Jm Godfrey

Political cost influences on income smoothing via extraordinary item classification

Until 1990, Australian managers could classify recurring gains and losses outside the normal operations of the firm as either operating or extraordinary items. The results of this study indicate that managers of companies with highly unionised workforces, and therefore subject to labour-related political costs, attempted to affect the probability of wealth transfers by smoothing reported net operating profit via the classification of those recurring gains and losses. The degree of management ownership is associated with classificatory smoothing but interest coverage is not, indicating differential contracting influences.

Standard‐setting in Australia: Implications of Recent Radical Reform Proposals

We examine the implications of the Howard governments Corporate Law Economic Reform Program as they relate to accounting standard-setting in Australia. A luck of systematic and compelling evidence for wholesale changes to the existing standard-setting process is identified, as is a fundamental shift in the rationale for standard-setting which underlies the proposed changes. We disagree with the main plank of the proposals, that is, that international accounting standards should be adopted in Australia.

Modeling Total Accruals in an International Environment: The Impact of Alternative Measures of PPE

Abstract The role of accounting regulation hinges upon whether, how, and why managers manage earnings in the absence of regulatory constraints. Determining whether managers engage in earnings management to transfer wealth away from its most economic or socially effective/efficient distribution requires the researcher to first model predicted earnings, or accruals, so that unexpected variations are appropriately classed as earnings management. In this study, we examine whether refining the property, plant and equipment (PPE) variable in the Jones (1991) model of total accruals — by excluding assets not subject to depreciation or amortization, and including intangibles that are subject to amortization — improves the model’s explanatory power. Results indicate that progressively refining the PPE variable improves the explanatory power of the total accruals model. The improvement in explanatory power is modest, however, and statistically significant only when the refinement is to use gross, rather than net, measures, and only when extreme observations remain in the sample. Therefore, the practical significance of this result for researchers is that written-down asset measures can be substituted for the more difficult-to-collect gross measures, particularly when extreme observations are removed from the sample. Adjustments for the effects of upward asset revaluations do not improve the model’s explanatory power.

Benchmarking quality management: How does it apply to the university alumni office?

This paper describes the extent to which Australian university alumni offices currently apply benchmarking principles. Not surprisingly, there is considerable diversity in the way that the offices measure, evaluate, and progress their operations. Benchmarking has been adopted by only half of the respondents to a survey of management practices. To some extent, the differences reflect differences in alumni officers’ perceptions of the primacy of various customer groups, and the extent to which the top echelons of the universities advocate quality management practices. Resource constraints and concerns about meeting target performance measures are key deterrents to the adoption of benchmarking. Those associations that adopt benchmarking out‐perform those that do not on the following dimensions: commitment to quality management practices; communication with employees; continuous improvement, emphasis on customer satisfaction; and participative management. Organisations that have adopted quality management principles vary according to how they implement benchmarking, including the types of benchmarking partners adopted.

Determinants of Income Smoothing

ABSTRACT In this study we examine whether managers of Australian listed companies are more likely to smooth corporate earnings as the political cost exposure of the firm and its management increases. We find that the incidence of smoothing increases as the firms ratio of executive compensation to operating profits increases, and the higher the market concentration of the industry in which the firm operates. We argue that the former relation arises because managers attempt to avoid possible negative repercussions arising from apparent high compensation relative to returns to shareholders. Such repercussions could include revisions of their management compensation plans, or insecurity of job tenure. We also find that firms in industries with high market concentration smooth earnings more than firms in industries with low market concentration. This is consistent with attempts to avoid earnings peaks that can lead to accusations of profiteering at the expense of consumers. However, this latter finding is not...