This study investigates the application of fair value ac- counting in companies in Bosnia and Herzegovina. The study was conducted on a sample of 190 companies. The application of fair value accounting causes a lot of controversy related to the relevance and reliability of fair value information. It is believed that the extent to which fair value measurement is used reflects attitudes of financial statement preparers about the usefulness of this model at its best. The findings of this study sug- gest that most companies in Bosnia and Herzegovina do not have tendency to apply fair value accounting. It is found that half of the companies in the sample do not use fair value accounting at all. Almost half of the com- panies that use fair value accounting use it just because they own assets that require fair value measurement. Fair value accounting is much more used in financial and larger companies than in non-financial and smaller companies. Companies mostly use fair value accounting for the measurement of investment property. However, they use it for the measurement of intangible assets at a minimum. The findings also suggest that the application of fair value accounting increases the uncertainty in fi- nancial statements. The quality of fair value disclosures is very low. Numerous companies do not disclose infor- mation on fair value hierarchy and valuation techniques that were used for fair value measurement. Companies that disclose this information mostly use indirectly ob- servable inputs (Level 2) for fair value measurement and these create a lot of room for earnings management.
After the major corporate accounting scandals that happened at the beginning of the 21st century, many countries introduced the obligation to disclose information about the effectiveness of internal control over the financial reporting system. It was based on the assumption that mandatory reporting on internal control will encourage managers to pay more attention to the improvement of internal control over the financial reporting system and that this will lead to an improvement in the quality of financial statements and restore investor confidence in financial statements. The aim of this paper is to examine the economic consequences of the introduction of the obligation to disclose information on the effectiveness of internal control i.e., whether the assumed benefits have been realised. In order to realize the established goal, the author analyses the results of numerous empirical studies that investigated the impact of disclosure of information about the effectiveness of internal control on the quality of financial statements, the behaviour of investors and the behaviour of lenders. According to the author's findings, the obligation to disclose information about the effectiveness of internal control led to an improvement in the quality of financial statements. Also, the disclosure of this information has informational value for investors and lenders and affects their behaviour i.e., their risk assessment and the decisions they make.
This study examines the practice of disclosing risk information in the financial statements of banks in Bosnia and Herzegovina. The research is carried out using the content analysis. The aim of the research is to determine the volume and characteristics of risk disclosures. The results of research show that banks in Bosnia and Herzegovina disclose less risk information than banks in developed countries, such as Canada and the UK. Most information is disclosed about credit risk. More quantitative than qualitative data is disclosed. The banks are focused on providing mandatory risk disclosures but they do not provide all mandatory disclosures. They primarily disclose past and time-neutral risk information. They are more likely to disclose positive and neutral news about risk exposure and risk management rather than negative news.
External stakeholders rely heavily on the information contained in the financial statements when making business decisions. Given the risks they take in making decisions based on this information, they expect the management to provide them with quality financial statements. In order to be able to provide such financial statements, the company’s management needs to establish quality internal control over the financial reporting system. The task of this internal control is to reduce the risks of unintentional errors in accounting records, as well as intentional manipulation of accounting information contained in financial statements. Having in mind the importance of internal control for providing reliable financial statements, the author intends to identify the determinants of the quality of internal control in this article. In order to identify these determinants, the author relies on the results of empirical research conducted in countries where companies are required to disclose information on the quality of internal control over financial statements. According to the author’s findings, the quality of internal control is influenced by a number of factors concerning the characteristics of corporate governance and the characteristics of the company in which internal control is established. When it comes to the characteristics of corporate governance, the quality of internal control over the financial reporting system is affected by the quality of the board of directors, the quality of the audit committee and the quality of internal audit. When it comes to the characteristics of the company, the author found that the quality of internal control over the financial reporting system is influenced by the ownership structure of the company, its size, age, financial stability, complexity, growth rate and the fact that the company is in the process of restructuring.
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