• Title/Summary/Keyword: Fair disclosure regulations

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Study on the Problems of Korean GAAP and Tax Regulations on the Merge Transactions ("기업인수.합병 등에 관한 회계처리준칙" 및 관련 세법 규정의 문제점)

  • Shin, Hyun-Geol
    • Korean Business Review
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    • v.17 no.2
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    • pp.1-23
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    • 2004
  • Since revision of Korean GAAP on the merge transaction in 1999, the few studies on the problems of the GAAP or on the inconsistency of GAAP and regarding tax regulations have been performed. The objective of this study is to understand the present state of the merge transactions, to find out the problems on the regarding GAAP and tax regulations, and to suggest the method to improve them. Among the 69 merge transactions of the listed and registered companies for the recent 3 years, 67 merge transactions are reported as the purchase transactions and 2 transactions as the pooling of interest. And 11 transactions occurred between parents and subsidiaries. I investigate the sufficiency of the foot disclosures on the merge transactions, I find out that the disclosure on the amortization of the negative goodwill are not sufficient, and several transactions are not recorded in conformity with GAAP. This paper indicates the problems on the GAAP as follows: the complicated and irrational method of amortization of the negative goodwill, the valuation of the stocks acquired before the merge, the inconsistent adjustments to purchase consideration contingent on future events, and the valuation of the merge between the parents and subsidiaries. And the problems on the tax regulations are as follows: tax deferment of the income from merge valuation, the ambiguous definitions of the fair value, and stock dividend of the income from merge valuation.

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The Effect of Management Earnings Forecasts on Future Earnings Quality (경영자의 이익예측정보공시가 미래 이익의 질에 미치는 영향)

  • Kim, Seon-Gu
    • Journal of the Korea Convergence Society
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    • v.8 no.11
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    • pp.363-372
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    • 2017
  • This study analyzed how management earnings forecasts would have an effect on future earnings quality. The analysis period of study was from 2003 till 2009 (ofrom 2004 till 2011) based on variables of interest (dependent variables) and the annual data from a total of 475 companies that publicly announced manager's operating earnings forecasts among securities listing companies were used for analysis. As a result, first, it appeared that the more optimistic the manager's earnings forecasts were for the current term, the lower the future earnings quality was. Second, it was found that the lower the accuracy of the manager's earnings forecasts was for the current term, the lower the future earnings quality was. Such findings suggest that management earnings forecasts will be used for determining future earnings quality.

A New Exploratory Research on Franchisor's Provision of Exclusive Territories (가맹본부의 배타적 영업지역보호에 대한 탐색적 연구)

  • Lim, Young-Kyun;Lee, Su-Dong;Kim, Ju-Young
    • Journal of Distribution Research
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    • v.17 no.1
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    • pp.37-63
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    • 2012
  • In franchise business, exclusive sales territory (sometimes EST in table) protection is a very important issue from an economic, social and political point of view. It affects the growth and survival of both franchisor and franchisee and often raises issues of social and political conflicts. When franchisee is not familiar with related laws and regulations, franchisor has high chance to utilize it. Exclusive sales territory protection by the manufacturer and distributors (wholesalers or retailers) means sales area restriction by which only certain distributors have right to sell products or services. The distributor, who has been granted exclusive sales territories, can protect its own territory, whereas he may be prohibited from entering in other regions. Even though exclusive sales territory is a quite critical problem in franchise business, there is not much rigorous research about the reason, results, evaluation, and future direction based on empirical data. This paper tries to address this problem not only from logical and nomological validity, but from empirical validation. While we purse an empirical analysis, we take into account the difficulties of real data collection and statistical analysis techniques. We use a set of disclosure document data collected by Korea Fair Trade Commission, instead of conventional survey method which is usually criticized for its measurement error. Existing theories about exclusive sales territory can be summarized into two groups as shown in the table below. The first one is about the effectiveness of exclusive sales territory from both franchisor and franchisee point of view. In fact, output of exclusive sales territory can be positive for franchisors but negative for franchisees. Also, it can be positive in terms of sales but negative in terms of profit. Therefore, variables and viewpoints should be set properly. The other one is about the motive or reason why exclusive sales territory is protected. The reasons can be classified into four groups - industry characteristics, franchise systems characteristics, capability to maintain exclusive sales territory, and strategic decision. Within four groups of reasons, there are more specific variables and theories as below. Based on these theories, we develop nine hypotheses which are briefly shown in the last table below with the results. In order to validate the hypothesis, data is collected from government (FTC) homepage which is open source. The sample consists of 1,896 franchisors and it contains about three year operation data, from 2006 to 2008. Within the samples, 627 have exclusive sales territory protection policy and the one with exclusive sales territory policy is not evenly distributed over 19 representative industries. Additional data are also collected from another government agency homepage, like Statistics Korea. Also, we combine data from various secondary sources to create meaningful variables as shown in the table below. All variables are dichotomized by mean or median split if they are not inherently dichotomized by its definition, since each hypothesis is composed by multiple variables and there is no solid statistical technique to incorporate all these conditions to test the hypotheses. This paper uses a simple chi-square test because hypotheses and theories are built upon quite specific conditions such as industry type, economic condition, company history and various strategic purposes. It is almost impossible to find all those samples to satisfy them and it can't be manipulated in experimental settings. However, more advanced statistical techniques are very good on clean data without exogenous variables, but not good with real complex data. The chi-square test is applied in a way that samples are grouped into four with two criteria, whether they use exclusive sales territory protection or not, and whether they satisfy conditions of each hypothesis. So the proportion of sample franchisors which satisfy conditions and protect exclusive sales territory, does significantly exceed the proportion of samples that satisfy condition and do not protect. In fact, chi-square test is equivalent with the Poisson regression which allows more flexible application. As results, only three hypotheses are accepted. When attitude toward the risk is high so loyalty fee is determined according to sales performance, EST protection makes poor results as expected. And when franchisor protects EST in order to recruit franchisee easily, EST protection makes better results. Also, when EST protection is to improve the efficiency of franchise system as a whole, it shows better performances. High efficiency is achieved as EST prohibits the free riding of franchisee who exploits other's marketing efforts, and it encourages proper investments and distributes franchisee into multiple regions evenly. Other hypotheses are not supported in the results of significance testing. Exclusive sales territory should be protected from proper motives and administered for mutual benefits. Legal restrictions driven by the government agency like FTC could be misused and cause mis-understandings. So there need more careful monitoring on real practices and more rigorous studies by both academicians and practitioners.

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