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.

A matter of confidence : privacy compliance for connected-up enterprises

Governments around the world are increasingly investing in information and communications technology (ICT) as a means of improving service delivery to citizens. Government ICT adoption is also being driven by a desire to streamline information accessibility and information flows within government - both between different levels of government and between different departments at the same level. Increasing the availability of information internally and to citizens has clear and compelling benefits but it also carries risks that must be carefully managed. This talk will examine the implications of such E-government initiatives for a range of compliance obligations, with a focus on information privacy. It will review recent developments in the area of systems-based enforcement of privacy policies and the particular privacy challenges presented by the aggregation of geospatial information.

Money laundering and FATF compliance by the international community

This paper examines the anti-money laundering systems of Australia, the United Arab Emirates (UAE), the United Kingdom (UK) and the United States of America (USA), the extent to which they have implemented the Financial Action Task Force (FATF) recommendations, and how compliance with these recommendations is affected by local cultural and economic factors. The paper makes use of FATF evaluation reports to compare the countries’ compliance; it examines some of the underlying cultural considerations and culture-specific ethical issues that affect the extent of compliance, and how cultural and ethical considerations may affect good governance. The findings indicate that the UK and the USA are the most advanced with regards to their compliance with the FATF recommendations and Australia and the UAE less so. The UAE is in particular found to be least compliant. We relate this finding to previous work on how a country’s legal and financial systems develop in line with its religion, culture and socio-economic situation, and examine how such local factors have affected the UAE’s financial and anti-money laundering and combating the financing of terrorism (AML/CFT) systems. This research will be of interest to policy-makers and government agencies involved in addressing money laundering and its successful detection and prosecution.

Compliance, normality and the patient on peritoneal dialysis

Monitoring and enhancing patient compliance with peritoneal dialysis (PD) is a recurring and problematic theme in the renal literature. A growing body of literature also argues that a failure to understand the patient's perspective of compliance may be contributing to these problems. The aim of this study was to understand the concept of compliance with PD from the patient's perspective. Using the case study approach recommended by Stake (1995), five patients on PD consented to in-depth interviews that explored the meaning of compliance in the context of PD treatment and lifestyle regimens recommended by health professionals. Participants also discussed factors that influenced their choices to follow, disregard, or refine these regimens. Results indicate that health professionals acting in alignment with individual patient needs and wishes, and demonstrating an awareness of the constraints under which patients operate and the strengths they bring to their treatment, may be the most significant issues to consider with respect to definitions of PD compliance and the development of related compliance interventions. Aspects of compliance that promoted relative normality were also important to the participants in this study and tended to result in greater concordance with health professionals' advice.

Serious tax non compliance : motivation and guardianship

This article reviews what international evidence exists on the impact of civil and criminal sanctions upon serious tax noncompliance by individuals. This construct lacks sharp definitional boundaries but includes large tax fraud and large-scale evasion that are not dealt with as fraud. Although substantial research and theory have been developed on general tax evasion and compliance, their conclusions might not apply to large-scale intentional fraudsters. No scientifically defensible studies directly compared civil and criminal sanctions for tax fraud, although one U.S. study reported that significantly enhanced criminal sanctions have more effects than enhanced audit levels. Prosecution is public, whereas administrative penalties are confidential, and this fact encourages those caught to pay heavy penalties to avoid publicity, a criminal record, and imprisonment.

Compliance, peritoneal dialysis and chronic kidney disease : lessons from the literature

Poor patient compliance with peritoneal dialysis (PD) has significant adverse effects on morbidity and mortality rates in individuals with chronic kidney disease (CKD). It also adds to the resource burdens of healthcare services and providers. This paper explores the notion of PD compliance in patients with CKD with reference to the relevant published literature. The analysis of the literature reveals that ‘PD compliance’ is a complex and challenging construct for both patients and health professionals. There is no universal definition of compliance that is widely adopted in practice and research, and therefore a lack of consensus on how to determine ‘compliant’ patient outcomes. There are also multiple and interconnected determinants of PD compliance that are context-bound, which healthcare professionals must be aware of, and which makes producing consensus of measuring PD compliance difficult. The complexity of the interventions required to produce even a modest improvement in PD compliance, which are described in this paper, are significant. Compliance with PD and other treatments for CKD is a multidimensional, context-bound concept, that to date has tended to efface the role and needs of the renal patient. We conclude the paper with the implications for contemporary practice.

A test vehicle for compliance with resilience requirements in index-based e-health systems

Increasingly, national and international governments have a strong mandate to develop national e-health systems to enable delivery of much-needed healthcare services. Research is, therefore, needed into appropriate security and reliance structures for the development of health information systems which must be compliant with governmental and alike obligations. The protection of e-health information security is critical to the successful implementation of any e-health initiative. To address this, this paper proposes a security architecture for index-based e-health environments, according to the broad outline of Australia’s National E-health Strategy and National E-health Transition Authority (NEHTA)’s Connectivity Architecture. This proposal, however, could be equally applied to any distributed, index-based health information system involving referencing to disparate health information systems. The practicality of the proposed security architecture is supported through an experimental demonstration. This successful prototype completion demonstrates the comprehensibility of the proposed architecture, and the clarity and feasibility of system specifications, in enabling ready development of such a system. This test vehicle has also indicated a number of parameters that need to be considered in any national indexed-based e-health system design with reasonable levels of system security. This paper has identified the need for evaluation of the levels of education, training, and expertise required to create such a system.

The impact of the Malaysian code on corporate governance: compliance, institutional investors and stock performance

In 2001, the Malaysian Code on Corporate Governance (MCCG) became an integral part of the Bursa Malaysia Listing Rules, which requires all listed firms to disclose the extent of compliance with the MCCG. Our panel analysis of 440 firms from 1999 to 2002 finds that corporate governance reform in Malaysia has been successful, with a significant improvement in governance practices. The relationship between ownership by the Employees Provident Fund (EPF) and corporate governance has strengthened during the period subsequent to the reform, in line with the lead role taken by the EPF in establishing the Minority Shareholders Watchdog Group. The implementation of MCCG has had a substantial effect on shareholders' wealth, increasing stock prices by an average of about 4.8%. Although there is no evidence that politically connected firms perform better, political connections do have a significantly negative effect on corporate governance, which is mitigated by institutional ownership.

Personal Injuries Proceedings Act 2002, s 32 - Duty to Disclose - consequences of non-disclosure - discretion to excuse non-compliance

In Newson v Aust Scan Pty Ltd t/a Ikea Springwood [2010] QSC 223 the Supreme Court examined the discretion under s 32(2) of the Personal Injuries Proceedings Act 2002 (Qld), to permit a document which has not been disclosed as required by the pre-court procedures under the PIPA to be used in a subsequent court proceeding. This appears to be the first time that the nature and parameters of the discretion have been judicially considered.