Browsing by Author "Ribeiro, Humberto"
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- Accounting for business combinations: (Un)desirable uniformity?Publication . Ribeiro, Humberto; Crowther, DavidFor many years, two methods existed alongside each other in the USA to account for business combinations: the pooling of interests method, applied to operations, such as mergers, that met all the conditions as stated at APB Opinion No. 16; and the purchase method for all other combinations. This dual accounting status was also widespread through many other countries, although some included substantial GAAP differences (e.g. USA versus UK) or applied restrictions to the application of those methods. The 1998 G4+1 Position Paper concerning business combinations recognized the inconvenience of this diversity in accounting and recommended the use of a single method, preferably the purchase method. Following a long period of discussion and controversy, as is usual when the business combinations topic is on the table, FASB published in 2001 the SFAS No. 141, which confirmed the purchase as the unique method for business combinations accounting. Simultaneously FASB also issued SFAS No. 142, which replaced goodwill amortization for impairment tests. In the meantime, IASB also started a business combinations project scheduled in two phases. The first has produced already IFRS 3, issued in March 2004, which also determined the purchase method as the single way for business combinations. The second phase is still in course and will provide guidance about the purchase method application (or ‘acquisition method’, as the board meanwhile decided to rename it). Once again, this topic has proved to be a very fertile ground for discussions, as IASB apparently dropped the ‘fresh start’ application and issued an ED with proposed amendments for the recently published IFRS 3. In the UK, business combinations accounting is still ruled by FRS 6 and FRS 7, which are not aligned with IFRS 3 and further IASB proposals. ASB is monitoring the IASB project and it is very likely to adopt its GAAPs, which means that business combinations accounting in the UK will change very soon. The accounting trend for business combinations seems now clear, but many questions remain, such as, was the pooling of interests method ban a major loss? Which challenges arise from replacement of goodwill amortization for impairment tests? With this paper the authors intend to discuss how and if business combinations accounting uniformity is indeed desirable, highlighting advantages and disadvantages, benefits and eventual problems for professionals and stakeholders. A final note to stress is that this paper deals with uniformity of business combinations accounting and not with international accounting harmonisation, to which we are required to refer since it is inherent to recent developments within this topic.
- Accounting for business combinations: lessons from the U.S.A.?Publication . Ribeiro, Humberto; Crowther, DavidThe number of different accounting practices at national level is considerable in Europe. The adoption of IAS/IFRS is a relevant step towards accounting harmonization in Europe, but also results in a dual accounting system for European companies. The accounting for business combinations provides a good example of profusion of different possible methods used by companies in different European countries, with implications on the comparability of financial statements. From the twenty-one European countries surveyed by FEE in 2002, only three did not allow the pooling of interests in any circumstance. In terms of purchased goodwill accounting, amortization was the default treatment. Fifteen countries had refutable amortization period limits, but ten countries had no absolute limits. Moreover, eight countries allowed write off to equity. If the accounting for business combinations in Europe was already a Tower of Babel, another level has been then added to it following IAS/IFRS adoption by EU. Within this dual accounting system, since 2005 listed companies ruled by the law of a Member State are required to prepare their consolidated accounts according IASB’s standards (EC, 2002). The matrix of possibilities has increased. Listed companies with consolidated accounts can only use purchase method, but pooling is still allowed for the remaining, except in few countries. Purchased goodwill is to be amortized by every company, using arbitrary ceilings; or is to be written off; or, finally, is to be subject to impairment tests by companies who adopted IFRS. The discrepancy among the different national GAAP is significant, and between these and IASB’s is huge. To mitigate these differences, some European countries are preparing changes in their national sets of accounting standards. Regarding business combination accounting, countries such as the U.K. (FRED 36 – 39, 2005), and Portugal (NCRF 14, 2007), have produced exposure drafts intended to align their national GAAP with IFRS 3. However, when does such changes will be enforced is unclear. The number of countries to follow these steps is also something to be known in the next years. On the other side of the Atlantic, from 2001 the purchased method is the single accounting method accepted, and purchased goodwill is to be tested using impairment tests. A major change that included every company in the U.S.A., regardless the company status, this is, being listed or reporting consolidated statements. The adoption of the new business combinations was controversial, as many argued it would produce significant economical effects. Several managers from high tech companies even argued that M&A activity would suffer if pooling were to be abolished. To verify whether the FASB new pronouncements have had impact on the M&A activity, we have carried out a study with the purpose to capture any possible effects from the adoption of the new accounting standards. We have found that the new accounting standards did not have any significant impact on the M&A activity in the U.S.A.. Accordingly, we argue that national European accounting boards should also follow IASB GAAP to enhance comparability among European companies involved in M&A deals.
- Avaliação de fusões no grupo crédito agrícolaPublication . Pires, Adérito; Ribeiro, HumbertoThe Mergers & Acquisitions (M&A) topic has been subject to numerous research studies over time, resulting in a wide variety of findings. The purpose of this paper is to evaluate to which extent mergers in Crédito Agrícola group are considered as beneficial for both the organization and their employees. The way to assess such evaluation was by preparing and sending a survey questionnaire to every CA employee, asking about their past and future perceptions about any mergers their organization may have been involved. The survey results can be considered as positive regarding both the responding rate and the findings. The main finding is that CA employees approve by large majority any merger deal that may allow future improvement of results, at both individual and corporate level. However, this finding is not consensual, as there are a number of employees away from the integrating process. Consequently, future negative impacts may occur.
- Business combinations accounting in the United States from AICPA to FASB: a study on the impact on M&A activityPublication . Ribeiro, Humberto; Crowther, DavidThis paper summarizes the problematic of accounting for business combinations since the 1960s. Albeit widely supported by the industry, the use of pooling of interests has been always subject to criticism, particularly from practitioners and academicians (see e.g. AAA, 1966; Mosich, 1968). In 1996, FASB added business combinations accounting to its agenda, with the purpose to improve its transparency. FASB would disallow the use of pooling of interests, despite numerous negative reactions from industry. Nevertheless, a later proposal of replacement of purchased goodwill amortization by impairment testing seems to have mitigated any outstanding criticism. Several authors (e.g. Zeff, 2002) described the fierceness of the lobbying on this FASB’s project. The paper studies whether SFAS 141 and SFAS 142 resulted in relevant economic consequences (see e.g. Zeff, 1978; Burchell et al., 1980; FASB, 1980) and finds that M&A activity has not been significantly affected by FASB’s changes
- Companies and professional boards’ reactions to new M&A accounting in the USAPublication . Ribeiro, Humberto; Crowther, DavidFollowing G4+1 recommendations issued after a meeting in 1998, the Financial Accounting Standards Board (FASB) reshaped dramatically in 2001 the accounting for business combinations, which had remained unchanged for thirty years in the USA. With the publication of SFAS 141, FASB dropped pooling of interests method in favour of purchase method and with SFAS 142 amortization of goodwill recognized as result of a business combination was replaced by impairment tests. Business combinations includes a wide range of deals, such as mergers and acquisitions (M&A), and is arguably one of the most polemic accounting topics ever. AICPA APB opinions issued in 1970 seemed to have praised almost everybody – difficult task given the different views about the most appropriate practice to adopt – although some prominent authors, such as Stephen Zeff, remained opponents of pooling of interests. Others always defended that pooling was the fair method for the real and true mergers and therefore strongly disagreed with G+1 and FASB views, stressing that the new rules would turn impracticable some mergers deals with specific characteristics. The FASB certainly did not intend to change the M&A market dynamic through its new set of accounting rules. Nevertheless, the critical voices raised against the pooling method ban suggested that the M&A activity could have been affected. Therefore, the authors of this paper considered relevant to discuss potential impacts of this new standards. Preliminary results obtained with questionnaires sent to firms included in S&P 500 index will be also presented.
- Distribution and reasons explaining mergers and acquisitions (M&A) in the EU countries and the USPublication . Ribeiro, Humberto; Cravo, DomingosThe M&A phenomenon has more than one century and has reached a particular highlight as the previous millenium went away. In fact, several mega operations occurred in the late nineties, particulary between 1998 and 2000, and it was very well widespread by worldwide media. The growing importance and dimension of the capital markets and also new business strategies seem to provide a major role for business combinations in a more global economy. The purpose of this paper is to analyse the M&A distribution among EU countries and the US. To achieve that we used several data, such as M&A activity and market capitalization, from 1990 to 1999. We also present some reasons that could explain the evolution of M&A activity in the EU in the nineties. The methodology used in the study is based on the regression model and in the 2000 European Comission M&A report.
- Effects and determinants of household debt in PortugalPublication . Morais, Lavínia Fernanda Magalhães; Ribeiro, Humberto; Pereira, J.A.; Silva, AméliaAs the amount of debt has gradually increased, particularly in recent years, Portugal is currently one of the European countries exhibiting one of the highest levels of overall indebtedness, including in both sovereign and private sectors. Indeed, this condition is the outcome of increasing levels of debt assumed not only by the government, but also by companies and families, being the later mostly due to mortgage loans and due charges. This paper focuses on the study of borrowing by Portuguese households. The research has been made in respect to the notion of debt, the consequences of recent developments in debt, among other factors. In order to analyze the factors that are most associated with debt, a study was developed using two multiple regression models, one using a longer time series and another shorter, evaluating the effect of several variables, such as consumption, savings, unemployment, inflation and interest rates, in order to check whether they could be associated with a higher level of debt.
- How compensation policy based on EVA performance reduces the conflict between managers and shareholdersPublication . Ribeiro, Humberto; Fonseca, CristinaThere is a well-known conflict between managers and shareholders, superbly illustrated by the agency theory. A way for shareholders to ensure that managers will perform optimally, by taking the best actions and decisions, is to tie managers’ compensation to the performance of the firms. However, how can we fairly measure their performance? The Economic Value Added (EVA) methodology seems to be a good solution; recent events reinforced the idea that accounting indicators analysis may not be a suitable approach. The EVA is not a widespread concept in Portugal and its inception is relatively recent. To have an idea about how Portuguese managers perceive EVA and to understand which strategies (e.g. wages policy, bonuses, stocks and/or stocks options) firms utilize to make everybody happy, particularly managers, we developed a study with Portuguese public entities, using the questionnaire methodology.
- M&A goodwill accounting: ‘Those are my principles, and if you do not like them...’Publication . Ribeiro, HumbertoThe accounting for business combinations has been a fertile source of controversies, to which the accounting for goodwill generated from Merger & Acquisitions (M&A) has made major contributions. Practitioners continue to suffer amidst industry lobbying versus regulators quarrels, and therefore one can argue that in M&A goodwill accounting: “Those are my principles, and if you do not like them ... … well, I have others”, as Groucho Marx would say. The replacement of amortisation of purchased goodwill and other intangible assets with definite life by impairment tests continues to raise concerns and therefore remains an accounting issue. Several authors, such as Hayn & Hughes (2006), questioned the superiority of impairment tests over amortisations, while Massoud & Raiborn (2003) suggested that managerial discretion in applying the goodwill impairment tests reduces the quality of reported earnings. Massoud & Raiborn (2003) also argued that SFAS No. 142 creates opportunities for earnings management, particularly in weak economic periods, where companies can undertake a “big bath”, i.e., to recognise big impairment losses in a period when earnings are already negatively affected. The early 2000’s was characterised by an economic downturn, which has resulted in a recession in the USA in the period between March and November 2001, as defined by the National Bureau of Economic Research (NBER). The dot.com bubble collapse, the September 11 attacks, and the numerous accounting and corporate scandals that resulted in the Sarbanes-Oxley act, are some of the events that could arguably trigger the recognition of massive losses following impairment testing in fiscal years 2001 and 2002. Significant impairment losses under SFAS 142 could only occur from fiscal year 2002 onwards, as this standard was first adopted in fiscal year 2002 by most companies. Unsurprisingly, a big bath earnings management has occurred in 2002, as documented in the accounting and financial literature. There is however another fact that may have eased the happening of this “big bath”: the change in the accounting regulation itself, which has diluted the negative impact on corporate earnings due to impairment charges. A big bath earnings management has occurred in 2002, as documented in the accounting and financial literature (see e.g. Jordan & Clark, 2004, 2005). There is however another fact that may have eased the happening of this “big bath”: the change in the accounting regulation itself, which has diluted the negative impact on corporate earnings due to impairment charges. By the means of financial reporting disclosures analysis, this paper examines several aspects of SFAS 142 adoption, namely its significant impact on corporate earnings reported in the USA.
- Measuring of the degree of innovation in commercial and service micro and small enterprisesPublication . Walter, Cícero; Veloso, Cláudia M.; Fernandes, Paula Odete; Ribeiro, HumbertoMicro and Small Enterprises (MSE) are considered the most dynamic and flexible arrangement of activity. In the economy, the foundation and development of these features is important for the creation of the so-called "normal" economic environment. In the recent past it was enough for companies to meet their needs in a profitable way to stay in the market, but that scenario has changed dramatically. Currently, it is necessary to be one step ahead towards the future, because the strategies that have worked well in the past are not guarantees of forthcoming sustainable success. The key to longevity and business competitiveness lies in innovation. Accordingly, the main objective of this research is to present a research model of innovation in Micro and Small Enterprises to analyse: first, the degree of innovation of Micro and Small Enterprises, and second, how the innovation is handled by existing Micro and Small Enterprises as a result of its business environment. The research made is based on a sample of 550 MSE distributed over 6 cities across the Brazilian State of Piauí. The data was collected using the Innovation Radar application, which is owned by the SEBRAE Local Innovation Agents program. Statistical techniques of descriptive, exploratory and inferential nature were used for corresponding data treatment and results validation. The results obtained suggest that MSE have innovation capacity between the "Little Innovative" and "Occasional Innovative" range, and also that the average and the distribution of innovation levels are similar amongst MSE analyzed.
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