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Constructing Accounting Uncertainity Estimates Variable

Author

Listed:
  • Nino Serdarevic

    (University of Zenica)

Abstract

This paper presents research results on the BIH firms’ financial reporting quality, utilizing empirical relation between accounting conservatism, generated in created critical accounting policy choices, and management abilities in estimates and prediction power of domicile private sector accounting. Primary research is conducted based on firms’ financial statements, constructing CAPCBIH (Critical Accounting Policy Choices relevant in B&H) variable that presents particular internal control system and risk assessment; and that influences financial reporting positions in accordance with specific business environment. I argue that firms’ management possesses no relevant capacity to determine risks and true consumption of economic benefits, leading to creation of hidden reserves in inventories and accounts payable; and latent losses for bad debt and assets revaluations. I draw special attention to recent IFRS convergences to US GAAP, especially in harmonizing with FAS 130 Reporting comprehensive income (in revised IAS 1) and FAS 157 Fair value measurement. CAPCBIH variable, resulted in very poor performance, presents considerable lack of recognizing environment specifics. Furthermore, I underline the importance of revised ISAE and re-enforced role of auditors in assessing relevance of management estimates.

Suggested Citation

  • Nino Serdarevic, 2012. "Constructing Accounting Uncertainity Estimates Variable," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 8(3), pages 62-75, October.
    • Handle: RePEc:rze:efinan:v:8:y:2012:i:3:p:62-75
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    References listed on IDEAS

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    1. Ball, Ray & Shivakumar, Lakshmanan, 2005. "Earnings quality in UK private firms: comparative loss recognition timeliness," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 83-128, February.
    2. Benston, George J., 2006. "Fair-value accounting: A cautionary tale from Enron," Journal of Accounting and Public Policy, Elsevier, vol. 25(4), pages 465-484.
    3. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
    4. Givoly, Dan & Hayn, Carla, 2000. "The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?," Journal of Accounting and Economics, Elsevier, vol. 29(3), pages 287-320, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    accounting conservatism; APC; fair value measurement; risk assessment; uncertainties;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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