Entity's information disclosure: a model

Availability of information is alleged to be a key requirement for the efficient functioning of a company or markets. Rapid economic development, processes of globalization and integration, establishment of a single financial market, changes in entities and the way they are managed require creation of new approaches and methods for information analysis and evaluation. However, the importance of corporate information is not diminishing. Entity’s information, its gathering, conversion and disposal is a complex phenomenon that integrates numerous scientific fields and practical areas such as finance, accounting, marketing, corporate management, public relations, economics, law. The analysis of scientific literature reveals that various papers address the issues of corporate information disclosure; however, they mostly analyze a single aspect or problem. Moreover, the literature analysis shows a lack of a credible theory which would facilitate the analysis and evaluation of entities’ information disclosure. Although, a few integrated studies have been found (Verrechia, 2001; Healy, Palepu, 2001, Dye, 2001; Kothari, 2001). In the scientific literature two directions of the research in the field of entity’s information disclosure are common: analytical (theoretical) papers (Ronen, Jaari, 1999; Suijs, 1999; Fishman, Hagerty, 1997; Baums, 2002; Colley et al., 2005; Allen, 2005; Cohen, 2002 and others) and empirical research papers (Botosan, 1997; Hope 2003; Hossain et al., 1995; Jun Lin, Wang, 2001; Fields et al., 2001; Globerman, Singleton, 2000; Rahman et al., 2002; Al-Razeen, Karbhari, 2004; Vanstraelen et al., 2003; Labelle, 2002; Ismail, 2002), which cover similar research topics, but employ different methods and tools of analysis, and report diverse findings. In this paper, findings of the both research directions are linked.The aim of the paper is to propose a model of the entity’s information disclosure. To reach the goal of the paper scientific methods of analysis, integration, interpretation, synthesis have been engaged and scientific literature in economics, management, accounting, finance, law, computer science, logistics, public relations and other fields has been analysed. The entity’s information disclosure is defined as a process which is carried out in an entity and which aggregates information flow of an entity, evaluation of internal and environmental influencing factors, transformation of data into information, and evaluation of influence and consequences of financial information flow for general and specific environment. The model of entity’s information disclosure is developed based on systematic approach to an entity and processual concept of management. The model is aimed to evaluate and manage public information flow of an entity. The model integrates 5 elements: 1) an entity; 2) the entity’s financial information flow; 3) environment in which the entity operates; 4) factors that influence information disclosure; and 5) influence and outcome of the entity’s information disclosure to general and specific environment. This model may be applied to financial, corporate governance, environmental and other information disclosure. In the model, the entity’s information flow is defined as entity’s information, which is disposed to environment and which is described by content, form, mean of dissemination, regularity and periodicity, users, voluntarism of disclosure, time orientation, and qualitative characteristics.The model for the entity’s information disclosure may be used: 1) for decision making in an entity, i.e. to evaluate what kind of information flow has to be formed in order to meet corporate transparency level, defined in entity’s public relations policy; and 2) by external information users, to assess the entity’s information flow, its influencing factors, etc. in order to make a judgment on the entity’s corporate transparency

An Assessment of accounting regulation changes in Lithuania

Laikoma, kad informacija ir jos viešumas yra lemiami veiksniai sprendžiant efektyvų išteklių paskirstymą ekonomikoje. Anksčiau atlikti moksliniai tyrimai parodė, kad įmonių finansinę informaciją įtakoja apskaitos ir ataskaitų reglamentavimas ir Europos Sąjungoje vykstantys apskaitos harmonizavimo procesai, tačiau Lietuvoje šie procesai buvo mažai analizuoti. Straipsnio tikslas yra identifikuoti ir įvertinti apskaitos reglamentavimo pokyčius, vykstančius Lietuvoje. Straipsnyje nagrinėjami trys klausimai: įvertinamos prielaidos apskaitos reglamentavimo pokyčiams Lietuvoje; nustatomi apskaitos reglamentavimo pokyčiai Lietuvoje de jure ir jie palyginami su pokyčiais Europos Sąjungoje; ir įvertinama Lietuvos kompanijose de facto vykdoma apskaita. Tyrimo rezultatai rodo, kad tiriamuoju laikotarpiu de jure Lietuvos apskaitos reglamentavimas smarkiai keitėsi. Šie pokyčiai daugiausia buvo įtakoti plačių apskaitos harmonizavimo procesų Europos Sąjungoje; vis dėlto Lietuvos apskaitos reglamentavimas turi nacionalines ypatybes, kaip pavyzdžiui privaloma finansinė apskaita ir ataskaitos buvo įvesti tik 2001 metais. Mūsų nacionaliniai verslo apskaitos standartai yra sukurti kaip supaprastinta tarptautinių finansinės atskaitomybės standartų versija ir Lietuva išvengė dvigubų apskaitos standartų situacijos. Apskaitos reglamentavimo įgyvendinimo de facto analizė atskleidžia, kad Lietuvos kompanijos veikė pagal skirtingus modelius: kai kurios anksti įvedė tarptautinius finansinės atskaitomybės standartus, kai tuo tarpu kitos įvedė apskaitos reglamentavimo pokyčius tik kai tai tapo privaloma.Information and its availability are assumed to be key determinants of efficient resource-allocation decisions in the economy. Previous scientific research has demonstrated that financial information of entities is influenced by accounting and reporting regulation and undergoing accounting harmonization processes in the European Union, however in Lithuania these issues were merely analyzed. The aim of this paper is to identify and evaluate undergoing accounting regulation changes in Lithuania. The paper addresses three issues: evaluates the background for accounting regulation changes in Lithuania; identifies de jure accounting regulation changes in Lithuania and compares them with the same of the European Union; and assesses de facto implementation of accounting regulation by Lithuanian companies. Research results indicate that over the research period de jure Lithuanian accounting regulation has undergone significant changes. These changes have largely been influenced by the European Union wide accounting harmonization processes; however Lithuanian accounting regulation has national peculiarities such as mandatory financial accounting and reporting was introduced only in 2001; our national Business Accounting Standards are created as a simplified version of the IFRS and Lithuania has avoided double-set accounting standards situation. Analysis of de facto implementation of accounting regulation reveals that Lithuanian companies have followed a different pattern: some have chosen early IFRS adoption while others adopted accounting regulation changes only when they became compulsory

ARE IFRS REQUIREMENTS APPLIED IN PRACTICE IN LITHUANIA: CASE OF PENSION RELATED PAYMENTS

Lithuania along with other European Union member states and countries worldwide has been undergoing major changes in its financial accounting system. The process, commonly named as accounting harmonization, is aimed to eliminate the differences among the accounting standards used by various countries, to increase transparency, to make disclosed information more mutually comparable, to contribute to a better functioning of the financial markets. To reach these goals a set of high quality accounting standards, namely International financial reporting standards (IFRS) has been introduced. Accounting harmonization, its driving forces, outcomes and other aspects are being examined and followed closely by researchers and accounting professionals. It could be stated that one of the most interesting topics of current scientific research is to assess whether the accounting regulation (or de jure) harmonization leads to the accounting practice (or de facto) harmonization. It has to be noted that previous research conducted by the author in the field of accounting harmonization discovered some evidence that IFRS requirements are not always necessarily applied in practice by Lithuanian companies. To address this important issue further a research of financial information disclosed by Lithuanian listed companies has been conducted. The aim of the research is using an example of pension related payments to assess whether IFRS requirements are adopted in accounting and information disclosure practices of Lithuanian corporations. In IFRS pension related payments are named post-employment benefits and are classified into defined contribution and defined benefits plans. In Lithuania both types of post-employment benefits are enforced by law as companies have to pay defined contribution payments to state social welfare fund and defined benefit payments in the amount of 2 monthly salaries to all retiring employees. Therefore information about such payments has been expected to be found in the financial statements of the companies. Results of the research revealed that only less than half of Lithuanian companies disclose such information. In 2011 payments to the state social welfare fund were disclosed by total of 14 companies (or 45,16% of companies that participated in the research), when obligatory retirement payment of 2 monthly salaries – by total of 15 companies (or 48,39%). It was concluded that Lithuanian companies do not follow all the requirements of IFRS although they claim compliance with these standards. Such results raise questions about true and fair view, reliability of the disclosed information and competencies of managers and auditors. Moreover, results of the research also revealed a strong influence of auditors in preparation of disclosures about post-employment benefits. Although participation of the auditors is not a harmful practice, in this case question about competencies and independence of the auditors have to be raised. DOI: https://doi.org/10.15544/ssaf.2012.1

Are IFRS requirements applied in practice in Lithuania: case of pension related payments

Lithuania along with other European Union member states and countries worldwide has been undergoing major changes in its financial accounting system. The process, commonly named as accounting harmonization, is aimed to eliminate the differences among the accounting standards used by various countries, to increase transparency, to make disclosed information more mutually comparable, to contribute to a better functioning of the financial markets. To reach these goals a set of high quality accounting standards, namely International financial reporting standards (IFRS) has been introduced. Accounting harmonization, its driving forces, outcomes and other aspects are being examined and followed closely by researchers and accounting professionals. It could be stated that one of the most interesting topics of current scientific research is to assess whether the accounting regulation (or de jure) harmonization leads to the accounting practice (or de facto) harmonization. It has to be noted that previous research conducted by the author in the field of accounting harmonization discovered some evidence that IFRS requirements are not always necessarily applied in practice by Lithuanian companies. To address this important issue further a research of financial information disclosed by Lithuanian listed companies has been conducted. The aim of the research is using an example of pension related payments to assess whether IFRS requirements are adopted in accounting and information disclosure practices of Lithuanian corporations. In IFRS pension related payments are named post-employment benefits and are classified into defined contribution and defined benefits plans. In Lithuania both types of post-employment benefits are enforced by law as companies have to pay defined contribution payments to state social welfare fund and defined benefit payments in the amount of 2 monthly salaries to all retiring employees.Therefore information about such payments has been expected to be found in the financial statements of the companies. Results of the research revealed that only less than half of Lithuanian companies disclose such information. In 2011 payments to the state social welfare fund were disclosed by total of 14 companies (or 45,16% of companies that participated in the research), when obligatory retirement payment of 2 monthly salaries – by total of 15 companies (or 48,39%). It was concluded that Lithuanian companies do not follow all the requirements of IFRS although they claim compliance with these standards. Such results raise questions about true and fair view, reliability of the disclosed information and competencies of managers and auditors. Moreover, results of the research also revealed a strong influence of auditors in preparation of disclosures about post-employment benefits. Although participation of the auditors is not a harmful practice, in this case question about competencies and independence of the auditors have to be raised

Business valuation methods and their implementation in Lithuania analysis

This study provides insights on the issues of business valuation implementation in Lithuania. Valuation is a complex area and experts often differ in methodology used. First of all, based on detail analysis of financial and investment literature, this paper overviews theoretical and practically used business valuation methods and approaches in order to prepare a background for Lithuanian business valuation analysis. There are three theoretical approaches to valuation: discounted cash flow valuation, relative valuation and contingent claim valuation. For practical implementation purposes all business valuation models are classified into 3 groups: income approach, market value approach, and assets approach. Further part presents Lithuanian business valuation methods approved by law and analyses their limitation emerging from present Lithuanian business conditions. Lithuanian laws recommend using comparable sales, replacement cost, and income capitalization or discounted cash flow methods. However all of them have some limitations, primarily due to the present Lithuanian financial markets development level and lack of historical data about companies' financial performance. Finally, utilizing the survey technique, this study provides an empirical examination of major business valuation goals and methods used by Lithuanian companies. Survey findings indicate that Lithuanian business valuation practice does not vary significantly form such practices in the other countries. It was found that experts place high importance on discounted cash flow valuation method and use comparable sales method as an alternative approach. It was also determined that acquisitions and takeovers (including privatization) were the main group of reasons for business valuation in our country.Based on the survey findings and author's analysis, the paper concludes some major business valuation problems and limitations, which are classified into two groups: overall economic and financial market problems and company specific problems

Activities of Lithuanian other than higher education institutions in the process of providing education in IAS

Vytauto Didžiojo universiteta

A concept of accounting quality from accounting harmonisation perspective

ISSN online 2256-0394The aim of this paper is to assess if and how a concept of accounting quality differs from perspectives of various types of organisations affected by the accounting harmonisation process. Accounting harmonisation is commonly associated with worldwide adoption of IFRS by public interest companies. However, in the EU this process is much broader and also involves efforts to harmonise accounting standards for non-listed companies and public sector organisations. Analysis of the previous scientific research revealed that accounting quality was commonly assessed from IFRS users' perspective and approximated with the quality of financial statements. However, based on the interviews with experts of Lithuanian accounting market, the concept of accounting quality for small and medium companies and public sector institutions is ambiguous and still needs to be clarified. Definition of accounting quality only as the quality financial statements is too narrow as financial disclosure is not that important for such companies. For non-listed companies and public sector organisations, other aspects and factors, such as qualification of accountants, supervision of accounting and reporting, overall and managers' perspective on importance of accounting, have more importance while defining accounting qualityFinansų katedraVytauto Didžiojo universiteta

Types of employee benefits in Lithuania – information disclosed in companies’ financial statements

Employees have always been recognized among the most important resources of the companies. To attract, retain and motivate their employees, companies introduce various motivation and compensation methods. In accounting they are commonly named as employee benefits. Employee benefits typically refer to wages and salaries, retirement plans, health insurance, life insurance, disability insurance, vacation and employee stock ownership plans. The aim of this paper is to assess what employee benefits are disclosed in financial statement of Lithuanian companies. Lithuania, as a member of the European Union, has been undergoing major changes in its financial accounting system. As a result of accounting harmonization processes, publicly traded Lithuanian corporations are obliged to use International financial reporting standards (IFRS), while closely held companies are required to apply Business accounting standards (BAS). IFRS regulates accounting and disclosure requirements for 5 types of employee benefits: short term employee benefits, post-employment benefits, other long term benefits, termination benefits, and share-based payments. Each type of employee benefits has its own recognition, valuation and disclosure requirements and may be useful for interested parties to make their decisions. To assess the variety of employee benefits in Lithuania an analysis of information disclosed in financial statements of 32 Lithuanian companies listed in Vilnius OMX stock exchange has been conducted. Analysis of financial statements of the companies revealed that Lithuanian companies are quite conservative in employee’s compensation methods and variety of employee benefits is not big. Shortterm employee benefits dominate in all the companies.In Lithuania companies are required by law to pay: defined contribution payments to state social welfare fund and single payment in the amount of 2 monthly salaries to all retiring employees. Information about such payments has been expected to be found in the financial statements of the companies. Results of the research reveal that only fraction of companies disclose such information. Payments to state social welfare fund was disclosed by 8 companies, when obligatory retirement payment – by 5 companies. Such results raise questions for managers and auditors of the companies about accounting and disclosure policies of the companies. However some voluntary employee benefits practices have also been documented. Companies offer bonus plans, jubilee payments and payments for long time employment in the company, although number of such companies is not high (total of 8 companies). Opposite to prediction, two companies offer sharebased payments to their employees. Information disclosed by Lithuanian companies also reveals a strong influence of auditors in preparation of information about employee benefits. Clients of international audit companies generally disclose identical information in accounting policy part of financial statement. On the other hand disclosure of clients of Lithuanian audit companies is much less than of international audit firms. Finally, it also has to be noted that information about employee benefits of Lithuanian companies is not easily understandable or readable. It would be difficult to find, analyze and use it not only by worker or middle level manager but sometimes even for professional. Results of the research may be discussed form various perspectives. It may be argued that accounting and disclosure for employee benefits requirements are complicated therefore companies need more time to build up their practices and expertise.Other would suggest that such results show overall view to corporate non transparency. Besides, many motivation and compensation methods (such as health insurance, life-long learning, etc.) are not in a favorable position form Lithuanian tax laws perspective. Companies see them as being too expensive. Moreover, employees also prefer higher salaries and wages to other compensation and motivation methods. Relatively high loyalty of employees and currently increasing rate of unemployment doesn’t stimulate employers to offer additional employee benefits. Although employees motivation and compensation is more often referred as a field of personnel management, existing, clear and comparable accounting rules and regulations can also facilitate to better choices of both companies and employees

Types of employee benefits in Lithuania – information disclosed in companies ’ financial statements

Straipsnyje analizuojamas atlygis už darbą, įvardijami pagrindiniai jo tipai finansų apskaitos kontekste, nagrinėjama jo reglamentavimo finansų apskaitoje ypatumai. Pateikiami tyrimo apie atskleidžiamos informacijos atlygio už darbą tipų, taikomų Lietuvos akcinėse bendrovėse, rezultataiEmployees have always been recognized among the most important resources of the companies. To attract, retain and motivate their employees, companies introduce various motivation and compensation methods. In accounting they are commonly named as employee benefits. Employee benefits typically refer to wages and salaries, retirement plans, health insurance, life insurance, disability insurance, vacation and employee stock ownership plans. The aim of this paper is to assess what employee benefits are disclosed in financial statement of Lithuanian companies. Lithuania, as a member of the European Union, has been undergoing major changes in its financial accounting system. As a result of accounting harmonization processes, publicly traded Lithuanian corporations are obliged to use International financial reporting standards (IFRS), while closely held companies are required to apply Business accounting standards (BAS). IFRS regulates accounting and disclosure requirements for 5 types of employee benefits: short term employee benefits, post-employment benefits, other long term benefits, termination benefits, and share-based payments. Each type of employee benefits has its own recognition, valuation and disclosure requirements and may be useful for interested parties to make their decisions. To assess the variety of employee benefits in Lithuania an analysis of information disclosed in financial statements of 32 Lithuanian companies listed in Vilnius OMX stock exchange has been conducted. Analysis of financial statements of the companies revealed that Lithuanian companies are quite conservative in employee’s compensation methods and variety of employee benefits is not big. Shortterm employee benefits dominate in all the companies. [...]Finansų katedraVytauto Didžiojo universiteta

An assessment of accounting regulation changes in Lithuania

Bazėje Social Science Research Network straipsnis peteiktas kitokiu pavadinimuInformation and its availability are assumed to be key determinants of efficient resource-allocation decisions in the economy. Previous scientific research has demonstrated that financial information of entities is influenced by accounting and reporting regulation and undergoing accounting harmonization processes in the European Union, however in Lithuania these issues were merely analyzed. The aim of this paper is to identify and evaluate undergoing accounting regulation changes in Lithuania. The paper addresses three issues: evaluates the background for accounting regulation changes in Lithuania; identifies de jure accounting regulation changes in Lithuania and compares them with the same of the European Union; and assesses de facto implementation of accounting regulation by Lithuanian companies. Research results indicate that over the research period de jure Lithuanian accounting regulation has undergone significant changes. These changes have largely been influenced by the European Union wide accounting harmonization processes; however Lithuanian accounting regulation has national peculiarities such as mandatory financial accounting and reporting was introduced only in 2001; our national Business Accounting Standards are created as a simplified version of the IFRS and Lithuania has avoided double-set accounting standards situation. Analysis of de facto implementation of accounting regulation reveals that Lithuanian companies have followed a different pattern: some have chosen early IFRS adoption while others adopted accounting regulation changes only when they became compulsoryVytauto Didžiojo universiteta