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.

Alcohol consumption among university students: a typology of consumption to aid the tailoring of effective public health policy

Objective: Elevated levels of alcohol consumption among university students are well documented. Policymakers have attempted to combat this issue at a university, national and international level. Tailoring public health policy to effectively tackle alcohol use is crucial. Using Q-methodology, the current study aims to develop a typology of alcohol consumption in the Irish university student population. Setting: A large Irish university. Participants Hundreds of possible statements on types of consumption were generated from a systematic review and a set of one-on-one interviews. These were reduced to 36 statements, 6 statements which define each of the 6 previously defined consumption types. Participants were advised to scan through the 36 statements and fill the statements into a ‘forced choice, standardised distribution’. Following this, a 45–90 min interview was conducted with students to illuminate subjectivity surrounding alcohol consumption. Analysis was conducted using PQ Method and NVivo software. Principal component analysis, followed by varimax rotation, was conducted to uncover the final factor information. Results: In total, 43 students completed the Q-study: 19 men and 24 women. A typology describing 4 distinct groupings of alcohol consumer was uncovered: the guarded drinker, the calculated hedonist, the peer-influenced drinker and the inevitable binger. Factor loadings of each of the consumer groupings were noted for type description. Conclusions: This is the first study to propose ideal types of alcohol consumption among a university student population. Further research is required to investigate the degree to which each of these ideal types is subscribed. However, this typology, in addition to informing public policy and strategies, will be a valuable analytic tool in future research.