Inconsistent measurement and disclosure of non-contingent financial derivatives under IFRS: A behavioral perspective

The accounting principle of decomposing hybrid financial instruments into their derivative and non-derivative components is widely accepted as it results in a consistent treatment of hybrid instruments and economically equivalent combinations of contracts. On the other hand, non-contingent derivatives and their economic equivalents are not treated consistently under the mixed accounting model underlying IAS 39. This calls for a critical assessment. The conventional criticism regarding such inconsistencies refers to the creation of opportunities for earnings management. The aim of this paper is to add another perspective by including the effects of the related disclosure rules on risk perception by analysts and investors. Thereby, we consider both the presentation on the balance sheet and the additional disclosure in the notes according to IFRS 7. From extant literature, we diligently develop the hypothesis that, due to availability effects, entities using non-contingent derivatives are perceived to be riskier than entities using economic equivalents, although in fact the latter are riskier due to their exposure to additional counterparty risk. This bias in the perception of disclosures might thereby alter an entity’s costs of capital in a way not intended by IAS 39. In particular, we expect individuals to valuate entities using non-contingent derivatives lower than identical entities using economically equivalent contracts instead. We expect this difference in valuation to result from a higher cognitive availability of negative associations with derivatives than with non-derivatives. The underlying assumptions are outlined as they build a framework of hypotheses that could be tested in future research, particularly in experimental survey studies.

Critical regularity of nonlinearities in semilinear classical damped wave equations

In this paper we consider the Cauchy problem for the semilinear damped wave equation $u_{tt}-\Delta u + u_t = h(u);\qquad u(0;x) = f(x); \quad u_t(0;x) = g(x);$ where $h(s) = |s|^{1+2/n}\mu(|s|)$. Here n is the space dimension and $\mu$ is a modulus of continuity. Our goal is to obtain sharp conditions on $\mu$ to obtain a threshold between global (in time) existence of small data solutions (stability of the zerosolution) and blow-up behavior even of small data solutions.Comment: 14 page

Quality of public finances and growth

In this paper we review the linkages between the quality of public finances, that is, the level and composition of public expenditure and its financing via revenue and deficits, and economic growth. We review the various channels through which public finances affect growth and its underlying determinants (institutional framework, employment, savings and investment, innovation). The paper addresses the approaches used to assess the performance and efficiency of public spending, and surveys the empirical findings on the impact of fiscal variables on sustained economic growth. JEL Classification: H50, O40Efficiency, Growth, quality of public finances

Optimal Layout for a Component Grid

Several puzzle games include a specific type of optimization problem: given components that produce and consume different resources and a grid of squares, find the optimal way to place the components to maximize output. I developed a method to evaluate potential solutions quickly and automated the solving of the problem using a genetic algorithm

Inconsistent measurement and disclosure of non-contingent financial derivatives under IFRS : a behavioral perspective

The accounting principle of decomposing hybrid financial instruments into their derivative and non-derivative components is widely accepted as it results in a consistent treatment of hybrid instruments and economically equivalent combinations of contracts. On the other hand, non-contingent derivatives and their economic equivalents are not treated consistently under the mixed accounting model underlying IAS 39. This calls for a critical assessment. The conventional criticism regarding such inconsistencies refers to the creation of opportunities for earnings management. The aim of this paper is to add another perspective by including the effects of the related disclosure rules on risk perception by analysts and investors. Thereby, we consider both the presentation on the balance sheet and the additional disclosure in the notes according to IFRS 7. From extant literature, we diligently develop the hypothesis that, due to availability effects, entities using non-contingent derivatives are perceived to be riskier than entities using economic equivalents, although in fact the latter are riskier due to their exposure to additional counterparty risk. This bias in the perception of disclosures might thereby alter an entity’s costs of capital in a way not intended by IAS 39. In particular, we expect individuals to valuate entities using non-contingent derivatives lower than identical entities using economically equivalent contracts instead. We expect this difference in valuation to result from a higher cognitive availability of negative associations with derivatives than with non-derivatives. The underlying assumptions are outlined as they build a framework of hypotheses that could be tested in future research, particularly in experimental survey studies

Acceptance of an app for contact-tracing of SARS-CoV-2 in the Swiss population

Die Befragung von 1929 volljährigen Personen in der Schweiz im Zeitraum vom 17. - 26. April 2020 legt nahe, dass eine grosse Mehrheit der Bevölkerung auf jeden Fall oder wahrscheinlich beabsichtigt, a) eine App zur Kontaktnachverfolgung von SARS-CoV-2 zu installieren, b) Infektionen in der App zu melden und c) der Aufforderung der App nach Kontaktreduktion bzw. häuslicher Quarantäne nachzukommen. Als Grundlage der Befragung diente das Szenario einer «anonymen» App zur freiwilligen Kontaktnachverfolgung via Bluetooth (analog zu DP-3T). Die App erfasst keine Standort- und Bewegungsdaten, sondern registriert lediglich andere App-Nutzer in der näheren Umgebung. Gründe für die Nutzung der App sind vor allem Verantwortungsbewusstsein gegenüber der Allgemeinheit (73% der Befragten), der Schutz der eigenen Familie und der eigenen Freunde (67%) und ein Beitrag zur Reduktion der Todesfälle unter älteren Menschen und Menschen mit Vorerkrankungen (50%). Die Befragten führen ebenfalls Gründe an, die für sie gegen die Nutzung einer App sprechen würden. Bei 40% besteht das Bedenken, dass der Staat die App als Vorwand für die stärkere Überwachung während oder nach der Pandemie nutzen könnte. 39% äussern das Bedenken, dass die App nicht funktioniert (z.B. Fehlalarme). Die Zusammensetzung der Befragten entspricht nach Alter, Geschlecht und Grossregionen der Struktur der volljährigen Schweizer Bevölkerung