AN ACCOUNTING PERSPECTIVE ON A CRISIS PERPETUATED THORUGH THE CAPITAL MARKET

Our paper analyzes the current financial crisis starting with some recent developments and reactions in the field of accounting. We find that involved parties within the financial system naturally look for a “scapegoat” instead of dealing with reality. Moreover, they try to avoid regulations that would reflect their current financial position and performance. Meanwhile, what reality reveals us is that we are dealing with a crisis of value, or better said valuation, framed by significant changes of paradigms. Starting with thoughts and reactions within trade literature and financial environment, we analyze some mechanisms of credit derivatives that propagated the crisis within the global financial system. Finally, we prove our point in defending fair value accounting and identify key aspects that allow future improvements. The need for informational transparency is emphasized through the whole paper.Financial crisis, fair value, derivatives, mortgages, informational transparency, capital markets

CORPORATE GOVERNANCE AND CREATIVE ACCOUNTING: TWO CONCEPTS STRONGLY CONNECTED? SOME INTERSTING INSIGHTS HIGHLIGHTED BY CONSTRUCTING THE INTERNAL HISTORY OF A LITERATURE

Corporate governance is concerned with the relationships between a business’smanagement and its board of directors, shareholders and lenders and its other stakeholders such asemployees, customers, suppliers, and the community in which activates. The connection betweenthis topic and creative accounting was debated in the literature since the latter occurrence isrelated to the weakness of the first. Our study offers interesting insights into this strong connectionby examining the relevant ideas developed previously in the literature with the scope ofunderstanding, reinterpreting and rediscovering from interesting points of view this association inour search for responsibility in the economic environment. By conducting this study we wanted toreinforce the role of literature analyst as an interpreter who contributes meaning to the presentstate of the art.corporate governance, creative accounting, Papineau`s hierarchy

An example of age dependency in compartmental analysis

Compact analytic solution to distribution theory of nonsteady state model illustrated with biological data - age dependency in compartmental analysi

LIQUIDITY RISK MANAGEMENT IN CRISIS CONDITIONS

In order to measure the liquidity risk we have developed an analysis model, based on stress-testing scenarios, that shows the ability of the bank to face different types of liquidity crisis. The scenarios were designed for each balance sheet position for assets and liabilities: Ordinary Course of Business, Name Crisis (Mild Name Crisis and Severe Name Crisis), Market Crisis (Mild Market Crisis and Severe Market Crisis) that reflects banking sector crisis and persistent recession. This offers a dynamic image about the bank's liquidity in report with different types of liquidity scenarios, but also about the time horizon of analyze. The research also wants to highlight the most significant features to consider in order to implement an effective liquidity risk management and to achieve a more integrated supervisory framework.liquidity risk, name crisis, market crisis, liquidity limits, gap analysis

FREE CASH FLOW AS PART OF VOLUNTARY REPORTING. LITERATURE REVIEW

The present study has as main objective to reflect the state of literature regarding free cash flow, and to withdraw the main pro's and con's in order to create an objective image upon this indicator. The main idea generating this research was the growing interest on cash flow reporting. As many say, "Cash Flow is King", while in Anglo Saxon countries the interest of investors and analysts in concentrated on operating cash flow, as the most important indicator of the probability of bankruptcy. In this context, voluntary additional reporting, like free cash flow may come either as an aid in providing the fair view or as an opportunistically reported figure. Throughout the paper, the intention was to provide answers to three main research questions: "What are the definition and calculation method of free cash flow? Why is there an interest in free cash flow reporting? What is the impact of free cash flow on the agency theory?" In order to provide relevant conclusions, four international data basis were used, and related articles and studies were extracted. The results proved that there is no generally accepted definition and computing method, while the format depends on the end-user of the report (shareholders, investors, analysts, bankers, a.s.o.). As stated below, this aspect generates confusion and lack of comparability, giving room to creative accounting techniques. Moreover, the interest on free cash flow reporting is connected mainly to liquidity assessment, company valuation and investors' choice. Still, in the context of agency theory, results show that in presence of high free cash flow, managers tend to make investment choices that satisfy their personal interest and that generate low efficiency and profitability for the company. The contribution to current state of research is providing a literature review study, focused on a comparative approach, as well as on underlying an objective image upon a debatable financial indicator and accounting report.free cash flow, reporting, management, agency theory, creative accounting

RECENT DEVELOPMENTS OF THE FINANCIAL REPORTING MODEL: THEORETICAL STUDIES IN REVIEW

Our paper analyzes the manner in which the financial reporting model evolved towards fair value accounting. After a brief introduction into the context of financial reporting at international level, the analysis focuses on the accounting model of fair value. This is done by synthesizing main studies in accounting research literature that analyze fair value accounting through a theoretical approach. The analysis being developed relies on literature review methodology. The main purpose of the developed analysis is to synthesize main pros and cons as being documented through accounting research literature. Our findings underline both the advantages and shortcomings of fair value accounting and of the recent mixed attribute in nowadays financial reporting practices. The concluding remarks synthesize the obtained results and possible future developments of our analysis.fair value, accounting research literature, mixed attribute, pros, cons

Fair Value Accounting for Financial Instruments – Conceptual Approach and Implications

This study complements the growing literature on the value relevance of fair value by examining the validity of the hypothesis that fair value is more informative than historical cost as a financial reporting standard for financial instruments. We therefore compare the relative explanatory power of fair value and historical cost in explaining equity values. In order to reflect fair values’ role in offering the fair view where financial instruments are concerned we briefly reviewed capital market studies that examine the usefulness of fair value accounting to investors, and discuss marking-to-market implementation issues of determining financial instruments’ fair values. In doing so, we identified several key issues, which need to be analyzed. More importantly, our results suggest that simply requiring fair value, as the reported measure for financial instruments may not improve the quality of information unless appropriate estimation methods or guidance for financial instruments that are not traded in active markets can be established. In contrast, fair value of available-for-sale securities, which are more actively traded in well-established markets, explains equity values more than historical cost. Taken together, our results are consistent with the notion that fair value is more (less) value relevant when objective market- determined fair value measures are (not) available.

SEARCHING FOR THE FAIR STORY BEHIND FAIR VALUE FOR FINANCIAL INSTRUMENTS

Our paper aims at telling the whole story where fair value accounting is concerned. Harsh criticism has been brought to this concept under current circumstances that motivated out research. Without arguing for fair value as something it is not, we brieflyFair value accounting, standards setting bodies, financial crisis