Compliance with international financial reporting standards (IFRS) and the value relevance of accounting information in emerging stock markets : evidence from Kuwait

Since the 1960s, the value relevance of accounting information has been an important topic in accounting research. The value relevance research provides evidence as to whether accounting numbers relate to corporate value in a predicted manner (Beaver, 2002). Such research is not only important for investors but also provides useful insights into accounting reporting effectiveness for standard setters and other users. Both the quality of accounting standards used and the effectiveness associated with implementing these standards are fundamental prerequisites for high value relevance (Hellstrom, 2006). However, while the literature comprehensively documents the value relevance of accounting information in developed markets, little attention has been given to emerging markets where the quality of accounting standards and their enforcement are questionable. Moreover, there is currently no known research that explores the association between level of compliance with International Financial Reporting Standards (IFRS) and the value relevance of accounting information. Motivated by the lack of research on the value relevance of accounting information in emerging markets and the unique institutional setting in Kuwait, this study has three objectives. First, it investigates the extent of compliance with IFRS with respect to firms listed on the Kuwait Stock Exchange (KSE). Second, it examines the value relevance of accounting information produced by KSE-listed firms over the 1995 to 2006 period. The third objective links the first two and explores the association between the level of compliance with IFRS and the value relevance of accounting information to market participants. Since it is among the first countries to adopt IFRS, Kuwait provides an ideal setting in which to explore these objectives. In addition, the Kuwaiti accounting environment provides an interesting regulatory context in which each KSE-listed firm is required to appoint at least two external auditors from separate auditing firms. Based on the research objectives, five research questions (RQs) are addressed. RQ1 and RQ2 aim to determine the extent to which KSE-listed firms comply with IFRS and factors contributing to variations in compliance levels. These factors include firm attributes (firm age, leverage, size, profitability, liquidity), the number of brand name (Big-4) auditing firms auditing a firm’s financial statements, and industry categorization. RQ3 and RQ4 address the value relevance of IFRS-based financial statements to investors. RQ5 addresses whether the level of compliance with IFRS contributes to the value relevance of accounting information provided to investors. Based on the potential improvement in value relevance from adopting and complying with IFRS, it is predicted that the higher the level of compliance with IFRS, the greater the value relevance of book values and earnings. The research design of the study consists of two parts. First, in accordance with prior disclosure research, the level of compliance with mandatory IFRS is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book value, is examined empirically using two valuation models: price and returns models. The combined empirical evidence that results from the application of both models provides comprehensive insights into value relevance of accounting information in an emerging market setting. Consistent with expectations, the results show the average level of compliance with IFRS mandatory disclosures for all KSE-listed firms in 2006 was 72.6 percent; thus, indicating KSE-listed firms generally did not fully comply with all requirements. Significant variations in the extent of compliance are observed among firms and across accounting standards. As predicted, older, highly leveraged, larger, and profitable KSE-listed firms are more likely to comply with IFRS required disclosures. Interestingly, significant differences in the level of compliance are observed across the three possible auditor combinations of two Big-4, two non-Big 4, and mixed audit firm types. The results for the price and returns models provide evidence that earnings and book values are significant factors in the valuation of KSE-listed firms during the 1995 to 2006 period. However, the results show that the value relevance of earnings and book values decreased significantly during that period, suggesting that investors rely less on financial statements, possibly due to the increase in the available non-financial statement sources. Notwithstanding this decline, a significant association is observed between the level of compliance with IFRS and the value relevance of earnings and book value to KSE investors. The findings make several important contributions. First, they raise concerns about the effectiveness of the regulatory body that oversees compliance with IFRS in Kuwait. Second, they challenge the effectiveness of the two-auditor requirement in promoting compliance with regulations as well as the associated cost-benefit of this requirement for firms. Third, they provide the first known empirical evidence linking the level of IFRS compliance with the value relevance of financial statement information. Finally, the findings are relevant for standard setters and for their current review of KSE regulations. In particular, they highlight the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. In addition, the finding that stricter compliance with IFRS improves the value relevance of accounting information highlights the importance of full compliance with IFRS and not just mere adoption.

Browser security : a requirements-based approach

A browser is a convenient way to access resources located remotely on computer networks. Security in browsers has become a crucial issue for users who use them for sensitive applications without knowledge ofthe hazards. This research utilises a structure approach to analyse and propose enhancements to browser security. Standard evaluation for computer products is important as it helps users to ensure that the product they use is appropriate for their needs. Security in browsers, therefore, has been evaluated using the Common Criteria. The outcome of this was a security requirements profile which attempts to formalise the security needs of browsers. The information collected during the research was used to produce a prototype model for a secure browser program. Modifications to the Lynx browser were made to demonstrate the proposed enhancements.

On the feasibility of using servo-mechanisms in wireless multimedia sensor network deployments

This paper considers the use of servo-mechanisms as part of a tightly integrated homogeneous Wireless Multi- media Sensor Network (WMSN). We describe the design of our second generation WMSN node platform, which has increased image resolution, in-built audio sensors, PIR sensors, and servo- mechanisms. These devices have a wide disparity in their energy consumption and in the information quality they return. As a result, we propose a framework that establishes a hierarchy of devices (sensors and actuators) within the node and uses frequent sampling of cheaper devices to trigger the activation of more energy-hungry devices. Within this framework, we consider the suitability of servos for WMSNs by examining the functional characteristics and by measuring the energy consumption of 2 analog and 2 digital servos, in order to determine their impact on overall node energy cost. We also implement a simple version of our hierarchical sampling framework to evaluate the energy consumption of servos relative to other node components. The evaluation results show that: (1) the energy consumption of servos is small relative to audio/image signal processing energy cost in WMSN nodes; (2) digital servos do not necessarily consume as much energy as is currently believed; and (3) the energy cost per degree panning is lower for larger panning angles.

Virtual communities as tools to support teaching practicum

The impact of Web 2.0 and social networking tools such as virtual communities, on education has been much commented on. The challenge for teachers is to embrace these new social networking tools and apply them to new educational contexts. The increasingly digitally-abled student cohorts and the need for educational applications of Web 2.0 are challenges that overwhelm many educators. This chapter will make three important contributions. Firstly it will explore the characteristics and behaviours of digitally-abled students enrolled in higher education. An innovation of this chapter will be the appli- cation of Bourdieu’s notions of capital, particularly social, cultural and digital capital to understand these characteristics. Secondly, it will present a possible use of a commonly used virtual community, Facebook©. Finally it will offer some advice for educators who are interested in using popular social networking communities, similar to Facebook©, in their teaching and learning.

Access control : allocating resources to selfish agents

The ultimate goal of an authorisation system is to allocate each user the level of access they need to complete their job - no more and no less. This proves to be challenging in an organisational setting because on one hand employees need enough access to perform their tasks, while on the other hand more access will bring about an increasing risk of misuse - either intentionally, where an employee uses the access for personal benefit, or unintentionally through carelessness, losing the information or being socially engineered to give access to an adversary. With the goal of developing a more dynamic authorisation model, we have adopted a game theoretic framework to reason about the factors that may affect users’ likelihood to misuse a permission at the time of an access decision. Game theory provides a useful but previously ignored perspective in authorisation theory: the notion of the user as a self-interested player who selects among a range of possible actions depending on their pay-offs.

An approach to access control under uncertainty

In dynamic and uncertain environments such as healthcare, where the needs of security and information availability are difficult to balance, an access control approach based on a static policy will be suboptimal regardless of how comprehensive it is. The uncertainty stems from the unpredictability of users’ operational needs as well as their private incentives to misuse permissions. In Role Based Access Control (RBAC), a user’s legitimate access request may be denied because its need has not been anticipated by the security administrator. Alternatively, even when the policy is correctly specified an authorised user may accidentally or intentionally misuse the granted permission. This paper introduces a novel approach to access control under uncertainty and presents it in the context of RBAC. By taking insights from the field of economics, in particular the insurance literature, we propose a formal model where the value of resources are explicitly defined and an RBAC policy (entailing those predictable access needs) is only used as a reference point to determine the price each user has to pay for access, as opposed to representing hard and fast rules that are always rigidly applied.