Accounting - Research Publications
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ItemWho pays attention to sustainability reports and why? Evidence from Google search activity(Wiley, 2023-09)We introduce country-level Google search activity as a direct measure of the level of stakeholder attention directed towards sustainability reports. We validate this measure by establishing that search activity for sustainability reports is correlated with temporal patterns in firms' supply of these reports. To frame the economic magnitude of this search behaviour, we then show that the level of attention directed towards sustainability reports is very low compared to the level of attention directed towards financial and accounting information. Next, we examine two related research questions. First, we identify who pays attention to sustainability reports. We find, consistent with the environmental Kuznets curve, that attention towards sustainability reports is strongly associated with economic development. Consistent with findings in prior research that suggest citizens in stakeholder-oriented countries have stronger preferences for firms to act prosocially, we also find that search activity for sustainability reports relative to search activity for financial performance metrics is greater in civil law countries than in common law countries. Finally, we then explore the question of why individuals pay attention to sustainability reports and find evidence that suggests sustainability reports are used for two primary purposes: evaluating the societal impacts of firms' actions; and, firm valuation.
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ItemSuperstar Productivity and Pay: Evidence from the Australian Football League(WILEY, 2022-06)We use game‐level data from the Australian Football League (AFL) to examine superstar workers' productivity and pay. By exploiting teams' injury‐induced line‐up changes between games, we show that, compared with replacement‐level players, superstars increase their teams' likelihood of winning away games by approximately 15 percentage points. While we then show that betting markets appear to appropriately price superstars' marginal productivity, we present back‐of‐the‐envelope calculations that suggest that teams underpay superstar players by at least 30 per cent. We discuss how inaccurate performance evaluations, labour market regulations, long‐term back‐loaded contracts, clubs' attempts to reduce harmful intra‐team pay disparities and on‐field success as a form of payment‐in‐kind may explain our findings.
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ItemFrequency and nature of the reporting of going concern by auditors in the financial statements of Australian listed companies(Australian Accounting Standards Board, 2022-11-01)This report presents descriptive statistics on the reporting of going concern in the audit reports of financial statements of ASX listed companies. Analysis is presented for Australia and the World (hereafter referred to as RoW) based on the financial statements for the financial year 2021 and across the 2010-2020 period. The objective is to provide a ‘stocktake’ of the current reporting of going concern by auditors which may provide some useful background information for identifying areas of economic importance for further investigation and the policy deliberations.
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ItemAnnual benchmark and analysis research report on the reported financial performance and position of Australian Listed Companies(CAANZ (Chartered Accountants Australia and New Zealand), 2023-06)This annual benchmark research report provides benchmarks of normal, high and low values for the primary drivers of performance and the values of financial reporting line-items in an Income Statement and Balance Sheet for Australian listed companies. The benchmarks are produced for each Global Industry Classification Standards Sector (GICS) and for four company size categories (large, medium, small and micro) within each Sector.
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ItemAustralian Listed Entities: Recognised intangible assets and key audit matters(Australian Accounting Standards Board and Auditing and Assurance Standards Board, 2023)The AASB-AUASB published a joint research report (with Professor Matthew Pinnuck and Dr Mark Willis) that aims to understand the significance of recognised intangible assets on the balance sheets of Australian listed entities. This Report explores the frequency, magnitude and nature of intangible assets recognised by the Australian Securities Exchange (ASX) listed entities on their balance sheets. This Report also identifies the frequency of key audit matters (KAMs) related to intangible assets in auditor’s reports to provide insights into the areas that auditors are focusing on, possibly due to the complexity of the accounting requirements. Through a review of the financial statements from 2010 to 2021, this Report finds that: • with the exception of micro-mining entities, the majority of Australian entities recognised some intangible assets on their balance sheets; • the level of investment in intangibles for the majority of entities, as a percentage of total assets, is relatively low. However, there are some entities that recognised a significant level of intangibles as a percentage of total assets; • there is a wide variety of category descriptions used to present intangible assets, possibly impeding both comparability and a precise understanding of the nature of the intangible asset; • intangibles are the most frequent KAM subject matter, suggesting a substantial fraction of auditors' resources to assure such information, despite the relatively low level of recognised intangibles.
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ItemInsights into Key Audit Matters 31 December 2022 to 30 September 2023 reporting in Australia(CAANZ Chartered Accountants Australia and New Zealand, 2024)A report on the frequency and nature of the reporting of key audit matters (KAM) in auditors’ reports of Australian Stock Exchange (ASX) listed entities that issued financial statements in 2023
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ItemSubmission to the Australian Competition and Consumer Commission (ACCC) Supermarkets Inquiry 2024-25( 2024)The ACCC supermarkets inquiry has an interest in whether there is effective competition between supermarkets and the broader competitive dynamics. If competition is effective then supermarkets should be making ‘normal’ profits. However, very little evidence has been provided as to what normal profits should be. To provide a benchmark we analyse the profitability of Australian supermarkets against the largest supermarkets in OECD countries across the 3-year period 2021 to 2023.
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ItemIs Financial Reporting Still Useful? Australian Evidence(Wiley, 2019-03-01)There has been recent and growing criticism of the usefulness of financial reporting for investors, particularly the annual financial statements. In response, the IASB is pursuing several projects aimed at improving the relevance of financial information. To inform the IASB’s work, we investigate, using a mixed‐method approach, the extent and nature of the use of annual financial statements by equity investors. We examine the relevance of financial reporting for equity valuation in Australia across time. We find that financial reporting (specifically, reported net income, shareholders’ equity, and operating cash flows) remains relevant for investment decisions. We further support this finding with evidence from field interviews that provide insight into how and why financial statements are used by equity investors. The field evidence also demonstrates that no one financial statement dominates in investor decision making. Given the increasing availability of more timely, forward‐looking information from alternative sources, we examine the relevance of non‐GAAP financial information and other non‐financial information for investor decision making. We find that non‐GAAP financial information (as proxied by EBIT and EBITDA) is more value relevant than statutory measures. We further find a broad range of non‐financial information is utilized by investors in making investment decisions both as a ‘screen’ and for valuation purposes. Our findings inform regulators and other stakeholders as we provide evidence of the continuing relevance of financial statements and the complementary role of non‐GAAP financial and other information. Our evidence provides a rebuttal to the recent criticism.
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ItemKeeping it private: financial reporting by large proprietary companies in Australia(WILEY, 2019-03-01)Since 2010, proprietary companies have had a choice of preparing three types of financial reports that vary in scope. We find that between 2010 and 2015, most proprietary companies in our random sample chose the lowest scope option, with very low quality financial reports. Few adoptedthenewoptionprovidedbyAASB1053Application of Tiers of AustralianAccounting Standards. The characteristics of the firms that adopted each type of report are consistent with the regulator’s intention. Our findings should provide a better understanding of how accounting standards impact practice, and should assist regulators to reform private company financial reporting.
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ItemEnhancing the Interface between Standard-setters and Academic Research(WILEY, 2021-09)Abstract This article points to gaps between academic research and the needs of accounting standard‐setters. In part it attributes those gaps to the academic literature seeming to be inaccessible and oriented to ideas apparently unrelated to the policy‐making issues facing standard‐setters. As a means of partially reducing that perceived inaccessibility, the paper provides a way for standard‐setters to identify and classify the various forms of academic accounting research so that they can evaluate their usefulness. Two prominent strands of research (agency theory/costly contracting and value relevance) are, as illustrations, analysed so that standard‐setters can see how they might approach those strands. The paper suggests a users’ needs/demand driven approach to improving understanding, rather than a supply (by academics) driven approach. Finally, the paper explains how the performance metrics faced by academics can be inconsistent with the readiness expressed by standard‐setters to have academics assist them. The paper provides a suggestion as to how there could be some alignment of academic performance metrics and standard‐setters’ needs.