Financial Accounting: Reporting, Analysis and Decision Making [5th ed.]

In recent years accounting education has seen numerous changes to the way financial accounting is taught. These changes reflect the demands of an ever-changing business world, opportunities created by new technology and instructional technologies, and an increased understanding of how students learn. The foundation of Financial Accounting is based on a number of unique principles and innovations in accounting education. The objective of Financial Accounting is to provide students with an understanding of those concepts that are fundamental to the preparation and use of accounting information. Most students will forget procedural details within a short period of time. On the other hand, concepts, if well taught, should be remembered for a lifetime. Concepts are especially important in a world where the details are constantly changing. Students learn best when they are actively engaged. The overriding pedagogical objective of Financial Accounting is to provide students with continual opportunities for active learning. One of the best tools for active learning is strategically placed questions. Discussions are framed by questions, often beginning with rhetorical questions and ending with review questions, and our analytical devices, called decision-making toolkits, use key questions to demonstrate the purpose of each.

Exploring the role of energy, trade and financial development in explaining economic growth in South Africa: A revisit

South Africa is an emerging and industrializing economy which is experiencing remarkable progress. We contend that amidst the developments in the economy, the role of energy, trade openness and financial development are critical. In this article, we revisit the pivotal role of these factors. We use the ARDL bounds [72], the Bayer and Hanck [11] cointegration techniques, and an extended Cobb–Douglas framework, to examine the long-run association with output per worker over the sample period 1971–2011. The results support long-run association between output per worker, capital per worker and the shift parameters. The short-run elasticity coefficients are as follows: energy (0.24), trade (0.07), financial development (−0.03). In the long-run, the elasticity coefficients are: trade openness (0.05), energy (0.29), and financial development (−0.04). In both the short-run and the long-run, we note the post-2000 period has a marginal positive effect on the economy. The Toda and Yamamoto [91] Granger causality results show that a unidirectional causality from capital stock and energy consumption to output; and from capital stock to trade openness; a bidirectional causality between trade openness and output; and absence (neutrality) of any causality between financial development and output thus indicating that these two variables evolve independent of each other.

Broadening generic skills development: Improving financial literacy of university students

Research has demonstrated the importance of financial literacy as one of the key life skills for sound financial decision-making. Despite the vast availability of educational resources, young adults were consistently found to have low levels of financial capability. Of particular concern is that many of these young people do not have adequate money skills to manage their freedom during university time, which may contribute to suboptimal financial behaviours. This study surveyed university students by assessing their financial literacy and perception of the financial education they received in school. Illiteracy across different domains of financial topics was evident. Results also indicate that majority of respondents viewed that high school has not taught them financial knowledge that will prepare them for adult life. Accordingly, it is proposed that graduate skills development in higher education should be broadened to incorporate financial literacy to help university students to navigate the financial maze.

Volatility transmission in global financial markets

This paper considers the transmission of volatility in global foreign exchange, equity and bond markets. Using a multivariate GARCH framework which includes measures of realised volatility as explanatory variables, significant volatility and news spillovers are found to occur on the same trading day between Japan, Europe, and the United States. All markets exhibit significant degrees of asymmetry in terms of the transmission of volatility associated with good and bad news. There are also strong links between diffusive volatilities in all three markets, whereas jumpactivity is only importantwithin the equitymarkets. The results of this paper deepen our understanding of how news and volatility are propagated through global financial markets.

Identifying the financial barriers to deliberative, affordable apartment development in Australia

Purpose The purpose of this paper is to identify the financial barriers to the supply of affordable apartments in Australia and examine whether demand aggregation and ‘deliberative development’ (self-build) can form a new affordable housing ‘structure of provision’. Design/methodology/approach Market design, an offshoot of game theory, is used to analyse the existing apartment development model, with ‘deliberative development’ proposed as an innovative alternative. Semi-structured interviews with residential development financiers are used to evaluate whether deliberative development could obtain the requisite development finance. Findings Our investigation into the financial barriers of a deliberative development model suggest that while there are hurdles, these can be addressed if key risks in the exchange process can be mitigated. Hence, affordability can be enhanced by ‘deliberative development’ replacing the existing speculative development model. Research implications Market design is a new innovative theoretical approach to understanding the supply of housing, offering practical solutions to affordable apartment supply in Australia. Originality/value This research identifies financial barriers to the supply of affordable apartments; introduces theoretical understandings gained from market design as an innovative solution; provides evidence that a new structure of building provision based on ‘deliberative development’ could become a key means of achieving more affordable and better designed apartments.

Parameterizing Unconditional Skewness in Models for Financial Time Series

In this paper we consider the third-moment structure of a class of time series models. It is often argued that the marginal distribution of financial time series such as returns is skewed. Therefore it is of importance to know what properties a model should possess if it is to accommodate unconditional skewness. We consider modeling the unconditional mean and variance using models that respond nonlinearly or asymmetrically to shocks. We investigate the implications of these models on the third-moment structure of the marginal distribution as well as conditions under which the unconditional distribution exhibits skewness and nonzero third-order autocovariance structure. In this respect, an asymmetric or nonlinear specification of the conditional mean is found to be of greater importance than the properties of the conditional variance. Several examples are discussed and, whenever possible, explicit analytical expressions provided for all third-order moments and cross-moments. Finally, we introduce a new tool, the shock impact curve, for investigating the impact of shocks on the conditional mean squared error of return series.

Social enterprises: Examining accountability for social and financial performance

This research examined the influence commercial customers have on the social and financial accountability of social enterprises, specifically considering whether a dominant or diversified customer base impacts on social enterprise accountability. Findings revealed that social enterprise accountability was influenced by social enterprises' main stakeholder(s), not necessarily the dominant customer. Accountability practices focused on fulfilling social enterprises' main stakeholders' accountability demands, and reporting to them rather than reporting on performance to a broader range of stakeholders. This research enhances the understanding of stakeholder impact on social enterprises' accountability, and develops an understanding of accountability theory in a social enterprise context.

Managing flexible work arrangements in small not-for-profit firms: The influence of organisational size, financial constraints and workforce characteristics

Small, not-for-profit organisations fulfil a need in the economy that is typically not satisfied by for-profit firms. They also operate in ways that are distinct from larger organisations. While such firms employ a substantial proportion of the workforce, research addressing human resource management (HRM) practices in these settings is limited. This article used data collected from five small not-for-profit firms in Australia to examine the way one significant HRM practice – the provision and utilisation of flexible work arrangements – operates in the sector. Drawing on research from several scholarly fields, the article firstly develops a framework comprising three tensions in not-for-profits that have implications for HRM. These tensions are: (1) contradictions between an informal approach to HRM vs. a formal regulatory system; (2) employee values that favour social justice vs. external market forces; and (3) a commitment to service vs. external financial expectations. The article then empirically examines how these tensions are managed in relation to the specific case of flexible work arrangements. The study reveals that tensions around providing and accessing flexible work arrangements are managed in three ways: discretion, leadership style and distancing. These findings more broadly inform the way HRM is operationalised in this under-examined sector.

Mathematical Aspects of Financial Markets with Frictions

Frictions are factors that hinder trading of securities in financial markets. Typical frictions include limited market depth, transaction costs, lack of infinite divisibility of securities, and taxes. Conventional models used in mathematical finance often gloss over these issues, which affect almost all financial markets, by arguing that the impact of frictions is negligible and, consequently, the frictionless models are valid approximations. This dissertation consists of three research papers, which are related to the study of the validity of such approximations in two distinct modeling problems. Models of price dynamics that are based on diffusion processes, i.e., continuous strong Markov processes, are widely used in the frictionless scenario. The first paper establishes that diffusion models can indeed be understood as approximations of price dynamics in markets with frictions. This is achieved by introducing an agent-based model of a financial market where finitely many agents trade a financial security, the price of which evolves according to price impacts generated by trades. It is shown that, if the number of agents is large, then under certain assumptions the price process of security, which is a pure-jump process, can be approximated by a one-dimensional diffusion process. In a slightly extended model, in which agents may exhibit herd behavior, the approximating diffusion model turns out to be a stochastic volatility model. Finally, it is shown that when agents' tendency to herd is strong, logarithmic returns in the approximating stochastic volatility model are heavy-tailed. The remaining papers are related to no-arbitrage criteria and superhedging in continuous-time option pricing models under small-transaction-cost asymptotics. Guasoni, Rásonyi, and Schachermayer have recently shown that, in such a setting, any financial security admits no arbitrage opportunities and there exist no feasible superhedging strategies for European call and put options written on it, as long as its price process is continuous and has the so-called conditional full support (CFS) property. Motivated by this result, CFS is established for certain stochastic integrals and a subclass of Brownian semistationary processes in the two papers. As a consequence, a wide range of possibly non-Markovian local and stochastic volatility models have the CFS property.

Modeling Asymmetries in Financial Data with Multiplicative Error Models

This thesis addresses modeling of financial time series, especially stock market returns and daily price ranges. Modeling data of this kind can be approached with so-called multiplicative error models (MEM). These models nest several well known time series models such as GARCH, ACD and CARR models. They are able to capture many well established features of financial time series including volatility clustering and leptokurtosis. In contrast to these phenomena, different kinds of asymmetries have received relatively little attention in the existing literature. In this thesis asymmetries arise from various sources. They are observed in both conditional and unconditional distributions, for variables with non-negative values and for variables that have values on the real line. In the multivariate context asymmetries can be observed in the marginal distributions as well as in the relationships of the variables modeled. New methods for all these cases are proposed. Chapter 2 considers GARCH models and modeling of returns of two stock market indices. The chapter introduces the so-called generalized hyperbolic (GH) GARCH model to account for asymmetries in both conditional and unconditional distribution. In particular, two special cases of the GARCH-GH model which describe the data most accurately are proposed. They are found to improve the fit of the model when compared to symmetric GARCH models. The advantages of accounting for asymmetries are also observed through Value-at-Risk applications. Both theoretical and empirical contributions are provided in Chapter 3 of the thesis. In this chapter the so-called mixture conditional autoregressive range (MCARR) model is introduced, examined and applied to daily price ranges of the Hang Seng Index. The conditions for the strict and weak stationarity of the model as well as an expression for the autocorrelation function are obtained by writing the MCARR model as a first order autoregressive process with random coefficients. The chapter also introduces inverse gamma (IG) distribution to CARR models. The advantages of CARR-IG and MCARR-IG specifications over conventional CARR models are found in the empirical application both in- and out-of-sample. Chapter 4 discusses the simultaneous modeling of absolute returns and daily price ranges. In this part of the thesis a vector multiplicative error model (VMEM) with asymmetric Gumbel copula is found to provide substantial benefits over the existing VMEM models based on elliptical copulas. The proposed specification is able to capture the highly asymmetric dependence of the modeled variables thereby improving the performance of the model considerably. The economic significance of the results obtained is established when the information content of the volatility forecasts derived is examined.

The economic consequences of financial reporting on Twitter

The use of social media has spread into many different areas including marketing, customer service, and corporate disclosure. However, our understanding of the timely effect of financial reporting information on Twitter is still limited. In this paper, we propose to examine the timely effect of financial reporting information on Twitter in Australian context, as reflect in the stock market trading. We aim to find out whether the level of information asymmetry within the stock market will be reduced, after the introduction of Twitter and the use of Twitter for financial reporting purpose

The nature and extent of use of Twitter for financial reporting by ASX listed companies: An exploratory study

We investigate the extent and nature of use of use of twitter for financial reporting by ASX listed companies. We consider 199 financial information related tweets from 14 ASX listed companies’ Twitter accounts. A thematic analysis of these tweets shows ‘Earnings’ and ‘Operational Performance’ are the most discussed financial reporting themes. Further, a comparison across industry sectors reveals that listed companies from varies industries show different usage patterns of financial reporting on Twitter. The examination of tweet sentiments also indicates a reporting bias within these tweets, as listed companies are more willing to disclose positive financial reporting tweets.

The economic consequences of corporate financial reporting on Twitter

The use of social media has spread into many different areas including marketing, customer service, and corporate disclosure. However, our understanding of the timely effect of financial reporting information on Twitter is still limited. In this paper, we examine the timely effect of financial reporting information on Twitter in the Australian context, as reflected in the follow-up stock market reaction. With the use of event methodology and comparative setting, we find that financial reporting disclosure on Twitter reduces the information asymmetry level. This is evidenced by reduction of bid-ask spread and increase of share trading volume. The results of this study imply that financial reporting disclosure on social media assists the dissemination of information and the stock market response to this information

Financial statement, Hebra Hased Ve-Amet

Digital image

Digital videos in financial accounting: A sociocognitive approach to learning

Understanding the important concepts necessary to undertake the preparation of consolidated financial statements has proven challenging for many accounting undergraduate students. As a result, the development of multimedia modelling concepts such as acquisition analysis, business combination valuation entries, reacquisition entries and intragroup transactions were embedded within an e-learning environment. The principle of modelling, derived from social cognitive theory, was applied to the design of the multimedia. A study was conducted to gauge the effectiveness of the approach and consider student perceptions with regard to learning through this approach. Quantitative data were collected from accounting undergraduate students (n= 464) enrolled across three different cohorts including international campuses (n=386), an Australian campus (n=49) and a distance education cohort (n=29). Analyses were undertaken to show significant differences between these cohorts. This research paper presents findings that indicate a positive and significant association between the number of times the videos were accessed, and the assignment score (p<0.05) was evident, suggesting that students that referred to the videos relatively frequently were able to utilise the knowledge gained from the videos to assist them in completing the assignment.