Were regulatory changes in reporting "abnormal items" justified? : evidence of intra-period classificatory earnings management practices in Australia

Purpose Managers generally have discretion in determining how components of earnings are presented in financial statements in distinguishing between ‘normal’ earnings and items classified as unusual, special, significant, exceptional or abnormal. Prior research has found that such intra-period classificatory choice is used as a form of earnings management. Prior to 2001, Australian accounting standards mandated that unusually large items of revenue and expense be classified as ‘abnormal items’ for financial reporting, but this classification was removed from accounting standards from 2001. This move by the regulators was partly in response to concerns that the abnormal classification was being used opportunistically to manage reported pre-abnormal earnings. This study extends the earnings management literature by examining the reporting of abnormal items for evidence of intra-period classificatory earnings management in the unique Australian setting. Design/methodology/approach This study investigates associations between reporting of abnormal items and incentives in the form of analyst following and the earnings benchmarks of analysts’ forecasts, earnings levels, and earnings changes, for a sample of Australian top-500 firms for the seven-year period from 1994 to 2000. Findings The findings suggest there are systematic differences between firms reporting abnormal items and those with no abnormal items. Results show evidence that, on average, firms shifted expense items from pre-abnormal earnings to bottom line net income through reclassification as abnormal losses. Originality/value These findings suggest that the standard setters were justified in removing the ‘abnormal’ classification from the accounting standard. However, it cannot be assumed that all firms acted opportunistically in the classification of items as abnormal. With the removal of the standardised classification of items outside normal operations as ‘abnormal’, firms lost the opportunity to use such disclosures as a signalling device, with the consequential effect of limiting the scope of effectively communicating information about the nature of items presented in financial reports.

Knowledge management

This paper describes the background and methodology developed and employed in undertaking research developing a Knowledge Management Strategy for a key construction focused government agency. This paper reviews this methodology and examines a likely Knowledge Management Strategy.

Management strategies to harness cultural diversity on Australian constructions sites : a social identity perspective

Construction sites around the world employ large numbers of people from diverse cultural backgrounds. The effective management of this cultural diversity has important implications for the productivity, safety, health and welfare of construction workers and for the performance and reputation of firms which employ them. The findings of a three year, multi-staged study of cultural diversity management practices on construction sites are critiqued using social identity theory. This reveals that so called "best-practice" diversity management strategies may have an opposite effect to that intended. It is concluded that the management of diversity on construction projects would benefit from being informed by social identity research.

Design of flight avoidance manoeuvre alphabets for mixed centralised-decentralised separation management

This paper investigates a mixed centralised-decentralised air traffic separation management system, which combines the best features of the centralised and decentralised systems whilst ensuring the reliability of the air traffic management system during degraded conditions. To overcome communication band limits, we propose a mixed separation manager on the basis of a robust decision (or min-max) problem that is posed on a reduced set of admissible flight avoidance manoeuvres (or a FAM alphabet). We also present a design method for selecting an appropriate FAM alphabet for use in the mixed separation management system. Simulation studies are presented to illustrate the benefits of our proposed FAM alphabet based mixed separation manager.

Proactive management of collision risks in port waters using navigational traffic conflicts

Navigational collisions are one of the major safety concerns in many seaports. To address this safety concern, a comprehensive and structured method of collision risk management is necessary. Traditionally management of port water collision risks has been relied on historical collision data. However, this collision-data-based approach is hampered by several shortcomings, such as randomness and rarity of collision occurrence leading to obtaining insufficient number of samples for a sound statistical analysis, insufficiency in explaining collision causation, and reactive approach to safety. A promising alternative approach that overcomes these shortcomings is the navigational traffic conflict technique that uses traffic conflicts as an alternative to the collision data. This paper proposes a collision risk management method by utilizing the principles of this technique. This risk management method allows safety analysts to diagnose safety deficiencies in a proactive manner, which, consequently, has great potential for managing collision risks in a fast, reliable and efficient manner.

Design and rationale of a Prospective, Observational European Multicenter study on the efficacy of acute surgical decompression after traumatic Spinal Cord Injury: the SCI-POEM study

Objectives:Despite many years of research, there is currently no treatment available that results in major neurological or functional recovery after traumatic spinal cord injury (tSCI). In particular, no conclusive data related to the role of the timing of decompressive surgery, and the impact of injury severity on its benefit, have been published to date. This paper presents a protocol that was designed to examine the hypothesized association between the timing of surgical decompression and the extent of neurological recovery in tSCI patients.Study design: The SCI-POEM study is a Prospective, Observational European Multicenter comparative cohort study. This study compares acute (<12 h) versus non-acute (>12 h, <2 weeks) decompressive surgery in patients with a traumatic spinal column injury and concomitant spinal cord injury. The sample size calculation was based on a representative European patient cohort of 492 tSCI patients. During a 4-year period, 300 patients will need to be enrolled from 10 trauma centers across Europe. The primary endpoint is lower-extremity motor score as assessed according to the 'International standards for neurological classification of SCI' at 12 months after injury. Secondary endpoints include motor, sensory, imaging and functional outcomes at 3, 6 and 12 months after injury.Conclusion:In order to minimize bias and reduce the impact of confounders, special attention is paid to key methodological principles in this study protocol. A significant difference in safety and/or efficacy endpoints will provide meaningful information to clinicians, as this would confirm the hypothesis that rapid referral to and treatment in specialized centers result in important improvements in tSCI patients.Spinal Cord advance online publication, 17 April 2012; doi:10.1038/sc.2012.34.