The quality of financial information in the extractive industries: a value relevance analysis

The extractive industry is characterized by high levels of risk and uncertainty. These attributes create challenges when applying traditional accounting concepts (such as the revenue recognition and matching concepts) to the preparation of financial statements in the industry. The International Accounting Standards Board (2010) states that the objective of general purpose financial statements is to provide useful financial information to assist the capital allocation decisions of existing and potential providers of capital. The usefulness of information is defined as being relevant and faithfully represented so as to best aid in the investment decisions of capital providers. Value relevance research utilizes adaptations of the Ohlson (1995) to assess the attribute of value relevance which is one part of the attributes resulting in useful information. This study firstly examines the value relevance of the financial information disclosed in the financial reports of extractive firms. The findings reveal that the value relevance of information disclosed in the financial reports depends on the circumstances of the firm including sector, size and profitability. Traditional accounting concepts such as the matching concept can be ineffective when applied to small firms who are primarily engaged in nonproduction activities that involve significant levels of uncertainty such as exploration activities or the development of sites. Standard setting bodies such as the International Accounting Standards Board and the Financial Accounting Standards Board have addressed the financial reporting challenges in the extractive industry by allowing a significant amount of accounting flexibility in industryspecific accounting standards, particularly in relation to the accounting treatment of exploration and evaluation expenditure. Therefore, secondly this study examines whether the choice of exploration accounting policy has an effect on the value relevance of information disclosed in the financial reports. The findings show that, in general, the Successful Efforts method produces value relevant information in the financial reports of profitable extractive firms. However, specifically in the oil & gas sector, the Full Cost method produces value relevant asset disclosures if the firm is lossmaking. This indicates that investors in production and non-production orientated firms have different information needs and these needs cannot be simultaneously fulfilled by a single accounting policy. In the mining sector, a preference by large profitable mining companies towards a more conservative policy than either the Full Cost or Successful Efforts methods does not result in more value relevant information being disclosed in the financial reports. This finding supports the fact that the qualitative characteristic of prudence is a form of bias which has a downward effect on asset values. The third aspect of this study is an examination of the effect of corporate governance on the value relevance of disclosures made in the financial reports of extractive firms. The findings show that the key factor influencing the value relevance of financial information is the ability of the directors to select accounting policies which reflect the economic substance of the particular circumstances facing the firms in an effective way. Corporate governance is found to have an effect on value relevance, particularly in the oil & gas sector. However, there is no significant difference between the exploration accounting policy choices made by directors of firms with good systems of corporate governance and those with weak systems of corporate governance.

Assessment in primary education in Ireland

This doctoral study examines assessment in primary education in the Republic of Ireland. The nature and purpose of assessment offer an insight into the values which are prioritised by an education system. In 2011, in the Republic of Ireland, the Department of Education and Skills (DES) published a strategy aiming to improve standards of literacy and numeracy. The document, entitled, Literacy and numeracy for learning and life: the national strategy to improve literacy and numeracy for children and young people 2011-2020, contains improvement targets as measured by standardised tests. It also mandates the increased use of standardised tests in primary education, and directs that aggregated scores should be reported to both Boards of Management and the DES. The study is framed by the theoretical perspectives of Michel Foucault and Pierre Bourdieu. Both of these commentators examine social policy and practice in an effort to provide insight into the history and operation of social institutions. This study is especially influenced by Foucault’s archaeology and genealogy of knowledge, and his notion of governmentality. It is also particularly cognisant of Bourdieu’s thoughts on habitus, doxa and capital. The study contains reviews of literature in the areas of assessment, assessment policy, and assessment policy in Ireland. These reviews highlight current debate in each of these areas while also grounding this debate in an historical context. The dissertation contains four empirical sections. 1) It analyses policy documents prepared in the development of the published strategy as well as investigating the strategy itself. In so doing it is aware of the burgeoning influence of pan-national bodies on policy development. 2) A number of high profile policy makers were interviewed as part of the study and their views are interpreted in light of the findings of the literature reviews. 3) The perspective of teachers was sought through a questionnaire survey. This gathered data on these teachers’ views on the purpose of assessment as well as their actual practice. 4) Finally, children were also included as participants in this study. They were interviewed in focus groups and encouraged to contribute drawings as well on their views of assessment in primary school. Literacy and numeracy for learning and life is seen as a seminal document in Irish education. This study is significant in its analysis of original data from high profile policy makers, including two Ministers for Education and Skills. It is also significant in its inclusion of the perspectives of primary school pupils. Finally, the study considers the nature and role of assessment in a holistic manner by including the views of policy makers, teachers and pupils. The study notes that policy development in Ireland underwent a change in the preparation of Literacy and numeracy for learning and life and that international influences, while present, are also mediated to suit the local context. It also highlights a lack of clarity in the definition of assessment in primary education and argues that there is a lack of balance in the approaches that are prioritised. The study demonstrates that teachers are impacted by the strategy but that they also change it by focusing on their own concerns while using assessment tools. The children provide compelling evidence of the impact of assessment on the learner. The study shows how assessment tools (and school subjects) are valued with differing levels of importance by a variety of stakeholders.