Journal of Law and Financial Management - Volume 5 (2) November 2006
Volume 5 (2) November 2006
Preserving Market Integrity
By Alex Proimos
The work of equity research analysts has come under considerable scrutiny in the wake of a number of scandals involving serious misconduct by high profile members of the profession. The work undertaken by analysts is an important component of the market mechanism, and in particular, the efficiency and integrity of that mechanism. A number of recent regulatory reforms and policy pronouncements suggest improvements to the manner in which analyst activity and recommendations are managed, in the context of broader investment banking organisations in which many analysts are embedded. This paper reviews a number of these prescriptions, and also sets out the results of a survey of practices adopted at a number of investment banks employing equity analysts operating in the Australian market place. Some relevant policy prescriptions are yielded from this work and set out in the concluding section of the paper.
Intangible Assets and Creative Impairment - An Analysis of Current Disclosure Practices by Large Australian Listed Firms
By Nigel Finch
This paper examines the disclosure of intangible assets by high user industrial firms in the Australian market subsequent to the introduction in 2005 of AASB 136 and AASB 138. Using a sample of ten large industrial firms with combined intangible assets of $37,758 million as at 2006, the paper analyses the disclosure of goodwill and 18 other distinct intangible assets classes of these firms, and examines their implied effective life by probing the impairment expense detailed in the profit and loss statement. While a high degree of uniformity in disclosure practices pertaining to intangible assets is evident, questions are raised in relation to factors motivating impairment decisions for intangible assets under the new financial reporting regime.
Too Many Grapes, Too Little Wrath
By Tyrone M Carlin
This paper provides a detailed review of the affairs of listed Australian wine producer Evans & Tate limited during the 2005 financial year, during which the firm surprised capital markets with far greater than expected losses, and foundered into near complete financial failure. A case is made to support the proposition that statements made by the firm in the lead up to the shock loss announcement were simply not supportable on the facts. This raises questions about the nature of the operation of a raft of corporate regulations in Australia, including the continuous disclosure regime a key plank of the mechanism designed to ensure that equity capital markets do not lapse into an uninformed state. It is concluded that there are serious flaws in the regime, and insufficient regulatory intervention in cases of apparent breach of the regime.