Journal of Modern Accounting and Auditing-David Publishing Company
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  Journal of Modern Accounting and Auditing

Volume 9, Number 1, January 2013

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Volume 9, Number 1, January 2013
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The move towards international harmonization of accounting standards has dominated the work program of International Accounting Standards Board (IASB) in the past years. This paper aims to verify the compliance of the comprehensive income (CI) statement format with International Accounting Standard (IAS) 1¾presentation of financial statements, which was revised in 2007. The changes introduced by the 2011 revision are also taken into account. For this purpose, this study analyzes the final annual financial statements approved in 2011 by the Italian companies whose shares belonged to the Italia Star segment of Financial Times and Stock Exchange (FTSE). Given that IAS 1 provides little specific guidance about the presentation of line items and permits many alternative types of format, this paper focuses on information organization in the statement of CI in order to analyze the degree of heterogeneity of financial information. For achieving this goal, this study considers the following issues: (1) presentation of all items of income and expense in an overall statement or in two separate statements; (2) a detailed level of the content in terms of number of items between revenue and net income (NI); (3) classification of expenses either by nature or by function; (4) number and type of intermediate margins; and (5) presentation of items of other comprehensive income (OCI) either before tax or net of tax. The results show some clear evidences. On the one hand, there is a high diversity in accounting practices, which makes it difficult for users to compare financial information across entities, highlighting the need to complete the joint project of the standards setters (IASB and Financial Accounting Standards Board (FASB)) on financial statement presentation. On the other hand, some alternative types of presentation (e.g., the tendency to split the CI statement into two statements rather than using an integrated solution, the prevalence to disaggregate the expenses by nature, etc.) are used by most of the entities of the sample possibly because of the influence of Italian accounting culture.


Keywords: statement of comprehensive income (CI), separate income statement, other comprehensive income (OCI), Financial Times and Stock Exchange (FTSE) Italia Star segment, reporting format


This case study focuses on the current and future needs of the management accounting within the Tallinn city government and their potential relationships with the sustainability reporting. This analysis is based on the study carried out within the city organizations in 2011. The questionnaire drawn up by the authors includes several questions about the current management accounting tools of the city and their development and support needs. The authors also add some questions related to the sustainability reporting, which is obligatory for the city as one of the members of the Aalborg Charter. The quantitative methodology was used. The authors conclusion is that the level of the managerial accountability of the Estonian municipality is increasing and its sole economic focus is changing to a broader perspective. According to the findings of the study, the authors argue that both management accounting principles and sustainability principles are coming closer together. By using Talcott Parsons adaptation, goal attainment, integration, and latency (AGIL) paradigm, the authors point out four critical components for implementing the sustainability reporting into a management accounting system. The results of this study highlight the role of values in the management accounting development, which is in harmony with the AGIL paradigm.


Keywords: adaptation, goal attainment, integration, and latency (AGIL) paradigm, budgeting, cost accounting, Estonia, local government, performance measurement, sustainability reporting, values


In this paper, the author provides a representation of Italian public hospital facilitators (HFs) (clinics, regional or local community hospitals, and medical centers) by means of different types of networks. Moving from the balance scorecards of HFs, the author has analyzed the representation of those data through the use of the minimum spanning tree (MST) and the planar maximally-filtered graph (PMFG). This paper firstly examined the amount of information provided by the two networks and then run a sensitivity analysis of the networks by varying the elements of the balance scorecards to be considered. In this way, the author obtained a quite unusual representation of the overall economic situation of Italian HFs. Moreover, the author observed the emergence of patterns which in the authors opinion might help policy makers to realize a more efficient allocation of financial resources among the existing HFs.


Keywords: social networks, healthcare services, efficiency, balance scorecards, hospital facilitators (HFs)


The chief production elements of an agricultural enterprise are its biological assets and the choice and practical application of the evaluation methods, as the assets directly affect many aspects: decision making of economic character by the financial statement user, indicators of financial operation analysis, inter-comparison of sector enterprises, assessment of the company value and taxes on its economic activity, and statistical data of the agricultural sector. The authors have used the discounted cash flow (DCF) as an alternative method and a model of system dynamics. Such a system dynamics method has not been used for assessment of biological assets so far. In the operating process, the company acquires or loses possession of the resources. It is vital to analyze the resources to see whether they comply with the concept of the assets and the terms of recognition. It is necessary for the same company as well as for external users of financial statements to get true information about the business and the value of money. Biological assets may be recognized in the companys accounting only when it is predictable that future benefits associated with these assets will flow into the enterprise. It is also important that the fair value or the cost can be measured reliably.


Keywords: biological assets, assessment methods, fair value


Markets can get the confidence of investors enhancing the quality of governance and audit systems surrounding a firm. Financial reporting is a main component of them, being the basis for information necessary to investors decisions. Managers have a chance to manipulate information provided in financial statements, in order to offer a better image of a firm to its potential and effective investors. The objective of this study is to evaluate the possibility of detecting extreme cases of earnings management and to check the predictive ability of the discretionary accruals models on the event of fraudulent earnings restatement. Through the abuse of reporting incentives, a manager gives out false information that should be averted and punished by regulators in a fair market system. The authors check the efficacy of different earnings management detection models in predicting discretionary manipulations and study the correlation between the frequency of manipulation and the event of fraud.


Keywords: fraud, earnings management, discretionary accruals


A full application of the new auditing law dated 2005 meant, among other things, an obligation for audit firms to present transparency reports. In the period of 2007-2010, audit firms overcame the barrier and started disclosing the data on their operations, being treated as confidential for a long period of time. A continuous period of four years might seem to be a short period to create a big picture of the developments in the audit profession in the Republic of Macedonia. However, the issue of who, how, and for what purposes these data were used remains open. Pursuant to Article 7 of the Statute of the Institute for Certified Auditors of the Republic of Macedonia (ICARM), the institute is in charge of carrying out quality control. In 2010, ICARM carried out, for the first time, quality control over the operations of audit firms in 2009. Did ICARM use and how much did it use the data from the transparency reports in the process of selecting the entities to be subjected to quality control? Is it possible to establish relation between transparency in the operations of the audit firms and improvement of quality of services they offer to their clients? The authors will try to provide the answers to the abovementioned questions in this paper.


Keywords: transparency report, quality control, auditee, audit law


In November 2011, the Australian government approved the legislation (Clean Energy Act 2011) to introduce a reduction plan of carbon emissions in Australia. This plan will be implemented from July 2012. This is one of the first accounting studies to investigate the potential impacts of this plan on long-lived asset values and operating cash flows for Australian listed companies. A sample of Australian Securities Exchange (ASX) 200 indexed companies from 2006 to 2010 is used. Hypotheses are tested based on Heckmans (1979) two-stage approach. Three regression models are developed to examine the association between carbon emissions and asset values/operating cash flows. This study finds that asset values and operating cash flows will be adversely affected, if the reduction plan is implemented. Specifically, this study finds that the book value of long-lived assets will decrease, if listed companies are considered to be emissions-liable. The book value of long-lived assets is further found to be negatively associated with listed companies carbon emission levels. This study also demonstrates that operating cash flows of emissions-liable companies will be adversely affected. However, this study does not find a relationship between operating cash flows and companies emission levels. The empirical findings from Australian listed companies provide the evidence that the reduction plan of carbon emissions will adversely affect corporate entities asset values and operating cash flows. The results further indicate that the magnitude of the impact will be proportional to the companies emission levels. The implications of these empirical findings for listed companies, for the accounting profession, and for carbon emission regulators are also discussed.


Keywords: carbon emissions reduction, asset values, operating cash flows, Australia


This paper deals with options on assets, such as stocks or indexes, which pay cash dividends. Pricing methods which consider discrete dividends are usually computationally expensive and become infeasible when one considers multiple dividends paid during the option lifetime. This is the case of long-term options and options on indexes. The first purpose of this paper is to assess efficient and accurate numerical procedures which yield consistent prices for both European and American options when the underlying asset pays discrete dividends. The authors then analyze some methodologies to extract information on implied volatilities and dividends from quoted option prices. Implied dividends can also be computed using a modified version of the well-known put-call parity relationship. This technique is straightforward, nevertheless, its use is limited to European options, and when dealing with equities, most traded options are of American type. As an alternative, the numerical inversion of pricing methods, such as efficient interpolated binomial method, can be used. This paper applies different procedures to obtain implied volatilities and dividends of listed stocks of the Italian derivatives market (IDEM).


Keywords: options on stocks, discrete dividends, lattice methods, implied volatilities, implied dividends


This paper examines the critical role of innovations as a driver for sustainable competitive advantages. A quadruple model of global strategy is introduced. The model is based on the introduction of an innovation-based perspective of strategy. This is in addition to the other three but well-known perspectives of global strategy (industry-based, resource-based, and institution-based views). Thus, the four perspectives of strategy could lead a complete set of factors that need to be analyzed for the formulation of global strategy. The model could assist organizations in sustaining their competitive advantages. It is proposed that the introduction of the innovation-based view represents the fourth perspective of a strategy quadruple, thus overcoming a long-standing criticism, namely, the global strategy may lack adequate attention to innovation in developing a firms global competitive strategies. This paper presents a set of four hypotheses. When tested, these hypotheses could result in a better understanding of the link between the innovation and the global strategy domain. Furthermore, the quadruple model could be useful in understanding the relationship between innovativeness and business performance. It is anticipated that this paper could assist researchers, business management, and analysts in developing global innovation strategies.


Keywords: strategy, innovativeness, product innovativeness, firm innovativeness, industry innovativeness, market innovativeness, competitive advantages


Ecotourism Potentials for Financing Parks and Protected Areas: A Perspective From Irans Parks

Mahdi Kolahi, Tetsuro Sakai, Kazuyuki Moriya, Mohammad Aminpour


Ecotourism has been considered as the impetus and economic investment for management of natural resources. The current research uses data mining from the recreation values of Irans parks and separating influential factors on visitors willingness to pay (WTP). This study delves into the main findings of 31 researches applied to assess the recreation value of 33 different parks across Iran from 2004 to 2011. Those researches collected 9,216 questionnaires in total. It was conducted using R software and Rattle user interface to analyze gathered data and information. Results showed that 69% of respondents were male. The averages of age and academic years were 34.4 and 13.7 respectively. The majority of the visitors were willing to pay money to visit the parks. Variables of education levels, household size, marital status, age, and bid amount had an effect on visitors rate of WTP for visiting, and variables of gender, education levels, and marital status affected the general amount of WTP. The average amount of WTP per person was estimated at US $1.4, and the average annual recreation value for each hectare of parks was calculated at US $2,313. This study provides justification for the decision to support the quality of Irans parks.


Keywords: Iran, park, recreation value, willingness to pay (WTP)




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This is Journal of Modern Accounting and Auditing (ISSN 1548-6583), a professional journal sponsored by American Sino-US Association of Entrepreneurs, and published across the United States by David Publishing Company, USA.


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