Articlegreen2012

How does the market view interests in jointly controlled entities?

Isabel Lourenço · Sónia Fernandes · José Dias Curto

13 citations0/0 files storedSpanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad

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Accounting Theory and Financial Reporting Auditing, Earnings Management, Governance Financial Reporting and Valuation Research

Abstract

This study addresses whether the market views the venturer's share of the assets and liabilities of Jointly Controlled Entities (JCEs) as assets and liabilities of the venturer. The role of JCEs' assets and liabilities is a key question underlying the international debate on the appropriate reporting method for interests in JCEs. We estimate a cross-sectional valuation model based on that used in Landsman et al. (2008). Our valuation model is one that includes measures of the venturer's assets, liabilities and net income as well as measures of the venturer's share of JCEs' assets and liabilities. Findings are based on comparisons of assets and liabilities coefficients. They suggest that investors view the venturer's share of JCEs' assets and liabilities similarly to the assets and liabilities of the venturer. The findings thus provide some tentative support against the IASB's decision to eliminate proportionate consolidation from IAS 31.

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References

1973Risk, Return, and Equilibrium: Empirical Tests 1995Earnings, Book Values, and Dividends in Equity Valuation*2008International Accounting Standards and Accounting Quality 2001The relevance of the value relevance literature for financial accounting standard setting: another view 1988A transaction costs theory of equity joint ventures 1991The Transaction Costs Theory of Joint Ventures: An Empirical Study of Japanese Subsidiaries in the United States 1997THE CHOICE BETWEEN MERGERS/ACQUISITIONS AND JOINT VENTURES: THE CASE OF JAPANESE INVESTORS IN THE UNITED STATES 1978Journal of business finance and accounting

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2019Effects of adopting IFRS 10 and IFRS 11 on consolidated financial statements 2020Did the switch to IFRS 11 for joint ventures affect the value relevance of corporate consolidated financial statements? Evidence from France and Italy

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