THE VALUE RELEVANCE OF FIXED ASSET REVALUATION RESERVES IN INTERNATIONAL ACCOUNTINGBY gyung paik

ANGGOTA KELOMPOK :•Nabella Roma Desi•Nadia A. Rahmi•Nitia L.N•Tata Triana•Yohanes Dwiky•Wildan Afrizal

Latar Belakang

•Perbedaan antara US GAAP dan IFRS pada penilaian Aset Tetap

•Penelitian yang sudah dilakukan pada Cadangan Revaluasi

Hipotesis

•H1 : Cadangan Revaluasi adalah nilai yang relevan. Cadangan revaluasi terkait secara positif dengan harga saham.

•H2 : Cadangan Revaluasi lebih relevan di negara-negara di bawah common law dibandingkan dengan negara-negara code law.

MetodologiSampel

Semua negara yang tersedia

database nya di Industri

Global/Komersial yang

ditemukan dalam database

Compustat global

1. Cadangan revaluasi2. Laba bersih3. Nilai buku ekuitas4. Selisih saldo

penelitian kembali (tahunan)

15 negara yang memiliki ukuran sampel

minimal 30 perusahaan.

- 8 Negara Common Law

- 7 Negara Code Law

Metode

Data termasuk perubahan tahunan cadangan revaluasi serta laba bersih dan nilai buku ekuitas sebagai variabel

independen untuk mengontrol efeknya pada harga. Semua variabel independen skala (dibagi) dengan jumlah saham.

Dianalisa dengan model regresi terhadap variabel dependen yaitu harga saham tiga bulan setelah akhir tahun

fiskal sehingga didapat selisih penilaian kembali.

Persamaan Model Regresi

Metodologi

Persamaan Model Regresi

Harga = a1NI + a2BV + a3RR + ε

NI adalah laba bersih yang dilaporkan oleh perusahaan pada akhir tahun fiskal. BV adalah nilai buku ekuitas pada tanggal neraca. RR adalah perubahan tahunan saldo selisih penilaian kembali yang menyesuaikan nilai buku aset tetap dengan nilai pasar.

Metodologi

Analisis Relevansi Nilai

InterceptPerubahan Cadangan Revaluasi

Ekuitas Laba Bersih

Negara Adj R2 Sampel Koefisien Koefisien Koefisien KoefisienAustralia 0,6296 71 237,59 -10,45** 0,28 10,67***Bermuda 0,5134 150 -208,57 -13,57*** 7,46*** -17,33***Brazil 0,3838 37 168813** -2240,75 81,49*** -283,75***Kepulauan Cayman0,5528 49 -890,9** 232,99* 8,84 62,15**Britania Raya 0,5881 130 -2094,07** 21,23*** 6,33*** 15,31**Yunani 0,7851 72 176,81*** -0,43 0,56** 4,61***Hong Kong 0,3775 65 1205,06 3,48** 0,11 8,77***Indonesia 0,9997 42 1753,81 -5295227 -12936*** 277373***India 0,0876 54 1480,72 4,23 -3,4 31,78**Jepang 0,0156 499 1204,59*** 3,52 -0,69 13,77***Korea -0,0279 88 1296,55*** 20,24 -7,17 -4,06Malaysia 0,9247 125 -16,86 1,28 0,67*** 6,67***Filipina 0,9563 31 18,81 -3,71** 0,55*** 2,85**Singapura 0,7804 61 51,29 1,23 1.11*** 5,02***Thailand 0,7245 103 51,02 0,01 0,82** 6,73***

negara common law * menunjukkan signifikansi statistis pada level 0,1 (two-tailed test)negara code law ** menunjukkan signifikansi statistis pada level 0,05 (two-tailed test)

*** menunjukkan signifikansi statistis pada level 0,01 (two-tailed test)

Analisis Relevansi Nilai: Perbandingan Negara Common Law dan Negara Code Law

InterceptPerubahan Cadangan Revaluasi

Ekuitas Laba Bersih

Periode Negara Adj R2 Sampel Koefisien Koefisien Koefisien Koefisien2005 Code law 0.0265 1040 11176.00 98.36 75.56*** 238.47***2005 Common law 0.364 537 -421.27 9.73*** 3.84*** 3.92*

* menunjukkan signifikansi statistis pada level 0,1 (two-tailed test)** menunjukkan signifikansi statistis pada level 0,05 (two-tailed test)

*** menunjukkan signifikansi statistis pada level 0,01 (two-tailed test)

Kesimpulan

•Perubahan dari penerapan US GAAP dan IFRS berpengaruh terhadap nilai pasar perusahaan

•Negara yang menggunakan sistem code law memiliki revaluasi aset tetap yang tidak value relevant terhadap nilai pasar perusahaan.

•Adopsi IAS 16 akan memengaruhi harga saham di berbagai negara.

CLASSIFICATION OF FINANCIAL INSTRUMENTS

WITH CHARACTERISTICS OF BOTH DEBT AND EQUITY:

EVIDENCE CONCERNING CONVERTIBLE

REDEEMABLE PREFERRED STOCK

Mark G. McCarthy, East Carolina UniversityDouglas K. Scheineder, East Carolina University

Introduction

•This study addresses one type of compound financial instrument called convertible redeemable preferred stock (CRPS)

•CRPS is a type of preferred stock that contains a debt-like redemption feature requiring the issuer to pay the holder the par value for the preferred stock at a specified redemption date.

• Ex:Issuances of CRPS include a $15 million issuance by Frontline Communications Corporation and Mpower Communications Corporation’s $207 million issuance, both in February 2000.

• In the US, redeemable preferred stock is currently accounted for as “temporary equity”.

• According to the Securities and Exchange Commission’s (SEC) Accounting Series Release No. 268, “Presentation in Financial Statements of Redeemable Preferred Stocks” (Securities and Exchange Commission 1979), it should be reported below debt but above stockholder’s equity on the balance sheet.

•FASB issued a Discussion Memorandum entitled “Distinguishing between Liability and Equity Instruments and Accounting for Instruments with Characteristics of Both”. It discussed alternatives from current reporting standards for compound financial instruments (1990).

• in 1997 FASB formally added redeemable preferred stock and convertible debt instruments to its active agenda.

• In March 2000, FASB announced its tentative decisions on how to approach accounting for compound instruments.

• The findings of this study suggest that CRPS is perceived as debt for sample firms, consistent wit the FASB’s tentative approach to such financial instruments.

• This study empirically examines the market perception of CRPS for fiscal years 1991 through 1995 by employing a levels approach research design

• The result of this study provide insight into investor perception of a compound financial instrument and challenge current accounting rules for CRPS.

Research Design & Model Development

•Objective of this study : To provide evidence concerning the market perceptions of CRPS to the equity value of a firm.

•Landsman 1986 use an equation to explain the variation in the market value of stockholders’ equity (ME).

◦

(1)

•Ohlson (1995), models the value of a firm with the inclusion of an income variable in addition to the balance sheet.

•The hypothesis testing examines the relationship between stock prices and CPRS as a separate independent variable.

•The following regression equation is estimated to test how the market perceives CRPS.

Additional Procedures• Potential problems may be encountered with

regression equations are adressed here :1. Heteroscedasticity

Occurs since large firms tend to have large errors and small firms usually have small errors.Method to mitigate : Deflation

2. MulticollinearityThe imprecision of estimation (high sampling

variances) and a high degree of sensitivity of the estimates of the coefficients to particular sets of sample data.

Method to mitigate : Asset & Liabilities are combined to form a single variable, “net assets”

Sample Selection• To address the research issue in this study a

sample is constructed of firms reporting CRPS for the fiscal years 1991 through 1995. The Compustat data base provides all the necessary data.

• Firms included in this study are those reporting a positive net income.

• Table 1 presents summary statistics for all of the deflated variables, dependent and independent, used in the regression model for the years 1991-1995. CRPS, the variable of primary interest, ranges from $0.01 per share to $17.64 per share across all five years. The mean of CRPS ranges from $1.14 per share in 1992 to $2.25 per share 1994, while the median of CRPS ranges from $0.55 per share to $0.95 per share.

• Table 2 presents summary statistics for the sample of firms related to the mean and median percentage of CRPS to total liabilities and to total assets. Both percentages increase from the first year, 1991, to the last year, 1995. The mean CRPS/LIAB ratio percentages range from 10.1% in 1992 to 16.4% in 1995. The lowest mean CRPS/ASSET ratio percentage is 6.3% in 1992 and reaches maximum of 10.5% in 1995. The median CRPS/LIAB ranges from 5.6% in 1992 to 10.5% in 1995. The median CRPS/ASSET ranges from 3.6% in 1992 to 5.4% in 1995. In each year the mean is greater than the median.

• Variance Inflation Factors (VIFs) and Condition Indices (CI) are also examined and discussed below, but are not shown in a table for purposes of brevity. As expected, the VIFs for ASSET and LIAB range from 23 to 155 suggesting a high degree of multicollinearity (Neter, Wasserman and Kutner, 1985). The Condition Index values range from 17 to 34 suggesting moderate dependencies (Belsley, Kuh and Welsch, 1980). However, for the variable of interest, CRPS, the greatest VIF is 2.2 in 1991 suggesting that multicollinearity may not be a problem with this variable.

• The results of the initial regressions estimated for each year are presented in Table 4. The regression models are significant in every year with the adjusted R-square ranging from 0.4955 in 1994 to .7654 in 1993. The estimated coefficients for the variables representing total assets (ASSET) and total liabilities (LIAB) are in their expected direction in every year, but not significant in all years. The income variable is significant in all five years and has a positive coefficient as expected.

• The results for these regressions are presented in Table 5. Consistent with the previous results, CRPS was negative and significant in 1991 and 1993. The other three years were again insignificant but did have negative coefficients. These results tend to confirm the findings in the first regression model of some evidence that the market perceives CRPS to be primarily a liability. However, the lack of significance of the coefficient for CRPS in three of the five years leaves open the possibility that investors may regard CRPS as having a component other than debt, which logically would be an equity component. If one subscribes to this interpretation of the results, then the results would appear to lend support to the FASB's March 2000 proposal to consider an instrument such as CRPS as primarily a convertible debt instrument that should be broken up into separate debt and equity components.

• The pooled results in Table 6 show that ASSET, LIAB, and NI are significant and in the expected direction. The variable of interest, CRPS, is negative and significant, suggesting that the market perceives these instruments as liabilities. However, the entirely-debt conclusion based on a significant coefficient for CRPS is supported only by the pooled results and not the results for individual years.

Implications• Current U.S. accounting rules for CRPS place it in

'temporary equity,' excluded from stockholders' equity and not required to be included in debt. One could argue that CRPS should be equity since it has the form of, or is at least called, 'preferred stock' and is also reported in an pseudo-equity category, albeit temporary equity. Following this reasoning, all of the CRPS issues should be perceived by investors as equity, i.e., a positive and significant coefficient. Yet, that is not what the results of this study found.

Conclusions• In summary, this study can be said to provide at least some

evidence that current accounting rules for CRPS are at variance with investor perception of CRPS. The importance of these findings to financial reporting is the suggestion that new standards are needed for at least one compound instrument, CRPS. Perhaps a future area of research would be to repeat the tests and design presented in Table 5 for other compound instruments. If other such studies' results present findings similar to these findings, then additional evidence would exist to support the need for changes in reporting standards for compound instruments.