Browsing by Author "Mey, Mattheus Theodorus"

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    Investigating the association between the reconciliation quality of EBITDA disclosure by JSE-listed companies and factors associated with opportunistic disclosure
    (Stellenbosch : Stellenbosch University, 2019-04) Mey, Mattheus Theodorus; Lamprecht, C.; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy.
    ENGLISH SUMMARY : This study sought to determine whether the Johannesburg Stock Exchange (JSE) and the International Accounting Standards Board (IASB) should specify explicit disclosure requirements regarding the format of reconciliations between adjusted International Financial Reporting Standards (IFRS) earnings, referred to as non-GAAP earnings, and IFRS earnings. The disclosure of non-GAAP earnings is linked to both decision-usefulness and earnings management. As a form of earnings management, company management may disclose non-GAAP earnings in such a manner as to influence users’ perceptions of company performance in order to attain their own opportunistic goals. If reconciliations between non-GAAP earnings and IFRS earnings are of a high quality, the risk of opportunistic disclosure is limited and decision-useful information enabled. Focusing on earnings before interest, tax, depreciation and amortisation (EBITDA), the following research question was addressed: Are companies less likely to disclose higher quality reconciliations between EBITDA and IFRS earnings when factors linked to opportunistic disclosure are present? The quality of reconciliations between EBITDA and IFRS earnings, as included in the Stock Exchange News Service (SENS) reports of JSE-listed companies for the financial years 2014 to 2016, were determined. Ordinary least squares estimation was used to regress the EBITDA reconciliation score on three factors linked to opportunistic disclosure, namely: whether greater emphasis is placed on EBITDA than IFRS earnings; whether EBITDA is positive when IFRS earnings are negative; and whether invalid adjustments were made in deriving EBITDA. The results showed that higher reconciliation quality is negatively associated with instances where companies reported a positive EBITDA when IFRS earnings were negative. This potentially opportunistic use of poorly reconciled information provides support for the establishment of explicit disclosure requirements to enhance decision-useful disclosure. However, the association between reconciliation quality and the remaining two opportunistic factors, that is, when EBITDA is emphasised and when invalid adjustments are made in deriving EBITDA, was positive and indicates that management had disclosed decision-useful information through higher quality reconciliations when those two factors were present. In addition, the study found great diversity in how companies define EBITDA and also that the quality of EBITDA reconciliations in many SENS reports was lacking. This study contributes to the limited body of research on non-GAAP disclosure by South African companies. It also contributes to the voluntary disclosure literature by focusing on a non-GAAP earnings measure that has been largely ignored by prior studies, namely EBITDA. The findings may be of interest to the JSE in maintaining high quality corporate disclosure and may also have policy implications for the IASB which is involved in a disclosure initiative to improve presentation and disclosure in financial reports.
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    The value relevance of straight-lining lease expenses
    (Clute Institute, 2016-11) Mey, Mattheus Theodorus
    ENGLISH SUMMARY : The International Accounting Standards Board envisions the global acceptance of International Financial Reporting Standards (IFRS). Despite attempting convergence with IFRS, some national accounting standard setters, such as in India allow for certain carve-outs in their own accounting standards so as to meet country-specific requirements for fair presentation. Indian Accounting Standards allow for operating leases with fixed inflationary linked escalations to be accounted for on an as-incurred basis in contrast to the existing requirement in IFRS to straight-line such leases. This study explores whether operating lease expenses with fixed inflationary linked escalations and accounted for on a straight-line basis provide incremental value relevance beyond the as-incurred basis. This study exploits an occurrence in South Africa, where listed companies that previously accounted for operating leases with fixed inflationary-linked escalation clauses on an as-incurred basis, were required to straight-line those leases. Using the Ohlson (1995) valuation model this empirical study investigates the incremental value relevance of the straight-line basis over the as-incurred basis. Results show a significant change in the association between property-related operating lease expenses and market value indicators after the effect of straight-lining is introduced. This suggests that the straight-line basis provide investors with more value relevant information than when accounting for the expense as-incurred. Findings from this study prompt national accounting setters that allow for operating leases with fixed inflationary linked escalations to be accounted for on an as-incurred basis to consider first whether the straight-line basis do not provide more relevant information. Limiting the choice of accounting treatment may enhance comparability of financial statements.