Are tax incentives determinant and relevant for capitalizing R&D expenditures? Evidence from Europe

By | 2020-12-22T19:15:20+01:00 December 22nd, 2020|

Giuseppe Di Martino, Grazia Dicuonzo, Arcangelo Vitelli, Vittorio Dell’Atti / Financial Reporting / 2-2020

Using a sample of European listed companies between 2014 and 2017, we ex-a¬mine accounting factors that lead management to capitalize R&D costs, with a specific focus on the tax incentives in the form of government grants. In our analysis, we distinguish between companies which capitalize R&D costs (“capitalizers”) and companies which expense R&D costs (“expensers”). The evidence shows that the choice to capitalize R&D costs is positively related to the recognition of grants as revenue. We also investigate the value relevance of tax incentives related to R&D expenditures. Our empirical findings show that investors draw a distinction between government grants associated with research costs (EXP) and those associated with development costs (CAP). This paper presents both theoretical and practical implications. It contributes to the current debate on expensing or capitalizing R&D costs through a study of tax incentives received by companies for their research activity. Moreover, it offers empirical evidence on the use of R&D cost capitalization for purposes of tax incentives, which can be utilized by standard setters to assess opportunistic behaviors adopted by companies.

Accounting choices, government grants, R&D expenditures, tax incentives, value relevance.

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Is IFRS 9 better than IAS 39 for investors’ decisions? Evidence from the European context at the beginning of the transition year

By | 2020-11-04T17:02:07+01:00 November 4th, 2020|

Mechelli Alessandro, Sforza Vincenzo, Cimini Riccardo / Financial Reporting / 1-2020

The first-time adoption of International Financial Reporting Standards (IFRS) 9 at the beginning of fiscal year 2018 has offered the opportunity to test whether the informationn provided by this new accounting standard on financial instruments is more useful for investors than International Accounting Standard (IAS) 39. This paper assesses and compares the value relevance of book value calculated according to the requirements of the two accounting standards on financial instruments at the beginning of the transition year for a sample of 110 financial entities listed in 20 stock markets that have recorded transition effects between retained earnings. Findings provide evidence that both IAS 39 and IFRS 9 are value relevant and that the second one adds more infromation than that previously supplied by the first one. The paper contributes to the literature by providing the first evidence of the usefulness of the new accounting standard on financial instruments. About its practical implications, the paper provides insights regarding the high quaity of the International Accounting Standards Board (IASB)’s standard setting process.

IFRS 9, IAS 39, value relevance, European Union, financial entities

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The effects of business model regulation on the value relevance of traditional performance measures. Some evidence from UK companies

By | 2019-09-27T10:11:01+02:00 September 27th, 2019|

Simoni Lorenzo, Bini Laura, Giunta Francesco / Financial Reporting / 1-2019

The first case in the world of a mandatory requirement to disclose business model (BM) in the annual report is represented by Companies Act 2013 issued in the UK. The BM offers a simplified representation of a company’s key resources and of how these are combined to create value. For this reason, a systematic communication of BM should affect the way a company’s book value and its capability to generate earnings are perceived. The purpose of this work is to investigate the impact of mandatory BM disclosure on the value relevance of traditional financial measures. Focusing on a sample of UK listed companies over a six-year period, Ohlson model is utlized to assess the value relevance of book value and net income and their interactions with a dummy variable that accounts for the introduction of mandatory disclosure of BM. In line with previous studies on non-financial disclosure regulations, results show that the introduction of the mandatory requirement to disclose BM has a negative moderating effect on book value of equity and a positive moderating effect on net income. As this is the firt study to investigate the effects of a mandatory BM disclosure regime, it could be of interest for both academics and standard-setters.

business model, value relevance, regulation

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Global financial crisis and relevance of GRI disclosure in Italy. Insights from the stakeholder theory and the legitimacy theory

By | 2018-05-28T18:29:38+02:00 May 28th, 2018|

Fornaciari Luca, Pesci Caterina / Financial Reporting / 1-2018

In this study, we examine the effects of voluntary disclosure on the market value of Italian-listed companies adopting GRI guidelines, interpreting our results in the light of both stakeholder theory and legitimacy theory. From a methodological viewpoint, an index is used to measure the level of disclosure of human resources and environmental information. We consider a sample of firms listed on the Milan Stock Exchange for an eleven-year period (2004-2014). The period chosen gave us the opportunity to assess the value-relevance of environmental and social information before and during the Global Financial Crisis. We supplement the previous literature on the topic of the relationship between social and environmental disclosure and value-relevance by arguing that sustainability tools have to be evaluated, remembering that they express a notion of value in the long term and provide information to a large number of stakeholders. Our findings show that environmental information is only value-relevant during the crisis period, when the shareholder perspective comes more into line with other stakeholder perspectives because they are seeking a middle-to-long run notion of value. Finally, we find that a high level of GRI information disclosure is positively evaluated by investors; this result is important also because it was obtained in the Italian market which is largely considered inefficient, and thus it supports the urgent need to provide high-quality information in each type of market.

Social and environmental reports, Global financial crisis, Global reporting initiative guidelines, Stakeholder theory, Value relevance

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La rilevazione degli investimenti in R&S e la significatività dell’utile e del capitale netto

By | 2017-12-27T17:44:29+01:00 December 27th, 2017|

Lucianetti Lorenzo, Cocco Alfonso, Minunno Gianfabio/ Financial Reporting, Riviste / Fascicolo: 3-2011

La letteratura internazionale ha ampiamente indagato la significatività dell’informativa contabile di bilancio attraverso lo studio delle relazioni tra grandezze di derivazione contabile e valori dei mercati di borsa. A livello internazionale, infatti, si è rilevata una tendenza alla progressiva perdita di significatività delle grandezze di derivazione contabile dovuta, in linea principale, alla mancata e/o insufficiente rilevazione delle risorse immateriali. Nel contesto italiano, però, non si rinvengono studi specifici sull’argomento. Con questo lavoro ci si propone, pertanto, di percorrere questa via procedendo, innanzitutto, ad effettuare un’analisi descrittiva dell’incidenza dei beni e delle attività immateriali nei bilanci delle società italiane quotate. Successivamente, si procederà a fornire elementi empirici al fine di evidenziare la significatività dell’informativa contabile di bilancio. Infine, si procederà a verificare come le differenti modalità di rilevazione degli investimenti in R&S influiscano sulla significatività dell’utile e del capitale netto.

Accounting literature has widely investigated the informativeness of financial statements through the association between accounting value and market value. Several studies highlighted a tendency to a progressive decline in the value relevance of accounting measures due mainly to the inadequate accounting for intangibles. This paper reports a descriptive analysis of the impact of intangible assets in the financial statements of Italian listed companies. Successively, using multiple regression analysis, it highlights the informativeness of financial statement. Finally, it tests informational consequences of the accounting treatment of R&D on the value relevance of earnings and book value.

Keywords: value relevance, earnings, book value, stock returns, stock prices, intangible assets, R&D

 

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The value relevance of non-financial performance indicators: new cues from the European fashion industry

By | 2017-12-27T17:41:38+01:00 December 27th, 2017|

Dainelli Francesco, Giunta Francesco/ Financial Reporting, Riviste / Fascicolo: 3-2011

Intangible assets and related performance measures assume increasing importance in valuation processes. Value relevance studies testify to their importance through an analysis of market stock prices. We aim to examine the value relevance of non-financial indicators in European fashion companies. The indicator selected is the “change in mono-brand stores”. Applying the models proposed by current literature, we have refuted the value relevance hypothesis. However, refining both the “operationalization” of the concepts and the related result analysis procedure, the value relevance is confirmed. In this way, we contribute to increasing the generalizability of this research trend and to fuel the debate concerning the standardization process of this information. In particular, following in the footsteps of the Gartner/EBRC project, supported by AICPA (Gartner-EBRC, 2010), our results can help the national and international standard setters to pinpoint the indicators that really matter for the fashion industry and standardize their communication.

Keywords: Intangibles, value relevance, financial measures, non-financial measures, fashion industry, mono-brand stores

 

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Rilevanza ed affidabilità del valore contabile dell’avviamento e dei beni immateriali sul mercato italiano

By | 2017-12-29T17:39:11+01:00 December 27th, 2017|

Liberatore Giovanni, Ridi Tommaso, Di Pietro Filippo/Financial Reporting, Riviste / Fascicolo: 3-2012

Il presente lavoro si propone di indagare quale sia la rilevanza e l’affidabilità percepita dal mercato finanziario sul valore espresso nel bilancio d’esercizio sui beni immateriali e l’avviamento delle società quotate. Lo studio ha analizzato le aziende quotate al FTSE Italia All-share, nel periodo fra il 2002 ed il 2008. Attraverso un modello di regressione a più variabili si è verificato che: a) il valore contabile dei beni immateriali e dell’avviamento sono correlati positivamente al valore di mercato del capitale, b) la transizione agli IAS/IFRS non ha comportato un incremento della rilevanza ed affidabilità percepita dal mercato dei beni immateriali e avviamento.

We examine the value relevance and reliability perceived by the market for goodwill and identifiable intangible assets as reported in the financial statements of a sample of Italian listed companies. The dataset is composed of companies listed on FTSE Italia All-share during the period 2002-2008. Using a multiple regression model, our findings suggest that for the Italian companies the information relating to goodwill and identifiable intangible assets is value relevant in terms of market value. Moreover, we did not find any significant change in the reliability of these items after the introduction of IAS/IFRS.

Keywords: intangible assets, goodwill, value relevance, reliability, market value, IAS/IFRS

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La value relevance incrementale dell’other comprehensive income rispetto al net income. Un’analisi sulle società quotate in Italia

By | 2017-12-29T17:39:36+01:00 December 27th, 2017|

Veltri Stefania, Ferraro Olga/ Financial Reporting, Riviste/ Fascicolo: 3-2012

L’obiettivo principale dello studio è quello di testare l’assunzione, validata da una parte della letteratura, che l’Other Comprehensive Income (OCI) items reporting sia value relevant per gli investitori in misura incrementale, ossia che fornisca loro informazioni aggiuntive rispetto al reddito netto. La rassegna della letteratura evidenzia risultati contraddittori. Gli autori ipotizzano che una delle principali cause dell’inconsistenza dei risultati dipenda dall’utilizzo di dati che si riferiscono a periodi precedenti l’introduzione degli standard contabili sul Comprehensive Income (CI). Di conseguenza, hanno testato l’ipotesi di ricerca utilizzando dati relativi a periodi successivi allo IAS 1 revised 2007, in cui è esplicitamente richiesto alle aziende di presentare le componenti in bilancio. Il campione è costituto dai gruppi quotati alla borsa valori di Milano. L’analisi di regressione fornisce evidenza della value relevance incrementale dell’OCI rispetto al reddito netto.

The main aim of the article is to test that the Other Comprehensive Income (OCI) is incrementally value relevant for investors with respect to net income. Literature review highlights mixed results. The authors, hypothesizing that one of the main causes of the inconsistency of results is the use of OCI data from the period before implementation of comprehensive income reporting (as if OCI numbers), used in their value relevance regression analysis as reported OCI numbers in the listed companies’ financial accounts. The sample comprehends the groups listed on the Milan Stock Exchange. Our evidence supports the conclusion that the as reported OCI numbers are incrementally value relevant for investors.

Keywords: value relevance, net income, other comprehensive income, Italy, listed, groups, as reported data

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Assessing value relevance of comprehensive income in European banks and other financial institutions

By | 2017-12-29T17:45:43+01:00 December 27th, 2017|

Mechelli Alessandro, Cimini Riccardo/ Financial Reporting, Riviste / Fascicolo: 1-2013

The IAS/IFRS compliant groups have been disclosing comprehensive income since 2009, when the IAS 1-revised became effective. This paper aims to investigate the value relevance of comprehensive income and its components in European banks and other financial institutions. The research has been developed by having a sample of 166 European listed groups whose data have been collected in the 2009, 2010 and 2011 (498 firm-year observations) consolidated financial statements. In contrast to previous findings, related to all the sectors, our research highlights a higher value relevance of comprehensive income in respect to net income. Moving to the single OCI components, our results suggest that gains and losses on remeasuring available-for-sale financial assets (AFSit) are value relevant in European banks and other financial institutions.

Keywords: Comprehensive income, net income, value relevance, IAS 1-revised, European listed groups

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The value relevance of earnings and book value across the EU. A comparative Analysis

By | 2017-12-22T17:52:03+01:00 December 22nd, 2017|

Mechelli Alessandro, Cimini Riccardo/ Financial Reporting, Riviste / Fascicolo: 2-2014

This paper aims to investigate whether the value relevance of accounting amounts differs across nations depending on the country characteristics identified by Nobes (2008) and Nobes and Parker (2010) that is the source of funds, the legal system and the fiscal legislation that led them to identify, in the EU, the so-called strong-equity and the weak-equity countries. Because of the different disclosure needs, our hypothesis is that insiders, within the strong-equity countries, disclose more relevant information than in weak-equity countries. To test this hypothesis, we analysed a sample including all the listed entities belonging to the EU at the time of the issuance of EU Regulation 1606/2002. The sample covered the period of 2006-2011 and included 16,513 firm-year observations. Our sample selection strategy allowed us to include entities required to comply with the same accounting standards (IAS/IFRS), so our findings do not depend on differences between requirements of different standard setters. Comparatively, our findings demonstrate that the value relevance of accounting amounts not only is higher in strong-equity countries than in weak-equity countries – validating our research hypothesis – but also that it is not driven by specific firms’ characteristics that are the size, the future growth opportunity and the source of funds of the single entity.

Keywords: Value relevance, weak-equity countries, strong-equity countries, IFRS.

 

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