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The Effect of the Changes in Accounting Estimates of the Discount Rate to the Costs on Account of Creating Provisions

Author

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  • Staszel Anna

    (Cracow University of Economics, Cracow, Poland; ORCID: 0000-0002-4577-6262)

  • Hołda Artur

    (Cracow University of Economics, Cracow, Poland; ORCID: 0000-0001-7744-2905)

Abstract

The aim of the study is to answer the question of how a slight change in the actuarial assumptions (regarding the discount rate used) can affect the amount of the provisions, and consequently create the level of costs in the entity. In order to find the answer the financial statements of 148 stock-exchange-quoted companies from 2007 to 2014 (1184 financial statements in total) were analysed, determining whether the changes in long-term provisions for retirement benefits provisions (due to the use of a different discount) have a significant impact on the financial statements of these companies. The research involved the use of deductive-inductive research methods in the form of literature review and analysis of the content of financial statements. The obtained results indicate that the estimation of the discount rate significantly affects the levels of costs related to creating provisions, which may be an effective tool for manipulating the financial result.

Suggested Citation

  • Staszel Anna & Hołda Artur, 2019. "The Effect of the Changes in Accounting Estimates of the Discount Rate to the Costs on Account of Creating Provisions," Financial Sciences. Nauki o Finansach, Sciendo, vol. 24(1), pages 94-114, March.
    • Handle: RePEc:vrs:finsci:v:24:y:2019:i:1:p:94-114:n:6
    DOI: 10.15611/fins.2019.1.06
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    References listed on IDEAS

    as
    1. Audrey Wen-hsin Hsu & Chung-Fern Wu & Jui-Chia Lin, 2013. "Factors in Managing Actuarial Assumptions for Pension Fair Value: Implications for IAS 19," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 1-23.
    2. Martin Glaum & Tobias Keller & Donna L. Street, 2018. "Discretionary accounting choices: the case of IAS 19 pension accounting," Accounting and Business Research, Taylor & Francis Journals, vol. 48(2), pages 139-170, February.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    4. Matthias Amen, 2007. "Simulation-Based Comparison of Existent IAS 19 Accounting Options," European Accounting Review, Taylor & Francis Journals, vol. 16(2), pages 243-276.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    discount rate; long-term provisions; reliability of financial statements; estimations; true and fair view;
    All these keywords.

    JEL classification:

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

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