to adverse ESG developments. Crucially, our findings underscore the discernment of investors, who appear to prioritize financially material ESG information over news bearing solely reputational or non-pecuniary significance. This distinction highlights the critical role of financial materiality in shaping market responses to ESG news. By providing empirical evidence from the Brazilian market, this study contributes to the broader discourse on ESG factors in corporate valuation. It offers practical tools and insights for investors, companies, and regulators aiming to better understand the complexities of ESG investment strategies. Through the application of our comprehensive ESG Dictionary, we shed light on the diverse dimensions of ESG impact, suggesting an approach to evaluate how ESG practices influence corporate market value in emerging economies. Full article

The Financial Accounting Standards Board (FASB) released Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers”, with the aim of enhancing transparency to provide fairer representation and inhibit the misuse of revenues to manipulate earnings. During COVID-19, variable considerations in ASC 606 were used to manage earnings as a tool to help firms survive. The study aimed to test the mediating role of earnings management in influencing the effect of variable considerations in ASC 606 on the continuity of the firm. An online questionnaire was sent to financial reporting preparers in US public shareholding firms; 403 valid questionnaires were received. The results of PLS-SEM revealed that crises such as COVID-19 have highlighted the way in which variable considerations in ASC 606 were exploited to manage firms’ earnings to ensure their survival. Companies resort to showing their best financial performance, beautifying its financial reports by manipulating profits, using flexibility in accounting policies, but this may negatively affect the country’s entire economy by collapsing companies and creating more financial crises that cannot be easily addressed. Full article

Crypto assets have upset the pillars of regulatory and centralized monetary policy, and the Financial Accounting Standards Board (FASB) has been slow in developing a position on how to account for cryptocurrencies. Currently, there are many accounting, finance, and tax meanings of cryptocurrencies. The purpose of this study is to show the path FASB has taken to develop accounting standards for more than 20,000 crypto assets, outline the positions other authorities and agencies have taken, and discuss Central Bank Digital Currencies since the United States and other countries are considering replacing their fiat currency with a digital currency. Furthermore, the study presents insights from an exploratory survey of accounting faculty opinions on cryptocurrencies. The discussion of virtual currency regulatory and accounting treatments informs the development of a regulatory framework. Full article

The International Financial Reporting Standards (IFRS) do not make explicit provisions, in terms of a specifically dedicated standard, for the accounting treatment of cryptocurrencies. This creates uncertainty, and guidance is therefore required in terms of accounting for such investments. Accounting theory has the potential to provide the foundation for this guidance. This study aimed to determine the most appropriate accounting treatment for cryptocurrencies based on the International Accounting Standards Board’s (IASB) Conceptual Framework for Financial Reporting (as a form of accounting theory) that results in decision-useful information. The research further investigated the proposed accounting treatment in terms of IFRS and sought to determine whether this treatment was aligned with the IASB’s conceptual framework. This qualitative study conducted a non-empirical interpretative analysis of the literature (focusing specifically on accounting theory) to address the research aim. The conceptual framework indicated that the most appropriate way to account for cryptocurrencies was to recognise an asset at fair value. This accounting treatment aligns with accounting for assets under International Accounting Standard (IAS) 2 commodities held by broker-traders and the IAS 38 revaluation model. Addressing the problem of accounting for cryptocurrencies with reference to accounting theory makes this study novel. The guidance provided could reduce uncertainty among entities holding investments in cryptocurrencies and could increase the decision-usefulness of financial information. Full article

The International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB) of the IFRS Foundation support the integrated reporting of companies’ financial and sustainability performance to stakeholders. This paper aims to investigate whether financial and environmental, social, and corporate governance (ESG) practices have a real impact on the success of the companies in the European renewable energy equipment and services industry. Using the Granger test, the causality between the market capitalization and financial indicators was established, whereas no causality was identified between the market capitalization and ESG performance. The research led to the conclusion that the investment decision is mainly based on the information provided by the financial statements of the companies, the early stages of sustainability reporting regulation, and the need for increasing the quality and availability of corporate social responsibility information for investors. Full article

This study seeks to measure the microeconomic consequences of the adoption of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards on the conservatism, financial performance (FP), and earnings management (EM) of Islamic banks (IBs). The study draws on data from 122 IBs across 22 countries over a period of eight years (2014–2021), using the generalised method of moments (GMM). The results indicate a positive impact of AAOIFI adoption on financial performance and conservatism compared to non-adopters. Our results further show that IBs that adopt AAOIFI are less involved in EM. After applying robustness checks (corporate governance, inflation, and mandatory adoption of AAOIFI in some countries), our results remain the same. The implications of the study are potentially valuable for those setting accounting standards (such as AAOIFI and International Accounting Standards Board (IASB)), central banks, financial market regulators, investors, governments, and any adopting or non-adopting Islamic financial institutions (IFIs) through identification of the effects of AAOIFI adoption. Full article

Momentous developments in the regulatory environment, increasing investor demand, and growing awareness of climate change and societal issues are leading banks to adopt a comprehensive approach beyond the traditional financial lens. Assessing performance towards sustainability issues, including environmental, social, and corporate governance (ESG), and its’ relevance in firm value in the banking sector offers a field of continuous interest for researchers. This paper investigates the role of ESG materiality in firm value, based on a sample of banks operating in OECD countries, for the period 2016–2020. Adopting the materiality classification for the banking sector provided by the Sustainability Accounting Standards Board (SASB), the study consists of a multi-layer methodology. In the first stage, a dynamic technique for order preference by similarity to ideal solution (TOPSIS) and entropy methods are utilized to calculate ESG score based on ESG materiality for 1115 bank-year observations while in the second stage, value relevance analyses are applied in order to reveal whether ESG materiality affects firm value. The results depict that ESG performance based on ESG materiality has a positive influence on the firm value for both models, price-to-book value ratio (PBV), and Tobin’s Q (TQ). Moreover, collected from the Refinitiv database, ESG combined has a low impact on PBR whereas there is no significant effect on TQ. The implication is that the firm value is influenced by the materiality-adjusted ESG performance than by the extended ESG spectrum. Full article

The main objective of this study is to find out why sugar companies’ revaluation of their fixed assets has no direct financial impact. The purpose of this financial statement analysis of the sugar sector is to help potential investors make better decisions. It can also be used to address information asymmetries and alert investors. Fixed assets form a major part of a company’s value. During 2013–2018, 19 selected enterprises of Pakistan’s sugar sector adopted the International Accounting Standards Board’s international accounting standard 16 for fixed assets. Ordinary least squares, fixed effects, and random effects methods were used as a static panel, a panel-corrected standard errors method was used for the robust standard error and the system generalized method of moments was used as a dynamic panel. The surplus had a negative impact on operative income on revaluation of fixed assets in sugar businesses. As expected, revaluation by fixed asset firms resulted in changes in potential outcomes, as measured by cash in operating income and revenue, both of which were extremely negative. The return on assets was also linked to revaluation balance. The debt over the proportion of assets resulted in a strong correlation between revaluations, which meant that motivation affected how the volatility in asset value reflected the revaluation. Relationships were generally worse and more uncertain for listed companies at a time of strong economic volatility. Investors should not consider such accounting justice. The price-earnings ratio had a beneficial effect on operative income. The statistics support the idea that external concerns help the revaluation of assets. Full article

This paper presents the case for the sustainability reporting field as a contested arena and examines the behavior and the influence of the various actors, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council (IIRC), and the European Commission, including the European Financial Reporting Advisory Group (EFRAG) and the International Financial Reporting Standards (IFRS) Foundation in influencing the shape of the regulation in the arena. Drawing on the arena concept and documentary analysis, this study explores the dynamic in which each actor is attempting to change the rules within the arena and how this contributes to the harmonization and future direction of sustainability reporting. The findings of this study show that the actions and behavior of the various actors are premeditated and strategically calculated to maintain their influence, relevance, and defend their technical authority in the arena. The findings also suggest that sustainability reporting regulation is still far away from harmonization due to the perceived hegemony in the arena, and diversity in the overarching objective of the various actors and the inability of each actor to renounce its particular perspective and orientation. Insights are provided for policy makers on the urgent need to decide and reclassify the specific rules required in upholding the sustainability reporting arena. Full article

Traditional financial reporting primarily discloses information about assets, equity, liabilities and financial situation of an enterprise. Simultaneously, socio-economic changes are prompting enterprises to implement business reporting towards disclosing activities for sustainable development and information about the business model in non-financial reporting. Shaping of an enterprise’s business model is carried out in the spirit of sustainable development, which is beginning to dominate the strategies of many large enterprises. At the same time, the concept of the business model and its reporting have still not been characterized in detail or standardized, which limits transparency and the usefulness of information. These phenomena provided an incentive to undertake the research on the business model reporting. The overall goal of this study is to expand research on disclosures about the business model in the corporate reporting of Polish listed companies, as well as to indicate the degree and directions of development of this subject against the background of the accounting system. The study also addresses the epistemological goal by entering the discussion on reporting about the business model. The research uses the financial statement content analysis method and the statistical method (Spearman’s correlation). The scope of disclosures about the business model are examined in integrated reports, consolidated reports, management reports, non-financial data reports and CSR reports of Polish companies listed on the stock market. This information is examined according to its four main components: inputs, business activities, outputs and outcomes. The correlation between the number of audited disclosures and selected economic and similar parameters characterizing enterprises (total assets, performance, board, EBITda, equity and liabilities) is also studied. The research reveals that entities preparing an integrated report demonstrate a greater number of disclosures of business model components in selected economic categories than entities that do not prepare such a report. Thus, the companies preparing an integrated report follow the mainstream of stakeholder theory, opting for a more descriptive reporting approach, accessible to a wider group of users. Moreover, business model information is often reported in a highly random manner. Simultaneously, descriptive forms of business model disclosure prevail over numerical ones, although not to a large degree. The findings also confirm that there is a positive correlation between the detail of disclosures about the business model and selected economic parameters of an enterprise (the strongest with total assets, board and EBITda). Thus, it becomes possible to recognize that large enterprises with a strong and stable structure of assets follow specific, more detailed reporting patterns aimed at sustainable development of reporting. At the same time, they are more likely to expand the scope of disclosures compared to smaller enterprises. This investigation responds to the interest of enterprises and other stakeholders in the reporting spectrum by increasing market information efficiency and transparency. Findings can also be used by standards setters, while providing new rules and regulations. Full article

The effect of considering the financial materiality of ESG (environmental, social and governance) issues on firms’ ESG performance scores and rankings is investigated using Morgan Stanley Capital International (MSCI) ESG Ratings and the financial Materiality Map^® developed by the Sustainability Accounting Standard Board (SASB). Results show that when financial materiality is applied, firms’ ESG performance scores change significantly. Further corroboration is provided by significant changes in firms’ ESG rankings when ESG performance assessment is based on SASB-adjusted ESG performance scores. Environmental pillar issues, and particularly natural resource use, are predominantly responsible for the changes. Overall, the results suggest that financial materiality affects the informative value of ESG scores and rankings, allowing the identification of investment opportunities in firms with high scores on business-critical ESG issues. We argue that consideration of financial materiality can better inform investment decisions based on ESG performance. This study adds to the understanding and assessment of ESG performance and its information content. Full article

This study focuses on the transparency of financial reporting on emission allowances (EA) and greenhouse gas (GHG) emissions within the European Union Emissions Trading Scheme (EU ETS). In particular, the different accounting treatments adopted by standard setters and professionals were analyzed to evaluate the influence of regulation in the transparency of financial reporting on EA and GHG emissions. Based on a sample of 85 companies registered with the Portuguese, Spanish, and French National Plans of Allocation (NPAs), data collected from the annual reports were analyzed for the 2008–2014 period. The results were obtained based on descriptive, logistic regressions and panel data statistical techniques, and they show that better levels of transparency of financial reporting on EA and GHG emissions are conditioned by a variety of accounting policies, which compromises the comparability of the financial information. The adoption of the International Accounting Standards Board (IASB) standards set lead to a greater dispersion in the choice of the accounting approach and a higher probability of not disclosing any information, as well as adopting off-balance sheet policies. Therefore, the regulatory factor is a determinant of the level of transparency of financial reporting on EA and GHG emissions, contributing to reduce strategies of omission. Full article

The world has great expectations for how the private sector, both companies and investors, can support the 17 Sustainable Development Goals (SDGs). In fact, it is generally believed that these goals cannot be achieved without strong support from the private sector. But will making the world a better place hurt financial returns? The answer is “No” if companies focus on the SDGs and their associated targets that benefit from strong performance on the material environmental, social, and governance (ESG) issues that matter to investors. In this paper we map the 30 generic ESG issues identified by the Sustainability Accounting Standards Board (SASB) to the SDGs and their targets. We show that some SASB issues are more material for a given SDG than others. We also show that some SASB issues are more important to the SDGs in general than others. We also map the material ESG issues for each of SASB’s 79 industries to the SDGs and to their targets. For each sector, there are particular SDGs where it has high impact and for each SDG there are particular sectors that have a high impact on it, and some sectors are more important to the SDGs in aggregate than others. The same is true at the target level. This mapping can be used as a guide for both companies and investors who want to understand how value-creating ESG performance can contribute to the SDGs. This paper is divided into four parts. Part I explains the motivation for this study. Part II explains our methodology and Part III the results. Part IV concludes with a summary of our results and some reflections on how our mapping methodology can be improved. Full article