The residual value models : a framework for business administration

This article investigates the relationship between a firm’s performance and Residual Value Models (RVM) which serve as decision making tools in corporate management. The main measures are the Economic Value Added (EVA®2) and Cash Value Added (CVA®3), with key components the Residual Income (RI), Free Cash Flow (FCF) and Weighted Average Cost of Capital (WACC). These measures have attracted considerable interest among scientists, practitioners and organizations in recent years. This work focuses on the relations, among Net Income (NI), Residual Income, Cash Flows from Operations activities (CFO), cost of equity capital and debt capital, we also discuss the usage of accounting data from accrual or cash flow basis, the economic adjustments on them, and the compatibility with IFRS4 rules or other countries’ GAAPs5. Generally, the decision making based on Value Based Management (VBM) key metrics shows inconsistencies and limitations in definitions and applications, but at the same time, it is a way for management to have influence on the company’s performance and total market value (TMV) which are strongly related to current and future VBM key metrics’ amounts. The contribution of this paper is that it surveys from a critical perspective, literature about Residual Value Models (RVM) and VBM metrics and proposes a new framework for managing the firm’s value and monitoring performance.peer-reviewe

Fair value and cost accounting, depreciation methods, recognition and measurement for fixed assets

In accounting and finance, fair value is a rational and unbiased estimate of the potential market price of a good, service or asset. On the other hand, cost accounting policy is more conservative and prudence. Accounting fairness refers mostly to the fair presentation, the initial recognition and measurement or valuation of an element. Therefore, adopting different accounting policies results in the assets being presented in the entity’s financial statements with different values. With the application of cost or fair value accounting policies across firms or countries, the financial statements are being incomparable. Another issue arises from depreciation methods applied. With the application of different depreciation accounting methods across firms or countries, the financial statements are being incomparable. Both accounting policies for recognition and measurement and depreciation methods, determine the net value of fixed assets in financial statements’ presentations. Thus, a decision-making procedure exists for recognition and measurement of property assets using the above components. The research objects of the paper are to explore in detail the relationship between cost and fair value accounting policies with depreciation methods, by enabling decision-making options. The financial method of discounted cash flow (DCF) technique is used for fair value accounting as well as for impairment test and the depreciation accounting methods are used for cost accounting policy, in order to explore the decision options for a property asset recognition and measurement. Following the above procedure, a fair value accounting model is correlated with the deprecation methods and an analysis of the impact of each decision-making alternative in financial statements’ figures is producedpeer-reviewe

Property assets fair value accounting under uncertainty

Accounting fairness refers mostly to the fair presentation, and therefore, measurement or valuation of an element recognized in the entity’s financial statements. In accounting and finance, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. Applying different accounting and valuation methods across firms or countries makes financial statements incomparable to each other. The research objects of the paper are: a literature view of IFRS2 and US GAAP3 principles and accounting standards for fixed assets; a critical perspective of the used accounting frameworks, providing comparison for each framework and each portfolio; the incorporation of uncertainty into the WLC4 methodology for the valuation and management of real property assets. The methodology of WLC with the NPV5 technique of a property asset, are used. These methods are incorporated into a decision-making mathematical model using the PERT probability distribution function for the input variables. The model is applied to a typical property asset (an office building as a part of a company’s fixed assets portfolio) in order to explore the significance of impacts from changes in structured variables by using the Monte Carlo Simulation. After the above procedure a unique fair value accounting model is founded on the dynamic integration of WLC fundamental concepts and the widely used appraisal measures for property assets with quantitative risk analysis to address the endemic in the property assets uncertainty.peer-reviewe

A comparative analysis for the accounting reporting of “employee benefits” between IFRS and other accounting standards : a case study for the biggest listed entities in Greece

The main aim of this paper is to illustrate a comparative analysis for the accounting reporting of “employee benefits” between the International Financial Reporting Standards (IFRS) and other accounting reporting standards. The empirical analysis is carried out in accordance with the Greek Generally Accepted Accounting Principles (GGAAP), with IFRS, following the implementation of International Accounting Standard (IAS) 19 "Employee Benefits" and with the U.S. Financial Accounting Standards (USFAS) 87. The sample consists of the 20 biggest listed entities in the Athens Stock Exchange (FTSE 20 index of the ASE). The contribution of the paper is to review the accounting reporting between different accounting standards, to a great extent, in order to find out the appropriate adjustments that have to be made for the treatment and presentation of employee benefits in the financial statements. The conclusions of the paper would be contributed to debate for the recognition of employee benefits on entities’ accounting statements in a more accurate way.peer-reviewe

Accounting GAAPs and accounting treatments for management of property : case studies from Greek real estate market

The present article reconciles the GAAP to each other, which apply to accounting recording of fixed assets. It separates the fixed assets, from the side of buyer, as Own Used, Investments, and Inventories and integrates these types of assets into four main portfolio categories. It examines, what are the features to incorporate an element of fixed assets in these portfolios. It analyzes the accounting treatments for each portfolio transaction and the impact of any accounting entry to equity and profit and loss account. It presents the key accounting profitability metrics for any kind of fixed asset. The subject of the article focuses on land and buildings as main part of the total fixed assets of a company. It discusses the influence of taxations and other expenditures at purchase time on the cost and tries to establish a purchase price allocation method for property acquisition. It describes the accounting entries for the revenues, expenses and valuations per portfolio. It makes a comparative analysis between Greek GAAP, IFRS and U.S GAAP for accounting treatments of fixed assets. Finally, it uses the framework of Greek Real Estate Market as experimental setting where the principles of Historic Cost and Fair Value Accounting can be compared. The contribution of this article is that it surveys from a critical perspective, principles, literature and the practice about all the above issues, and presents from accounting point of view a way to managing and monitoring real estate investments.peer-reviewe

Measuring a bank’s financial health : a case study for the Greek banking sector

The main aim of this article is to demonstrate a holistic framework for measuring a bank’s financial health by classifying its main responsibilities between conformance and performance. Responsibilities are classified into five categories as follows: First, Corporate Financial Reporting (CFR) that integrates General Accepted Accounting Principles (GAAP), Generally Accepted Auditing Standards (GAAS), Securities Exchange Commission (SEC), Financial Services Authority (FSA), and International Accounting Standards (IAS). Second, Risk Management Procedures (RMP), that incorporates methods and directives which arise from Basel I, Basel II, Capital Adequacy frameworks or solvency ratio benchmarks. Third, Corporate Governance (CG), that integrates Sarbanes – Oxley Act, Audit Committees, and Internal Audit Mechanisms. Fourth, Corporate Social Responsibility (CSR), that consists of instructions and standards such as Global Reporting Initiative (GRI) – social and environmental, Social accountability (SA 8000) – working conditions, International Organization for Standardization (ISO 9000). Fifth, Stockholders Value Creation (SVC), that is a set of methodologies and ratios used in order to measure value creation for shareholders such as Strategic and Balanced scorecard, Economic Value Added EVA®, and other business performance management tools. On the other, the Rating Agencies (RA) applies various rating systems in different fields. Based on this framework, the article correlates all qualitative and quantitative components, with the banks’ ratings. The dependent variable is the bank’s financial health score, represented by a dummy variable based on the bank’s rating by the rating agencies and from the relevant value of each bank that arises from its performance in the above mentioned framework of responsibilities. The independent quantitative variables belong to a set of financial, risk and market key ratios and the qualitative variables to a set of dummy variables which describe the above framework. With the use of financial and other published data of the Greek banking sector the article proposes a new model and a procedure for the explanation, management and monitoring of a bank’s financial health.peer-reviewe

Toward a common tax regime for the European Union countries

The tax burden on wages, profits, property, and goods or services has a serious impact on cross-country competiveness, something that, in turn, impinges strongly on the actual economy of common markets such as the European Union (EU). While the mobility of productive factors is directly related with country tax-regime differences, government budget funding from tax revenues and rates are the main fiscal policy tools. This article analyzes the trends, similarities and differences between the tax regimes of European Monetary Union (EMU) for the period from1995 to 2019. The methodologies we employ include time series analysis, regression analysis and multivariate cluster analysis. The data are mainly collected from the OECD database and tax revenue departments at country level. We argue that there are significant differences among the tax regimes of EU countries and that no policy has been implemented to ensure tax homogeneity across the EU, nor is there any likelihood of such. The anarchy in fiscal policy is an obstacle for the European Integration. Budget deficits have an impact on taxation and countries, invariably, manage the recent debt crisis by selecting different taxes as fiscal policy tools. Our article presents the differences between tax regimes of EMU countries and shows that the level of economic growth affects the structure of taxes at work and alters the performance of different types of taxes; is also wishes to explain the factors that differentiate tax regimes by using multi dimensional criteria and variance analysis. Our work contributes to the debate toward a common tax regime between EU countries and our analysis is concentrated on this.peer-reviewe

A capital structure financial analysis and unmeasured effect of each countries regime : the real estate companies (REITS)

This article investigates the capital structure of Real Estate companies (REITS) and how it is connected with key financial ratios. Financial analysis provides significant insight of the company capital structure. Existing financial models accumulate the dynamics of different key factors that enhance or diminish the capabilities of a company to extend the debt finance. Previous literature review in trade-off theory, pecking order theory, agency costs and market timing hypothesis postulate the relation of capital structure with several financial measurements. The contribution of this research is to link debt to capital ratio with independent variables, which are important within the real estate business context. Panel data analysis of an adequate sample, from 2005 to 2010, of 371 international listed real estate companies’, materialize our assumptions of this linkage of debt ratio. The unmeasured effect of each countries regime is inherited into the equation with the incorporation of dummy variables. This valuation methodology is an easy accessible tool for professionals and practitioners engaged in real estate business.peer-reviewe

The clusters of economic similarities between EU countries : a view under recent financial and debt crisis

This article analyzes the clusters of similarities among EU member states before and during the recent financial and debt crisis, using variables from banking, taxation, government debt and deficit, and the Current Account of the Balance of Payment; our study follows the method of Multi-Sample Case of Cluster Analysis between and within groups of EU countries. Our findings show that the current economic crisis the EU is faced with is twofaceted and has arisen from the financial and banking sectors and from government debt. In this sense, problems have resulted from the credit policies of the national banking sectors and from national fiscal and budgetary controls. These two crisis facets are correlated and a new problem emerges concerning the fiscal similarities of European Monetary Union (EMU) countries and the necessity for a fiscal union or for common fiscal policies between them. The aim of this article is to help us understand that the current EU crisis is due to the lack of homogeneity in fiscal and financial polishes across the Union.peer-reviewe

The Residual Value Models: A Framework for Business Administration

This article investigates the relationship between a firm’s performance and Residual Value Models (RVM) which serve as decision making tools in corporate management. The main measures are the Economic Value Added (EVA®) and Cash Value Added (CVA®), with key components the Residual Income (RI), Free Cash Flow (FCF) and Weighted Average Cost of Capital (WACC). These measures have attracted considerable interest among scientists, practitioners and organizations in recent years. This work focuses on the relations, among Net Income (NI), Residual Income, Cash Flows from Operations activities (CFO), cost of equity capital and debt capital, we also discuss the usage of accounting data from accrual or cash flow basis, the economic adjustments on them, and the compatibility with IFRS4 rules or other countries’ GAAPs5. Generally, the decision making based on Value Based Management (VBM) key metrics shows inconsistencies and limitations in definitions and applications, but at the same time, it is a way for management to have influence on the company’s performance and total market value (TMV) which are strongly related to current and future VBM key metrics’ amounts. The contribution of this paper is that it surveys from a critical perspective, literature about Residual Value Models (RVM) and VBM metrics and proposes a new framework for managing the firm’s value and monitoring performance. f his legislature, which ends in 2010 (1). Polish Prime Minister Donald Tusk said during the Economic forum in Krynica that Poland would adopt euro in 2011 a year before the European football championship organized together by Poland and Ukraine. In November 2008 Polish Government accepted so called road map to introduce euro by 2012. Firstly, Polish zloty should join the ERM 2 system which was planned in the middle of 2009. Secondly, after accomplishment convergence criteria in 2011, Poland is going to fix the permanent exchange rate between polish zloty and euro. Thirdly, introduction of Euro and withdrawal of polish zloty is previewed on 1 January 2012. The prices on polish market are going to be presented in two currencies (polish zloty and Euro) during six month. However, before Poland will join the euro zone , the Polish Constitution has to be amended to give the European Central Bank the right to print and distribute euro as a national currency. In connection with the world financial crises and suddenly devaluation of polish zloty most economist agree that government plan of euro introduction in Poland is too rushed and not realistic and adhesion of zloty into ERM 2 system should be delaying.Value Based Management, Corporate Governance, Performance Measurement, EVA®, Residual Income, WACC