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Compliance with IAS 2 in consolidated financial statements of PSE listed companies

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  • Kateřina Polachová

Abstract

As inventories represent a significant balance sheet item for many companies, their correct presentation and disclosure is fundamental for the financial statements' users. This article identifies compliance with the "IAS 2 Inventories" requirements in consolidated financial statements of selected Czech companies. After determining criteria for the issuer's sample, two research questions were set up for the evaluation of compliance measures with IAS 2. The research focuses on the association between the sum of total assets and the sum of inventories as well as an association between the sum of inventories and their allowances. Investigation is followed by the determination of compliance or non-compliance with the requirements of IAS 2. The research leads to the conclusion that the sum of inventories depends on the sum of assets. However, the sum of inventories' allowances does not depend on the sum of inventories. As far as the area of compliance with the IAS 2 requirements is concerned, on average, issuers did not comply with 3 out of total 8 IAS 2 requirements. The most problematic area of compliance was how reversals of write-downs were disclosed. The second most problematic requirement was a write-down justification and the third most problematic requirement was a disclosure of pledged inventories.

Suggested Citation

  • Kateřina Polachová, 2019. "Compliance with IAS 2 in consolidated financial statements of PSE listed companies," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2019(3), pages 61-78.
    • Handle: RePEc:prg:jnlefa:v:2019:y:2019:i:3:id:230:p:61-78
    DOI: 10.18267/j.efaj.230
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    References listed on IDEAS

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    1. Martin Červený, 2017. "Fulfillment of IFRS 2 Disclosure Requirements by Companies Listed on the Prague Stock Exchange," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2017(3), pages 53-64.
    2. Tsalavoutas, Ioannis & André, Paul & Evans, Lisa, 2012. "The transition to IFRS and the value relevance of financial statements in Greece," The British Accounting Review, Elsevier, vol. 44(4), pages 262-277.
    3. Barbu, Elena M. & Dumontier, Pascal & Feleagă, Niculae & Feleagă, Liliana, 2014. "Mandatory Environmental Disclosures by Companies Complying with IASs/IFRSs: The Cases of France, Germany, and the UK," The International Journal of Accounting, Elsevier, vol. 49(2), pages 231-247.
    4. Alin Monea, 2011. "Some Aspects Regarding Implications of IAS 2 "Inventory" in Romanian Acounting," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(4), pages 183-190.
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    More about this item

    Keywords

    IAS 2; inventories; allowances; IFRS disclosure;
    All these keywords.

    JEL classification:

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

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