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TCC AG is a fast-growing bicycle production company and is headed by an ambitious top management team that wants to reinforce the firm’s expansion strategy with a sophisticated financial funding scheme. However, combined with an income decline, the financing strategy unexpectedly poses an existential threat to TCC. Complex accounting questions arise including the likely breach of a financial covenant, the detailed contractual clauses of a prospectus and the execution of a debt-for-equity swap. The underlying accounting requirements cover the recognition, the measurement and the disclosures of non-derivative financial instruments according to the International Financial Reporting Standards (IFRS). To foster a holistic understanding of financial instruments, the educational resource further combines the accounting concepts with related corporate finance theory. With this integrative approach, the case intends to encourage students’ critical reflection upon the far-reaching economic consequences resulting from accounting decisions.
This paper iestigates the level of consistency in using financial key performance indicators (KPIs) in capital market communication in Germany and examines specific determinants of consistent KPI reporting. To measure such consistency, the study reports three consistency indices that were uniquely developed for this pa-per. The indices measure the consistent KPI reporting of a sample of German listed companies from 2009 to 2014 and consist of up to 396 firm year observations. These indices indicate a high level of inconsistency in the reporting behaviour of German companies in the management report, the annual report and capital market communication. The results range from 36% to 48% consistency, indicating room for improvement. The results of a random effects regression analysis report for all indices that the level of consistency increased significantly in 2013 and 2014. The study shows that profitable firms and firms with an above average number of KPIs report more consistently than other firms. This paper contributes to the literature on disclosure topics in accounting by introducing KPI consistency indices as a proxy of disclosure quality and demonstrates that the KPI reporting behaviour of German firms lacks consistency.
International Additives Producer AG (IAP) recently announced ambitious forecasts regarding revenue and operating income to the capital market. These key performance indicators depend on the way IAP's iestments are currently accounted for in its consolidated financial statements, a situation that is seriously questioned by the newly appointed auditor. In this context, the case requires the application of the relevant International Financial Reporting Standards (IFRS) regarding the categorization of iestments for group reporting purposes. Specifically, Part I of the case requires the application of the control concept of IFRS 10 as well as the classification rules of IFRS 11 for joint arrangements, while Part II of the case introduces the assessment of significant influence according to IAS 28. Throughout the case the consequences of iestment categorization on external reporting and related management incentives that arise from the interplay between financial reporting and capital markets, compensation contracts and additional disclosure requirements are discussed.
The overall importance of capital market communication has increased hand in hand with the development of the economic importance of the capital market it-self. Equity iestors use various information sources, such as management reports, consolidated financial statements, iestor relation presentations, and web pages, to prepare and assess iestment decisions. This cumulative dissertation consists of four manuscripts that analyses different group accounting related aspects of the capital market communication. The first two manuscripts are classified as contributions to the understanding of current IFRS topics in capital market communication. These manuscripts are case-based instructional resources and deal with group accounting decisions on financial instruments and consolidation issues. The second part of the dissertation comprises empirical analyses on financial KPI reporting across different parts of capital market communication. The manuscripts provide empirical analysis of the consistent use of financial KPIs across the different parts of capital market communication, the determinants of consistent KPI reporting and the value relevance.