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Journal of Law and Financial Management - Volume 9 (2) December 2010

Editorial »

Proposals to Change Lease Accounting: Evidence from Canada and Malaysia

By Roger Hussey and Audra Ong

Leasing transactions are significant in business activities and both national and international accounting regulations require leases to be classified as either operating or finance leases. The International Accounting Standards Board recently proposed for the present classification to be removed, and for both finance and operating leases to appear on the balance sheet. This paper compares the opinions of 63 qualified accountants in Canada and 54 qualified accountants in Malaysia on the present regulations and the implications of the new standard. The responses from these countries support the substance-over-form model, but raise doubts on its applicability to leasing transactions. The majority of respondents agree on one method for accounting for leases, but support for the removal of finance and operating lease classifications is weaker. An analysis of the data reveals that those who believe the current information is of use are more likely to reject the proposed changes. This suggests that future research should be less concerned with whether users find the information relevant and should be directed towards the nature of user decisions and how the present information is utilised.

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A Double-Hurdle Approach to the Analysis of Factors Affecting Dividend Payouts by Firms Issuing Restricted Stocks

By Orapin Duangploy, Justo Manrique and Rahul Verma

The recent financial scandals, backdating problems, expensing of options and increasing use of restricted stocks have affected the cash dividend payout policies of firms, especially of those issuing restricted stocks. This research examines the accounting, financial and demographic variables affecting both the decision to pay cash dividends and the decision about the size of these payments by firms that issued restricted stocks. A double-hurdle approach was used to model the interaction between these two decisions and to study the statistically significant factors affecting each of them. The empirical evidence shows that the sets of statistically significant factors affecting the decision to pay dividends and the decision about the size of cash dividend payments are not the same. Firm¿s life cycle and degree of leverage had a statistically significant influence on the probability of paying cash dividends. On the contrary firm size, profitability, growth and the number of employees had a statistically significant influence on the amount of cash dividend payments.

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An Investigation into Questionable Organisational Responses to ASX Price Queries

By Cary Di Lernia

The obligation of listed and other disclosing entities to continuously disclose material information to the market under ASX Listing Rule 3.1 is crucial to the achievement of market integrity. ASX Compliance (a wholly-owned subsidiary of ASX Ltd) fulfils the ASX¿s market oversight obligations by monitoring and enforcing compliance with the market¿s operating rules. If concerned that less than transparent disclosure behaviour may have been responsible for movement in a company¿s share price or unusual trading volumes, the ASX may issue a query to the company concerned. Details of the response and the query sent by the ASX are then made available through the announcements platform on the ASX website. This paper examines organisational responses to such queries which prima facie exhibit potentially suspect disclosure behaviour. Focusing on this element of the practical reality of the enforcement of the continuous disclosure regime provides insights into the types of situations which might yield suspect disclosure practices, as well as providing an opportunity to evaluate the extent of enforcement of the regime by the ASX and ASIC.