Qualitative Characteristics of Financial Information Toward Quality of Financial Reporting in Malaysian Listed Manufacturing Firms
Abstract
This study aims to examines qualitative characteristics and financial reporting quality of the Malaysian listed manufacturing firms. This paper explores whether qualitative characteristics may contribute to financial usefulness by providing quality financial reporting information. Qualitative characteristics, according to the International Accounting Standards (IASB) and International Financial Reporting Standards (IFRS) framework, are the characteristics that make the information contained in financial statements useful to users. There are four qualitative characteristics under Financial Accounting Standards Board (FASB) and International Accounting Standards (IASB) namely (1) relevance, (2) reliability, (3) understandability, and (4) comparability. These four qualitative characteristics are truly tested to see whether they can improve the consistency of financial reporting data in manufacturing sector. According to both standards (FASB and IASB) relevance, reliability, understandability, and comparability are the main characteristics for enhancing the consistency of financial reports.
References
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Chen, A., & Gong, J. J. (2019). Accounting comparability, financial reporting quality, and the pricing of accruals. Advances in Accounting, 45, 100415. https://doi.org/10.1016/j.adiac.2019.03.003
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Choi, H., & Suh, S. H. (2019). The effect of financial reporting quality on CEO compensation structure: Evidence from accounting comparability. Journal of Accounting and Public Policy, 38(5), 106681. https://doi.org/10.1016/j.jaccpubpol.2019.106681
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Iatridis. G., & Rouvolis. S. (2010). The post-adoption effects of the implementation of International Financial Reporting Standards in Greece. Journal of International Accounting, Auditing and Taxation. 19. 55-65
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Kamaruzaman, A. J., Mazlifa M.D., & Maisarah A. R (2009). The Association between Firm Characteristics and Financial Statements Transparency: the case of Egypt, International Journal of Accounting, Vol. 18 No.2.
Kargin. S. (2013). The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms. International Journal of Economics and Finance. 5(4). Pp: 71-80.
Krishnan, R., Peters, J., Padman, R. & Kaplan, D. (2005). On Data Reliability Assessment in Accounting Information Systems. Information Systems Research, 16(3), 307-326.
Maines, L. & Wahlen, J. (2006). The Nature of Accounting Information Reliability: Inferences from Archival and Experimental Research. Accounting Horizons, 20(4), 399- 425.
Neel, M. (2017). Accounting Comparability and Economic Outcomes of Mandatory IFRS Adoption. Contemporary Accounting Research, 34(1), 658–690. https://doi.org/10.1111/1911-3846.12229.
Nwaobia, A.N., Kwarbai, J.D., Kwarbai, J.D. & Ajibade, A.T. (2016). Financial Reporting Quality on Investors Decisions. International Journal of Economics and Financial Research, 2(7), 140-147.
Ohlson, J. A. (1995). Earnings, Book Values, and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661-687. http://dx.doi.org/10.1111/j.1911-3846.1995.tb00461.x
Qingyuan, L., & Lumeng, W. (2018). Financial statement comparability and corporate tax avoidance. China Journal of Accounting Studies, 6(4), 448–473. https://doi.org/10.1080/21697213.2019.1612187.
Ross, J., Shi, L., & Xie, H. (2019). The determinants of accounting comparability around the world. Asian Review of Accounting, 28(1), 69–88. https://doi.org/10.1108/ARA-04-2019-0087.
Sloan, R. (2001). Financial Accounting and Corporate Governance: A Discussion. Journal of Accounting and Economics, 32, 335-347.
Taplin, R. H. (2011). The Measurement of Comparability in Accounting Research. Abacus, 47(3), 383–409. https://doi.org/10.1111/j.1467-6281.2011.00345.x
Tasios, S., & Bekiaris, M. (2012). Auditor's perceptions of financial reporting quality: the case of Greece. International Journal of Accounting and Financial Reporting. 2(1). pp.57-74.
Try Yurisandi & Evita Puspitasari, (2015). Financial Reporting Quality – Before and After IFRS Adoption Using NiCE Qualitative Characteristics Measurement. Procedia – Social and Behavioural Sciences 211, 644 -652.
Van Tendeloo, B., & Vanstraelen, A. (2005). Earnings management under German GAAP versus IFRS. European Accounting Review, 14(1), 155–180. doi: 10.1080/0963818042000338988.
AICPA, (1970), APB statement no 4, Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises, (cited in Rosenfield, 2006).
Barth, M. E., Landsman, W. R., Lang, M. H., & Williams, C. D. (2006). Are IFRS-based and US GAAP-based accounting amounts comparable? Journal of Accounting and Economics, 54(1), 68–93. doi: 10.1016/j.jacceco.2012.03.001
Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International accounting standards and accounting quality. Journal of Accounting Research, 46(2), 467–498. doi: 10.1111/j.1475-679X.2008.00287
Beest, F. V., Braam, G., Boelens, S. (2009). Quality of Financial Reporting: Measuring Qualitative Characteristics. NiCE Working Paper, Nijmegen: Institute for Management Research, Radboud University Nijmegen.
Beretta, S. & Bozzolan, S. (2004). A Framework for The Analysis of Firm Risk
Communication. The International Journal of Accounting, 39, 265-288.
Botosan, C. (2004). Discussion of A Framework for The Analysis of Risk Communication. The International Journal of Accounting, 39, 289-295.
Chalmers. K., Clinch. G., & Godfrey. J., M. (2011). Changes In Value Relevance Of Accounting Information Upon IFRS Adoption: Evidence From Australia. Australian Journal of Management, 36(2), 151-173.
Chen, A., & Gong, J. J. (2019). Accounting comparability, financial reporting quality, and the pricing of accruals. Advances in Accounting, 45, 100415. https://doi.org/10.1016/j.adiac.2019.03.003
Christensen., H., B., Lee., E., Walker., M., & Zeng., C. (2015). Incentives or Standards: What determines Accounting Quality Changes around IFRS adoption?. European Accounting Review. 24(1). 31-61.
Choi, H., & Suh, S. H. (2019). The effect of financial reporting quality on CEO compensation structure: Evidence from accounting comparability. Journal of Accounting and Public Policy, 38(5), 106681. https://doi.org/10.1016/j.jaccpubpol.2019.106681
Cleary, S. (1999). The relationship between firm investment and financial status. The Journal of Finance, 54(2), 673-692.
De Franco, G., Kothari, S. P., & Verdi, R. S. (2011). The benefits of financial statement comparability. Journal of Accounting Research, 49(4), 895–931. https://doi.org/10.1111/j.1475-679X.2011.00415.x
Department of Statistics Malaysia. (2020). Monthly Manufacturing Statistics, Malaysia January 2021*. In Department of Statistics Malaysia (Issue January 2021).
Gajevszky, A. (2015). Assessing financial Reporting Quality: Evidence from Romania. Audit Financial, pp.1583- 5812.
Gassen, J., & Sellhorn, T. (2006). Applying IFRS in Germany – determinants and consequences. Betriebswirtschaftliche Forschung und Praxis, 58(4), 365–386.
Gates, S., Reckers, P., Robinson, D. (2009). Media Image of The CEO and The Impact on Auditors' Perception of Financial Reporting Reliability and Client Risk Assessments, 25(2), 156-164.
Herath, S., K., & Albarqi, N. (2017). Financial Reporting Quality: A Literature Review. International Journal of Business Management and Commerce. 2(2). pp. 1-14.
Hung, M., & Subramanyam, K. (2007). Financial statement effects of adopting international accounting standards: The case of Germany. Review of Accounting Studies, 12(4), 623–657. doi: 10.1007/s11142-007-9049-9
IASB (2006). Preliminary Views on an Improved Conceptual Framework for Financial Reporting.
IASB (2007). International Financial Reporting Standards an IAS Plus Guide Presentation and Disclosure Checklist 2007.
IASB (2008). Exposure Draft on an improved Conceptual Framework for Financial Reporting Chapter 1 & Chapter 2.
IASB. (2010). The Conceptual Framework for Financial Reporting 2010.
IASB. (2018). Revised Conceptual Framework for Financial Reporting 2018 (Conceptual Framework).
Iatridis. G. (2010). International Financial Reporting Standards and The Quality of Financial Statement Information. International Review of Financial Analysis, 19. 193-204.
Iatridis. G., & Rouvolis. S. (2010). The post-adoption effects of the implementation of International Financial Reporting Standards in Greece. Journal of International Accounting, Auditing and Taxation. 19. 55-65
Ibrahim Elsiddig Ahmed (2020). The Qualitative Characteristics of Accounting Information, Earnings Quality, and Islamic Banking Performance: Evidence from the Gulf Banking Sector. International Journal of Financial Studies, 8(2), 1-16.
Jamila, K. R., and Alhabshi, S. M. (2019). Waqf Financial Reporting and Transparency: Case
of Ar-Raudhatul Hasanah Islamic Boarding School. Kitabah: Jurnal Akuntansi dan
Kewangan Syariah, (1).
Jonas, G. & Blanchet, J. (2000). Assessing Quality of Financial Reporting. Accounting Horizons, 14(3), 353-363.
Kamaruzaman, A. J., Mazlifa M.D., & Maisarah A. R (2009). The Association between Firm Characteristics and Financial Statements Transparency: the case of Egypt, International Journal of Accounting, Vol. 18 No.2.
Kargin. S. (2013). The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms. International Journal of Economics and Finance. 5(4). Pp: 71-80.
Krishnan, R., Peters, J., Padman, R. & Kaplan, D. (2005). On Data Reliability Assessment in Accounting Information Systems. Information Systems Research, 16(3), 307-326.
Maines, L. & Wahlen, J. (2006). The Nature of Accounting Information Reliability: Inferences from Archival and Experimental Research. Accounting Horizons, 20(4), 399- 425.
Neel, M. (2017). Accounting Comparability and Economic Outcomes of Mandatory IFRS Adoption. Contemporary Accounting Research, 34(1), 658–690. https://doi.org/10.1111/1911-3846.12229.
Nwaobia, A.N., Kwarbai, J.D., Kwarbai, J.D. & Ajibade, A.T. (2016). Financial Reporting Quality on Investors Decisions. International Journal of Economics and Financial Research, 2(7), 140-147.
Ohlson, J. A. (1995). Earnings, Book Values, and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661-687. http://dx.doi.org/10.1111/j.1911-3846.1995.tb00461.x
Qingyuan, L., & Lumeng, W. (2018). Financial statement comparability and corporate tax avoidance. China Journal of Accounting Studies, 6(4), 448–473. https://doi.org/10.1080/21697213.2019.1612187.
Ross, J., Shi, L., & Xie, H. (2019). The determinants of accounting comparability around the world. Asian Review of Accounting, 28(1), 69–88. https://doi.org/10.1108/ARA-04-2019-0087.
Sloan, R. (2001). Financial Accounting and Corporate Governance: A Discussion. Journal of Accounting and Economics, 32, 335-347.
Taplin, R. H. (2011). The Measurement of Comparability in Accounting Research. Abacus, 47(3), 383–409. https://doi.org/10.1111/j.1467-6281.2011.00345.x
Tasios, S., & Bekiaris, M. (2012). Auditor's perceptions of financial reporting quality: the case of Greece. International Journal of Accounting and Financial Reporting. 2(1). pp.57-74.
Try Yurisandi & Evita Puspitasari, (2015). Financial Reporting Quality – Before and After IFRS Adoption Using NiCE Qualitative Characteristics Measurement. Procedia – Social and Behavioural Sciences 211, 644 -652.
Van Tendeloo, B., & Vanstraelen, A. (2005). Earnings management under German GAAP versus IFRS. European Accounting Review, 14(1), 155–180. doi: 10.1080/0963818042000338988.
Published
2021-07-01
How to Cite
MOHD HUSSIN, Suhaili et al.
Qualitative Characteristics of Financial Information Toward Quality of Financial Reporting in Malaysian Listed Manufacturing Firms.
Asian Journal of Research in Business and Management, [S.l.], v. 3, n. 2, p. 102-111, july 2021.
Available at: <https://myjms.mohe.gov.my/index.php/ajrbm/article/view/14075>. Date accessed: 16 jan. 2025.
Section
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