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Author: Athanasios Dimos
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
2005 was a landmark year in the European Union's (EU) financial reporting history as all EU listed firms were required to switch from national accounting standards to IFRS. Using a sample of European commercial banks, this study explores two research questions within the framework of equity valuation theory: (i) whether the disclosed fair value estimates of loans and advances; held-to-maturity investments; deposits; and other debt, as well as the recognition of derivatives at fair value, are value relevant, (ii) whether the adoption of IFRS led to a reduction in European banks' cost of equity capital. The results show that the fair value of loans and advances and other debt are value relevant as is the recognition of derivatives at fair value. Further analysis revealed that the relevance of fair value of loans and derivatives is contingent on banks' financial health and earnings variability, respectively, as well as on the ability of countries to enforce IFRS. The findings also indicate that the cost of equity capital of European commercial banks decreased after the adoption of IFRS. However, banks domiciled in countries with continental accounting standards and weak enforcement rules experienced a greater reduction in their cost of equity capital.
Author: Athanasios Dimos
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
2005 was a landmark year in the European Union's (EU) financial reporting history as all EU listed firms were required to switch from national accounting standards to IFRS. Using a sample of European commercial banks, this study explores two research questions within the framework of equity valuation theory: (i) whether the disclosed fair value estimates of loans and advances; held-to-maturity investments; deposits; and other debt, as well as the recognition of derivatives at fair value, are value relevant, (ii) whether the adoption of IFRS led to a reduction in European banks' cost of equity capital. The results show that the fair value of loans and advances and other debt are value relevant as is the recognition of derivatives at fair value. Further analysis revealed that the relevance of fair value of loans and derivatives is contingent on banks' financial health and earnings variability, respectively, as well as on the ability of countries to enforce IFRS. The findings also indicate that the cost of equity capital of European commercial banks decreased after the adoption of IFRS. However, banks domiciled in countries with continental accounting standards and weak enforcement rules experienced a greater reduction in their cost of equity capital.
Author: Athanasios A. Dimos
Publisher:
ISBN:
Category :
Languages : en
Pages : 323
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Book Description
Author: Mr. Rudy Wytenburg
Publisher: International Monetary Fund
ISBN: 1513563602
Category : Business & Economics
Languages : en
Pages : 145
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Book Description
About one-quarter of the world’s central banks apply IFRS with approximately a quarter more looking to IFRS for further guidance where their local standards do not provide enough guidance. Given the varied mandates and types of policy operations undertaken by central banks, there also exists significant variation in practice, style, and the extent of the financial disclosures in both the primary statements and in the note disclosures. By their nature, central banks are unique in their jurisdiction and so do not always have local practices and examples they can follow. Although the major accounting firms have created model disclosures intended for commercial banks, these are often not totally appropriate for a central bank. The application of IFRS across central banks differs based on the mandate of the central bank and the capacity of the accounting profession in the specific jurisdiction. An analysis of international practices, such as those undertaken in preparing these model statements, may help address questions about the structure of the statements themselves as well as the organization of the note disclosures. As a consequence, each central bank following IFRS has largely developed its own disclosures with only limited reference to others. Input from the external auditors has been significant, but some of this has been determined by the approach used by the specific auditor’s style for commercial banks rather than central banks. Auditors do not always fully appreciate the differences between a commercial bank and a central bank, which has a different role and undertakes transactions to meet its policy objectives. This has often led to an over emphasis of items not material in the context of a central bank and insufficient disclosures on operations or accountabilities specific to the functions of the central bank.
Author: Ernst & Young
Publisher:
ISBN:
Category : Banks and banking
Languages : en
Pages : 24
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Book Description
Author: Joachim Brixner
Publisher:
ISBN:
Category : Earnings management
Languages : en
Pages :
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Book Description
Author: Ö. Olgu
Publisher: Springer
ISBN: 0230305911
Category : Business & Economics
Languages : en
Pages : 284
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Book Description
Despite considerable progress on political and economic convergence over the last decade, financial structures of individual countries within the EU remain diverse. This book considers the future prospects of the banking industry in the context of enlargement, application of the IFRS and a potential new member country, Turkey.
Author: Vera Palea
Publisher:
ISBN:
Category :
Languages : en
Pages : 18
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Book Description
The effects of disclosure level on the cost of equity are a matter of considerable interest and importance to the financial reporting community. Economic theory indeed claims that commitment to increased level of disclosure reduces the cost of capital component that arises from information asymmetries. Accordingly, this paper investigates the effects of IFRS adoption in Europe on the cost of equity for the bank industry. In doing so, it performs an event study, which isolates the effects of accounting changes on the cost of capital from institutional and enforcement mechanisms. This study shows that IFRS adoption has exerted, on average, a positive effect on the cost of capital for the bank industry at least in the very short run. Firms adopting IFRS seem to have experienced a lower cost of equity in the period immediately subsequent the release of financial reporting according to the new accounting standard set.
Author: Vera Palea
Publisher: FrancoAngeli
ISBN: 9788846480880
Category : Business & Economics
Languages : en
Pages : 132
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Book Description
Author: Didier Bensadon
Publisher: Springer
ISBN: 3319282255
Category : Business & Economics
Languages : en
Pages : 477
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Book Description
This book, dedicated to Prof. Jacques Richard, is about the economic, political, social and even environmental consequences of setting accounting standards, with emphasis on those that are alleged to be precipitated by the adoption and implementation of IFRS. The authors offer their reasoned critiques of the effectiveness of IFRS in promoting genuine global comparability of financial reporting. The editors of this collection have invited authors from 17 countries, so that a great variety of accounting, auditing and regulatory cultures, and educational perspectives, is amply on display in their essays.
Author: Kenneth Born
Publisher: Anchor Academic Publishing
ISBN: 3960671059
Category : Business & Economics
Languages : en
Pages : 57
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Book Description
The broad consensus before the recent financial crisis was that the so called fair value accounting (FVA) improves transparency contrary to the historical cost model. Since 2008, the discussion has been on the root cause of the crisis, which lessons can be gleaned from it and how making the same mistakes again can be avoided. Basel III was implemented in order to improve the regulatory environment and was the response of regulators and politicians to public pressure and suspicions raised by the bail out programmes for banks. Consequently, an until then inconceivable number of new regulations and regulatory bodies were introduced. FVA was also blamed as part of the cause of the recent financial crisis. Available-for Sales (AfS) securities represent a major component of bank balance sheet asset. Gains and losses of AfS-positions are recorded within the Other Comprehensive Income (OCI). The OCI includes items which are not recognized (IAS 1.7) in income statements but increase or decrease a bank’s equity. The items also include income and expenses from Available-for-Sale positions (AfS) in accordance with IAS 39. On October 13th, 2008, an amendment to IAS 39 was published by IASB. This amendment did authorize the reclassification of assets. This amendment clearly demonstrates the influence of FVA on the value of assets of banks that apply IFRS. The main objective of this book is to verify the influence of OCI and whether the new regulations sufficiently capture this critical factor. Regulators should ensure that unrealized profits do not result in a capital drain. One way to assure this is to make OCI subject to a prudential filter and to deduct it from regulatory capital, which was the case until CRR became effective on January 1st, 2014 (CEBS guideline 2004). Basel III is even less strict than Basel II in that regard. Article 26(1) CRR clearly states that CET1 items must be recognized only in case they are really available to the financial institution for “unrestricted and immediate use to cover risks or losses as soon as these occur”. Nevertheless, with the introduction of the CRR, the prudential filter for positions that caused the financial crisis and led to poor capitalization of banks was not strengthened but actually removed. At present, CRR does not envisage any filter for unrealized gains parked in OCI.
