Boundaries of management performance measures (MPMs) disclosed in primary financial statements prepared in accordance with new standard planned to supersede IAS 1

• Authors: Ewa Wanda Maruszewska , Maciej Andrzej Tuszkiewicz

Abstracts

EN

We outline the management performance measures (MPMs)' boundaries based on the upcoming introduction of MPM's definition to International Financial Reporting Standards (IFRS). The literature investigates business performance measures concentrating on managers' needs, while IFRS aims to provide financial information to external users who provide resources to the entity. This indicates a gap between how performance metrics have been investigated so far and how IFRS will adopt them. We used analysis of the exposure draft of the planned standard together with working materials developed in the consultation process. Further, a case study is presented. Results show that the scope of MPM to be introduced to IFRS is limited compared to the broad spectrum of performance measures presented in the literature. We contribute by showing the avenues for future performance measures research using signalling and agency theory and by indicating the limited scope of MPMs and thus bound prospects for using them for a full assessment of the entity‘s performance.

Keywords

EN

management performance measures; MPM; performance measurement; IAS 1; IFRS 18; signalling theory; agency theory

• Publisher: Uniwersytet Warszawski. Wydział Nauk Ekonomicznych
• Journal: Central European Economic Journal
• Year: 2023
• Volume: 11
• Issue: 58
• Pages: 1-16

Dates

published

2024

Contributors

author

Ewa Wanda Maruszewska

• Uniwersytet Ekonomiczny w Katowicach

author

Maciej Andrzej Tuszkiewicz

• Uniwersytet Ekonomiczny w Katowicach

References

• Alexander, D., & Archer, S. (2003). On economic reality, representational faithfulness and the “true and fair override.” Accounting and Business Research, 33(1), 3–17. https://doi.org/10.1080/00014788.2003.9729628
• Aljughaiman, A. A., Nguyen, T. H., Trinh, V. Q., & Du, A. (2023). The Covid-19 outbreak, corporate financial distress and earnings management. International Review of Financial Analysis, 88. https://doi.org/10.1016/j.irfa.2023.102675
• Ayu, M., Lindrianasari Gamayuni, R. R., & Urbański, M. (2020). The impact of environmental and social costs disclosure on financial performance mediating by earning management. Polish Journal of Management Studies, 21(2). https://doi.org/10.17512/pjms.2020.21.2.06
• Bahrl, M., St-Pierre, J., & Sakka, O. (2016). Performance measurement and management for manufacturing SMEs: A financial-statement-based system. Measuring Business Excellence, 21(1), 17–36. https://doi.org/10.1108/MBE-06-2015-0034
• Berliner, C., & Brimson, J. A. (1988). Cost management for today's advanced manufacturing: The CAM-I conceptual design. Harvard Business School Press, Boston, MA.
• Białek-Jaworska, A., & Dec, K. (2019). Pożyczki od jednostek powiązanych a wygładzanie zysków przez polskie przedsiębiorstwa prywatne. Zeszyty Teoretyczne Rachunkowości, 102(158). https://doi.org/10.5604/01.3001.0013.2499
• Boselie, P., Dietz, G., & Boon, C. (2005). Commonalities and contradictions in HRM and performance research. Human Resource Management Journal, 15(3), 67–94. https://doi.org/10.1111/j.1748-8583.2005.tb00154.x
• Brignall, S., Fitzgerald, L., Johnston, R., & Silvestro, R. (1991). Performance measurement in service businesses. Management Accounting, 69(10), 34–36.
• Burchell, S., Clubb, C., & Hopwood, A. G. (1985). Accounting in its social context: Towards a history of value added in the United Kingdom. Accounting, Organisations and Society, 10(4), 381–413. https://doi.org/10.1016/0361-3682(85)90002-9
• Chandler, A., Jr. (1977). The visible hand: The managerial revolution in American business. Harvard University Press.
• Chapman, C. S., Hopwood A. G., & Shields M. D. (Eds.). (2007). Handbook of Management Accounting Research. Elsevier.
• Chen, W., Harding, N., & He, W. (2021). Non-professional investors' judgments of reliability of fair value estimates – the impact of investor mood. Behavioral Research in Accounting, 33(1), 43–63. https://doi.org/10.2308/BRIA-19-035
• Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, Ch. R. (2011). Signaling theory: A review and assessment. Journal of Management, 37(1), 39–67. https://doi.org/10.1177/0149206310388419
• Cooper, R., & Kaplan, R. (1988). Measure cost right: Make the right decisions. Harvard Business Review, 66(5), 106–111.
• Cutler, D. M., Poterba, J. M., & Summers, L. H. (1989). What moves the stock prices? Journal of Portfolio Management, 15, 4–12.
• Deloitte. (2020, September 30). Deloitte comment letter on general presentation and disclosures. https://bit.ly/Deloitte-2020c
• EFRAG. Primary financial statements. Targeted outreach activities. Corporates (2022, September). https://bit.ly/EFRAG-2022-09
• EFRAG IASB Joint Online Roundtable. What are the implications of recent IASB decisions on primary financial statements? (2022, November 15). https://www.efrag.org/News/Meeting-502/PROGRAMMEEFRAG-IASB-online-roundtable---What-are-the-implications-of-the-recent-IASB-decisions-on-Primary-Financial-Statements-15-November-2022
• FASB IASB Joint Educational Meeting. (2022, September). https://bit.ly/FASB-IASB-09-2022
• Gomoi, B. C., & Pantea, M. F. (2016). The impact of signaling theory and agency theory on the financial reporting. Lucrări Ştiinţifice Management Agricol, 18(2), 199–202. https://lsma.ro/index.php/lsma/article/view/860
• Harrison, P. D., & Harrell, A. (1993). Impact of “adverse selection” on managers' project evaluation decisions. Academy of Management Journal, 36(3), 635–643.
• Hartmann, B., Marton, J., & Söderström, R. (2018). The improbability of fraud in accounting for derivatives: A case study on the boundaries of financial reporting compliance. European Accounting Review, 27(5), 845–873. https://doi.org/10.1080/09638180.2018.1494022
• Holthausen, R. W. (1990). Accounting method choice: Opportunistic behavior, efficient contracting, and information perspectives. Journal of Accounting and Economics, 12(1–3), 207–218. https://doi.org/10.1016/0165-4101(90)90047-8
• IFRS Accounting. Accounting Standards Advisory Forum Meeting. Staff paper. (2023, July). https://bit.ly/IFRS-07-2023
• IFRS Foundation. IFRS completes technical work on two new IFRS Accounting Standards. (2023, July 26). https://www.ifrs.org/news-and-events/news/2023/07/iasb-completes-technical-work-ontwo-new-ifrs-accounting-standards/
• IFRS Foundation. IFRS standards exposure draft ED/2019/7: General presentation and disclosures. (2019, December). https://cdn.ifrs.org/content/dam/ifrs/project/primary-financial-statements/exposure-draft/ed-general-presentation-disclosures.pdf
• IFRS Foundation. Primary financial statements. (2023). https://www.ifrs.org/projects/work-plan/primary-financial-statements/#current-stage
• Jassim, A., Dexter, C. R., & Sidhu, A. (1988). Agency theory: Implications for financial management. Managerial Finance, 14(4), 1–5. https://doi.org/10.1108/eb013600
• Kadous, K., Koonce, L., & Thayler, J. M. (2012). Do financial statements users judge relevance based on properties of reliability? The Accounting Review, 87(4), 1335–1356. https://doi.org/10.2308/accr-50157
• Kaplan, R., & Norton, D. (1992). The balanced scorecard: Measures that drive performance. https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2 (Original work published in 1992).
• Kennerly, M., & Neely, A. (2003). Measuring performance in a changing business environment. International Journal of Operations & Production Management, 23(2), 213–229. https://doi.org/10.1108/01443570310458465
• Khan, S., Khan, H., & Khan, F. (2019). Firms audit committee and external auditor influence on accounting conservatism and firm's performance. International Journal of Management, Accounting & Economics, 6(1), 22–47.
• Knoeber, Ch. R., & McKee Jr., A. J. (1991). Accounting choice: The role of monitoring cost. Managerial and Decision Economics, 12(5), 353–360. https://doi.org/10.1002/mde.4090120503
• Lambert, R., Leuz, Ch., & Verrecchia, R. E. (2007). Accounting information, disclosure, and the cost of capital. Journal of Accounting Research, 45(2), 385–420. https://doi.org/10.1111/j.1475-679X.2007.00238.x
• Liang, J., Yang, S., & Xia, Y. (2023). The role of financial slack on the relationship between demand uncertainty and operational efficiency. International Journal of Production Economics, 262, 108931. https://doi.org/10.1016/j.ijpe.2023.108931
• Lynch, R. L., & Cross, K. F. (1991). Measure-Up: The essential guide to measuring business performance. Mandarin.
• Macintosh, N., Shearer, T., Thorton, D. B., & Welker, M. (2000). Accounting as simulacrum and hyperreality: Perspectives on income and capital. Accounting, Organisations and Society, 25, 13–50. http://www.sciencedirect.com/science/article/pii/S0361-3682(99)00010-0
• Macintosh, N. B. (2009). Accounting and the truth of earnings reports: Philosophical considerations. European Accounting Review, 18(1), 141–175. https://doi.org/10.1080/09638180802327073
• Marilen, P., Flavia, B., & Lucia, N. M. (2013). The institutional investors' behaviour under the impact of the global financial crisis. Annals of the “Constantin Brâncuşi” University of Târgu Jiu, 1, 285–292. http://www.utgjiu.ro/revista/ec/pdf/2013-01/39_Pirtea%20Marilen,%20Barna%20Flavia.pdf
• Maruszewska, E. W., Niesiobędzka, M., & Kołodziej, S. (2023). Why is it so hard to provide a faithful representation? The impact of indirectly evoked incentives on the accounting policy decision and the accountant's subsequent post-decision distortion. Meditari Accountancy Research. Advance online publication. https://doi.org/10.1108/MEDAR-11-2021-1505
• Mavropulo, O., Rapp, M. S., & Udoieva, I. A. (2021). Value-based management control systems and the dynamics of working capital: Empirical evidence. Management Accounting Research, 52, https://doi.org/10.1016/j.mar.2021.100740
• Micheli, P., & Mari, L. (2014). The theory and practice of performance measurement. Management Accounting Research, 25(2), 147–156. https://doi.org/10.1016/j.mar.2013.07.005
• Morris, R. B. (1987). Signalling, agency theory and accounting policy choice. Accounting and Business Research, 18(69), 47–56. https://api.semanticscholar.org/CorpusID:154914982
• Neely, A. (Ed.) (2002). Business performance measurement. Theory and practice. Cambridge University Press.
• Neely, A., Mills, J., Platts, K., Richards. H., Gregory, M., Bourne, M., & Kennerly, M. (2000). Performance measurement system design: Developing and testing a process-based approach. International Journal of Operations & Production Management, 20(10), 1119–1145. https://doi.org/10.1108/01443570010343708
• Palas, R., Solomon, D., Gafni, D., & Baum, I. (2023). Does wedge size matter? Financial reporting quality and effective regulation of dual-class firms. Finance Research Letters, 54, 103774. https://doi.org/10.1016/j.frl.2023.103774
• Ross, S. A. (1973). The economic theory of agency: The principal's problem. Decision Making under Uncertainty, 63(2), 134–139.
• Taticchi, P., Tonelli, F., & Cagnazzo, L. (2009). A decomposition and hierarchical approach for business performance measurement and management. Measuring Business Excellence, 13(4), 47–57. https://doi.org/10.1108/13683040911006783
• Van der Hauwaert, E., Hoozée, S., Maussen, S., & Bruggeman, W. (2022). The impact of enabling performance measurement on managers' autonomous work motivation and performance. Management Accounting Research, 55 100780. https://doi.org/10.1016/j.mar.2021.100780

Identifiers

DOI

10.2478/ceej-2024-0001

Biblioteka Nauki

24202983