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1
Q

(R. Ball) IFRS wants? 3 Answers

A

Lower cost of capital, Information Transparency, More efficient cross-boarding transactions

2
Q

(R. Ball) Example of cost reduction by adapting IFRS?

A

Less analytical costs, less cost of creating standardized international financial databases

3
Q

(R. Ball) Less risky for the investors mean?

A

Lower required return on equity.

4
Q

(R. Ball) From a Social Welfare perspective?

A

The anticipated outcome would be increased wealth, due to increased valuation of existing capital and increased capital creation.

5
Q

(R. Ball) Adaption of IFRS: Corporate governance?

A

Improve corporate governance via several channels. More transparent could enhance monitoring by boards, investors, analysts, rating agencies, press, etc.

6
Q

(R.Ball) Mergers crossboard?

A

Enhance mergers with the higher information transparency.

7
Q

Conclusion of (R.Ball)?

A

For IFRS to work, it has to be adapted in many countries. Many countries still stay with their local GAAP, which makes it hard. US and China is two key countries that need to adapt before IFRS really will work.

8
Q

(Cormona and Trombetta) “Consequences” of IFRS/IAS? 2 answers. (Principle-based)

A

Accountants and auditors needs to have more knowledge(good knowledge), Only Big 4 auditors (costly)

9
Q

Label users? (Cormona and Trombetta)

A

Label users = uses the flexibility of IAS/IFRS standards to keep on using their usual financial reporting strategy under the new international label

10
Q

Label users good or bad? (Cormona and Trombetta)

A

The positive effects of adoption are more pronounced for serious adopters than label adopters.

11
Q

Mandatory vs voluntary? (Cormona and Trombetta)

A

It’s shown that voluntary adaption to IFRS/IAS is better than mandatory.

12
Q

Mandatory vs voluntary, why? (Cormona and Trombetta)

A

Higher accounting quality. (Small companies maybe don’t have the resources to adopt IFRS because of higher educational costs?)

13
Q

Harmonisation process? (Read only) (Cormona and Trombetta)

A

The harmonization process will also benefit from the ‘‘global” nature of both auditors and their clients. Arguably, auditors and clients will drive forward common interpretations and practices around the world. Global clients willing to reduce the steps needed to unify the accounting information produced by local subsidiaries will promote this process. Consequently, global auditors may push forward harmonization through consistent interpretation to accommodate the needs of global clients. In this manner, auditors will also be facilitating the global character of business. In turn, the number of global clients in favor of globally harmonized interpretations will arguably increase and this will enhance the comparability of financial statements across countries.

14
Q

Consequences with “combining” IFRS and local GAAPs (Cormona & Trombetta)

A

Different views on accounting standards and practices could result in difficulties.

15
Q

Emerging Markets? (Cormona)

A

Lobbying is a problem with big emerging countries who wants to influence IFRS/IAS

16
Q

Result from Bessemir, (2018)?

A

Benefits more than costs.

17
Q

Private companies who adapts IFRS, pros? Bessemir, (2018)

A

Higher growth rate, higher leverage alternatives, higher capital raise in public debt and equity markets

18
Q

Private companies who adapts IFRS, pros continue? Bessemir, (2018)

A

Companies adopt to IFRS to lower the risk of asymmetric information and avoid adverse selection and moral hazard problems

19
Q

Important factors as legal form and ownership type? (Bessemir)

A

Public companies and PE companies are more likely to adopt to IFRS for lower their potential agency costs arising from the separation of ownership and control.

20
Q

Differences between a public market and privat market? (Bessemir)

A

Transparency and high-quality financial reporting in the private market is relatively low, because information asymmetries between the firm and the key contracting parties are typically resolved via private information channels.

21
Q

Economic Theory suggets what for PE companies vs. IFRS/IAS? (Bessemir)

A

PE companies only adopts IFRS/IAS if the benefits are higher than the costs

22
Q

Big Multinational PE companies should adopt IFRS because? (Bessemir)

A

Information transparency for investors and other international stakeholders

23
Q

Costs of IFRS adoption? (Bessemir)

A

Transition costs (educate employees, new research team), Big 4 auditor because of their higher knowledge

24
Q

High Tech industry and IFRS? (Bessemir)

A

Higher adoption because of information complexity and wants to lower their information asymmetry towards stakeholders

25
Q

Percentage of German PE companies who adapts IFRS?

A

10%

26
Q

Sustainability reporting needs from its writer? (La Torre)

A

More education

27
Q

One important factor from the article between stakeholder and the company? (La Torre)

A

Trust

28
Q

Accountability ? (La Torré)

A

Ansvarsskyldighet

29
Q

La Torre wants for NFR?

A

NFR regulation in Europe needs to move towards an accountability-based reform of accounting and reporting.

30
Q

How do you achieve higher accountability in the report? (La Torre)

A

Intern auditing, a good dialog with the stakeholders, adopting of other non-accounting tools (social media etc).

31
Q

Dialogical accountability? (La Torré)

A

Dialogic accounting stands for the legitimacy of the political in accounting; the need for systems that are responsive to the diversity of stakeholders’ values and interests. As such, it is receptive to the needs of a plural society. They talked with their most important stakeholders and discussed NFI.

32
Q

Materiality ? (La Torré)

A

Key factor for the NFI. But it might be hard to know what recognizes as materiality in the report. (Non-financial information)

33
Q

Double- Materiality? (La Torré)

A

Both investors and other stakeholders’ interests in what information that’s materially.

34
Q

Double-Materiality Risks? (La Torré)

A

You involve all stakeholders, but prioritise the financial sustainability aspect over social and environmental sustainability. (Managers have different rankings for their stakeholders, some more important than others and could choose to pick the interest of the more important stakeholders over the others.)

35
Q

How to solve the Double - Materiality risk? (La Torre)

A

Monitoring

36
Q

Results of La Torré

A

EU needs to give firm directions on not only what to report, but how to report and how to produce NFI

37
Q

Bradbury (2012) is about?

A

Principle vs. Rule-based Accounting-standards

38
Q

(Bradbury, 2012) American accounting standards is? And International accounting standard is?

A

US = Rule IAS = Principle

39
Q

(Bradbury,2012) Proposition 1 (Rules (proposition 1 more rules for rule-based standards than principal standards) True or false?

A

False, weak evidence. (NOTE: FAS 34 has 2x more rules principle based standards)

40
Q

(Bradbury, 2012) - Justification (proposition 2 is that principles-based standards will have relatively more references to conceptual framework qualitative characteristics.)

A

Not supported, but AS 34 contains more “justification” phrases than FAS 34R and IASB Standards

41
Q

(Bradbury, 2012) Judgement (Proposition 3 is that principles-based standards will require relatively more judgements.),

A

Supported. FAS 34R contains less judgement phrases than IAS. (NOTE: could be fundamental difference between FASB and IASB standards rather than a difference between principles based versus rules-based standards.)

42
Q

(Bradbury, 2012) Bright-line thresholds (proposition 4 s that principles-based standards will contain relatively fewer bright-line thresholds.)

A

Supported. Principle-based standards contain fewer bright-lines compared to Rule-based.

43
Q

(Bradbury, 2012) Exceptions (proposition 5s that principles-based standards have relatively fewer exceptions.)

A

Supported. Exceptions are used more in rule-based standards than principle-based standards.

44
Q

(Bradbury, 2012) Complexity and verbosity (proposition 6 is that principles-based standards are relatively less complex and verbose).

A

Hard to know. (NOTE:FAS 34 contains more specific references to other paragraphs within the standard and more references to other accounting standards. FAS 34 has more definitions than IAS 23AT. Under IFRS, definitions are reported in a separate section, whereas in FAS 34 the definitions are scattered throughout the text and in footnotes)

45
Q

Conclusion of (Bradbury, 2012)

A
  1. Rule-based are more complex and verbose.
    2.The drafted definitions between Rule-based and Principle-based standards.
  2. This suggests the IASB will need to consider drafting issues to maintain the appearance of being more principles-based.
  3. For judgement phrases and the use of exceptions, there are significant differences between IASB standards (IAS 23AT and IAS 23R) and the FASB standard (FAS 34).
46
Q

Management Control System Framework from Malmi, T contains?

A

Planning - Cybernetic Controls - Reward and Compensation (Outside the box: Cultural Controls and Administrative Controls)

47
Q

(Malmi, T) Cultural Controls and Adminstrative Controls contains?

A

Cultural Controls - Clans, Values and Symbols
Administrative Control - Governance structure, organisation structure and Policies and Procedures.

48
Q

(Malmi T) Planning stage contains?

A

Long-range and Action planning (ex ante)

49
Q

(Malmi T) Cybernetic control contains?

A

Budgets, Financial Measurements systems, N-FMS, Hybrid measurement systems (Plan, do, check, ACT!)

49
Q

(Malmi, T) Hybrid measurement system?

A

It’s a balanced score card that involves financial and non-financial measures

50
Q

(Malmi, T) What is adminstrative control system?

A

Control systems that direct employees behaviour through the organising of individuals

51
Q

(Malmi, T) Culture Control System is what?

A

Values, beliefs and norms that are implanted into the company. Influence employee behavior. It grows and creates.

52
Q

Levers of control (Simons) is? (Ferreira and Otley)

A

Beliefs and Diagnostic. Strategy Level.

53
Q

Criticism for Simons from Ferreria and Otley?

A

It’s too little focusing on informal control. Things that are not stated formalized (not included). To little focus on social-ideological control.

54
Q

Performance Management Systems (PMSs) contains? (Ferreira)

A

Internal: Vision & Mission, Key Success Factors, Organisational structures, Strategies & Plans, Key Performance Measures, Target Setting, Performance evaluation, Reward system
External: (Information flows, Systems & Networks) (PMSs use) (PMSs Change) (Strength and Coherence)

55
Q

Vision and Mission? (Ferreira)

A

What is your mission in “life”? Mechanisms, processes and so on.

56
Q

Key success factors in PMSs? (Ferreira)

A

What do we need? Essential for the overall future success for the company. How do we spread the information to our employees and managers and make them understand it?

57
Q

Organizational Structure in PMSs (ferreira)

A

The structure, processes, relationships, responsibilities accountability within the organization. Connected to the “outside” with networks as well. We build organizational charts vertically and horizontal (structures). Organizational charts = we build relationships. Responsibility accountant. Structuring your organization, centralized, decentralized etc.

58
Q

Strategies and plans in PMSs (Ferreira)

A

You need to know what strategy to adopt and remember to evaluate the strategies time to time

59
Q

Key Performance Measures (for PMSs) (Ferreira)

A

Either you measure performance (profit) or you look at for example efficiency. You can measure a lot of different areas. Financial outcome vs. measurement of processes.

60
Q

Target settings for PMSs (Ferreira)

A

Benchmarking, fixed targets? What level du you want to achieve?

61
Q

Performance evaluation for PMSs (Ferreira)

A

The processes a organisation follows to evaluate individual, group and organisational performance.

62
Q

Reward system for PMSs (Ferreira)

A

What you will get by reaching the set targets. Could be both financial and non-financial rewards

63
Q

Information flows, systems and networks in PMS (Ferreira)

A

External. Important is that the information is delivered at the correct spot at the correct time and in the right format and for the right purpose.

64
Q

Single and double loop learning? (Ferreira)

A

Single loop: Basic, one tells you what to do and one who receives the information has to learn what to do.
Double Loop: More advanced, The one who is supposed to (receiver) learn has the ability to question and interfere. Receive, learn, adopt and changing the frame. Becoming a different person afterwards. Reframing.

65
Q

PMS Change- from PMSs (Ferreira)

A

The system most fit the environment - more global = higher complexity.

66
Q

Strength and coherence from PMSs (Ferreira)

A

Shows how strong the links are between all components in the PMS

67
Q

What is the two basic rules from Kaplan and Norton?

A

Understand the management cycle that links strategy and operations and know what tools to apply at each stage of the cycle.

68
Q

What is a management system, according to Kaplan and Norton?

A

Management system is a integrated set of processes and tools that a company uses to develop its strategy, translate in into operational action and monitor and improve the effectiveness of both

69
Q

Closed Loop Management, what are the stages? (Kaplan & Norton)

A

Develop a strategy, Translate the strategy, Plan Operations, Monitor & Learn, Test & Adapt the strategy

70
Q

In the Closed Looped Management - what happens in Stage 2 (Translate the strategy)? (Kaplan & Norton)

A

You create a strategy map (Balanced Score Card)

71
Q

In Stage 3 - Plan Operation, what do you have to think about? (Kaplan & Norton)

A

It doesn’t just have to be finance and money. Apply the balanced score card (Balance between Financial and Non-financial activities and processes)

72
Q

In Stage 4 - Monitor and Learn, what do you have to think about? (Kaplan & Norton)

A

Review meetings is important.

73
Q

Stage 5 - Test and adapt the strategy, what do you have to think about? (Kaplan & Norton)

A

Does it work? You have to balance, short term, midterm and long term. Key issue is to find the balance.

74
Q

Major take aways from Kaplan and Norton?

A

-Operational level and strategic levels have to link(connect).
-With the help of the loop system maybe?
-It’s a dynamic model.

75
Q

What is the transparency perspective? (Maas)

A

Provide information that is transparent for other companies. (Outside-in Perspective)

76
Q

The performance improvement perspective? (Maas)

A

It’s all about decision making. (Inside-out)

77
Q

What is management accounting and management control (egentligen)? (Maas)

A

A toolbox

78
Q

Which are the stages in the framework from (Maas)

A

Performance improvement perspective - Sustainability Strategy - Sustainability Management accounting - Sustainability Management Control - Sustainability Reporting - Transparency perspective (Sustainability Assessment)

79
Q

Criticism for budgeting? (Libby and Lindsey)

A

Time - consuming, budget gaming, Principle-Agent problem etc.

80
Q

Major take-aways from Libby and Lindsey?

A

-Budgeting not too time consuming
- Companies does not want to abandon traditional budgets, rather renew and improve the existing one.
-In unpredictable environments, traditional budgets works worse than Beyond budgeting e.g.
- Budget gaming is a problem with traditional budgeting.
- Budgets that is not in-line with the strategy is a problem.

81
Q

Critics for budgeting from (Østergren) (Just read)

A

Are too time consuming, impose a vertical command-and-control structure, create centralized decision-making, stifle initiative, and focus on cost reduction rather than value creation. In addition, budgets creating vertical, command-and-control, and responsibility centre-focused budgetary controls are incompatible with flat, network, or value chain-based organizational designs and impede empowered employees from making the best decisions

82
Q

Good phrase from the Article of Østergren about budgeting

A

“However, studies have shown that the critique is more relevant for organisations in a rapidly changing environment (Bescos et al, 2003). A high level of autonomy for the company and low degree of predictability in forecasting (for example the bank sector) increase the need for a more dynamic form of planning such as rolling forecast etc., while for organisations with a low degree of autonomy and high degree of predictability in forecast (for example the public sector) the critique is less relevant. As a consequence of the critique, alternative ways of budgeting have emerged such as activity-based budgeting (Hansen et al, 2003). In addition, new forms of planning devices have been developed such as “beyond budgeting principles” that can be understood as a new form of budgeting. BB contains of all budgeting activities, but it is divided in time.”

83
Q

What happens if you remove budgeting? (Østergren)

A
  • Solve conflict between setting target and making forecasts.
    -Removes wrong incentives from managers (higher budgets than needed)
    -Removes the beliefs from managers that the future is manageable.
    -Removes a time-consuming process
84
Q

Beyond Budgeting has three “stages”, what are they? (Østergren)

A

Target Setting and Planning and Resource Allocation

85
Q

What are the differences between target setting and planning? (Østergren)

A

See picture.

86
Q

Major take-aways from Beyond Budgeting?(Østergren)

A

-From cost reduction to value-creation
-Performance based = Centralised power, decentralised action
-From controlling costs to controlling action
-From reactive to proactive planning
-Focus on big numbers rather than nitty-gritty details has thereby been eased into the mind-set of people.
-Empowerment for the employees! More creativeness and responsibilities for the lower level employees.
- More horizontal interaction between sub-managers.
-Holistic overview of the company

87
Q

Consequences of BB? (Østergren)

A

-Not everyone likes the more competitive environment.

88
Q

Public Interest Theory and Regulation?

A

See PIC

89
Q

Capture Theory and Economic interest group theory of regulation?

A

2) The market will be efficient. If you produce a lot of accounting rules there will be regulations that are not necessary for the stakeholders and create costs for companies that are not useful for any stakeholder. Instead, we should rely on principal-agency theory.
a. The free market perspective: There will not be any demand for a company if they do not provide the necessary information that the market demands.
b. Capture theory: Even though a regulation is put in place for the public interest it will eventually be captured (controlled) by the parties that it is supposed to control.
i.Private/Economic Interest theory: It can be captured since the regulators are not independent. They can be affected through lobbying. They act in order to increase their own wealth. And the regulators may focus on their own re-election.

90
Q

Some benefits with conceptual
framework ?

A
  • Accounting standards should be more
    consistent and logical
  • Standard-setters should be more accountable
    for their decisions
  • Enhanced communication between standard-
    setters and preparers/auditors
  • Economic benefit
  • Reduced need for additional accounting
    standards
  • Focus decision-usefulness rather than control
  • Legitimizing standard-setting bodies
91
Q

Some disadvantages with Conceptual Framework?

A

Based on lobbying and political actions
* Burden, Cost vs Benefit
* Focus on economic performance - less focus
on non financial transaction
* Codification of existing practice
* Codification of existing profession
* Legitimizing standard-setting bodies

92
Q

A asset is recognised as?

A

“a resource controlled by the entity as a result
of past events and from which future
economic benefits are expected to flow to the
entity”

92
Q

A asset is recognised as?

A

“a resource controlled by the entity as a result
of past events and from which future
economic benefits are expected to flow to the
entity”

92
Q

A asset is recognised as?

A

“a resource controlled by the entity as a result
of past events and from which future
economic benefits are expected to flow to the
entity”

92
Q

A asset is recognised as?

A

“a resource controlled by the entity as a result
of past events and from which future
economic benefits are expected to flow to the
entity”

92
Q

A asset is recognised as?

A

“a resource controlled by the entity as a result
of past events and from which future
economic benefits are expected to flow to the
entity”

92
Q

A liability is recognised as?

A

”a present obligation of the entity arising from
past events, the settlement of which is
expected to result in an outflow from the entity
of resources embodying economic benefits”

93
Q

Recognition criteria?

A
  • it is probable that any future ecoomic
    benefit associated with the item will flow to
    or from the entity - and -
  • the item has a cost or value that can be
    measured with reliability (faithful)
94
Q

Asset/liability approach ?

A

Links profit to changes that have occurred in the assets and liabilities of the reporting entity. Considers how transactions affected assets or liabilities. The Balance sheet is the most important part of the financial report.

95
Q

Revenue/expense approach?

A

Rely on concepts such as matching principle, which more focus on actual transactions. Reads the income statement as the principal financial statement. Considering how much of a transaction that should be treated as income or expenses. Any amount not treated as either of these are then put in the statement of financial position, asset or liability.