Template-Type: ReDIF-Article 1.0 Author-Name: Petr Dvořák Title: Watch Out for Post-crisis Regulatory Euphoria Abstract: Dear readers, although the crisis is not over yet it seems to be giving up as signs of economic upturn have been flashing lately. Logically, analysts and regulatory authorities seem to have shifted the scope of their interest. It is not research for roots of crisis any more - they are now formulating lessons learnt to shape the future of financial system. Similarly to historical periods of economic downturn nowadays we can hear voices calling for sound and more strict regulation. While this is perfectly reasonable it raises a question whether to hold appropriate the chosen trend of fixing the financial system. What are the most important issues? Last decade of the twentieth century as well as the beginning of the new millennium have both enjoyed important deregulation of financial markets which, in my opinion, not only brought revival to these markets but also had a very positive impact on the whole economy. We may only speculate on what would have happened then if we had set the regulatory rules in the form being considered today. The course of the crisis might have taken a different direction but the shape of financial markets and the whole economywould have been different, too. When contemplating more strict regulation we have to keep in mind the risks of negative impact on financial market and operating investor behaviour while not forgetting about expenses induced by the changes in regulation. Regulation promoters would certainly object that bad regulation induces vast losses and that efficient market benefits more than outweigh costs related to regulation. This objection cannot be put into question and I do not intend to advocate regulation cancellation. The main danger in stake is the risk of regulation over-tightening in the current “post-crisis euphoria”. All regulatory amendments must be thoroughly considered before adoption. They must not be too specific while being very simple, they must look ahead in the future while leaving space for innovations and without over-medication of investor responsibility. The quality of being general and relatively simple at the same time is far from being met with today’s regulatory rules, their complexity and sophistication is such that they become sole domain of a very narrow scope of people in regulated and regulatory institutions. The rest of population lacks not only knowledge about them but even capacity to understand. The regulation is not easily enforced and disputes often result in long court litigations that overemphasize procedural aspects over true matter. All these aspects amount higher costs of regulation. Additional amendments to existing rules often make the situation even worse. How can the regulation rules look ahead in the future? Regulatory changes tend to be reactive when fixing a specific problem. We should however notice that both parties learn lessons for the mistake. Regulators and market participants, none of them tend to reproduce the same mistake. If I simplify a bit I reckon that even if we did not change the current regulation there would be no other similar crisis rising from the same roots. And no matter if these roots were conscious or unconscious underestimating of any risk. This is why any regulatory amendment should not only reflect past problems but should with utmost importance predict issues and failures based on the past experience and take them into consideration when formulating new rules. Not forgetting about the prerequisite of general validity, once again. Regulatory rules can only set a certain framework. We may not expect them to make financial markets operate in an efficient way and they may never protect every single investor. Neither can any law abolish crime nor any traffic rule stop speeding. Regulation itself does not make a perfect market. Market participants always have their own stake and make the difference, and therefore it is so important to underline their code of ethics and moral judgements, again and again over time. And we have to keep these connected with responsibility. Over-emphasising regulation may lead to an unexpected drop in vigilance by investors who could misleadingly rely on regulation while assessing risks to be low. I am aware of the fact that it is by far easier to discuss general principles than formulate regulatory rules. And this is even more true today when rules are to a great extent created at the international level (which is given by the nature of financial markets). Such a situation leaves little space for national legislation. We should however remind regulatory authorities who often remind financial market participants to be precautious to do so when setting regulatory rules. Pages: 4-5 Volume: 2009 Issue: 3 Year: 2009 File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=69.pdf File-URL: http://www.vse.cz/efaj/69 File-Format: text/html Handle: RePEc:prg:jnlefa:v:2009:y:2009:i:3:id:69:p:4-5 Template-Type: ReDIF-Article 1.0 Author-Name: Dana Dvořáková Title: Historical Costs versus Fair Value Measurement in Financial Accounting Abstract: There are two important points in which in which we need assets and liabilities measured in financial accounting: on initial recognition and at a balance sheet day. Many International Financial Reporting Standards (IFRS) used the fair value measurement concept. But most of these standards use the fair value measurement method only at a balance sheet day. On initial recognition assets and liabilities are measured usually at costs. The IASB presented the discussion paper “Measurement Bases for Financial Accounting - Measurement on Initial Recognition (2005)” which proposed fair value measurement on initial recognition for all assets and liabilities. This article is aimed on assessment of risks arising from extending fair value measurement using and on issue of fair value measurement in time of financial crisis. Keywords: Fair value, Accounting, Measurement Classification-JEL: M41 Pages: 6-18 Volume: 2009 Issue: 3 Year: 2009 File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=70.pdf File-URL: http://www.vse.cz/efaj/70 File-Format: text/html Handle: RePEc:prg:jnlefa:v:2009:y:2009:i:3:id:70:p:6-18 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlefa/references/70 Template-Type: ReDIF-Article 1.0 Author-Name: Jana Skálová Author-Name: Tomáš PODŠKUBKA Title: Accounting Interpretation of Cross-border Mergers in the Czech Republic Based on Czech Accounting Standards Abstract: The paper deals with cross-border mergers that may be performed either out of or into the Czech Republic and focuses on the accounting and tax aspects of these transactions. Attention was also paid to the most important legal requirements imposed on merger projects and the net assets valuations. The Directive 2005/56/EC brought in new possibilities of business transformations across the EU member states’ borders. Income tax advantages that may be gained in cross-border mergers were implemented by virtue of the Directive 90/434/EEC. It may be difficult to meet stringent requirements that are conditional upon enjoyment of the neutral tax treatment. Keywords: Czech Republic, Cross-border mergers, Opening balance sheet, Decisive Day, Merger Project, Valuation Report Classification-JEL: G34, H25, M41 Pages: 19-39 Volume: 2009 Issue: 3 Year: 2009 File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=71.pdf File-URL: http://www.vse.cz/efaj/71 File-Format: text/html Handle: RePEc:prg:jnlefa:v:2009:y:2009:i:3:id:71:p:19-39 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlefa/references/71 Template-Type: ReDIF-Article 1.0 Author-Name: Carmen Giorgiana BONACI Author-Name: Jiří Strouhal Author-Name: Dumitru MATIS Title: Fair Value Accounting and Measurement through FASB’s Developments Abstract: Our research follows the path of fair value as a term and concept, as well as its disclosure, measurement and recognition back from 1953 until our days, and analyzes the regulations issued by United States Accounting Standard setters, through the point of view of the historical events, which led to their appearance. Our study brings its’ contribution to complementing growing literature on the value relevance of fair value, but focuses on the assessment of fair value as a financial reporting standard for financial instruments. The objective of the paper is to link the regulations with the historical events, which have guided them to their current shape and meaning. In doing so, we identified several key issues, which need to be analyzed, and through which we draw our conclusions after a closer analysis of SFAS’s foresights. In financial reporting, United States and International Accounting Standard setters have issued several disclosures, measurement and recognition standards for financial instruments. We conclude our study noticing how all indications are that both standard setters mandate recognition of financial instruments at fair value, despite all fingers currently being pointed toward fair value as a “scape goat” for the recent events. The relevance of the study is emphasized when looking through the lens of the current financial crisis, derivative financial instruments being a central element. With Churchill’s words and believe in our thoughts, “the deeper we can look into the past, the farther we’ll see into the future” we plead for fair value assessment by underlying its advantages, while being aware of its limitations. Keywords: Fair value, Financial crisis, Hierarchy Level, Reliability, Relevance, Estimates Classification-JEL: M41 Pages: 40-63 Volume: 2009 Issue: 3 Year: 2009 File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=72.pdf File-URL: http://www.vse.cz/efaj/72 File-Format: text/html Handle: RePEc:prg:jnlefa:v:2009:y:2009:i:3:id:72:p:40-63 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlefa/references/72 Template-Type: ReDIF-Article 1.0 Author-Name: Cornelia Elena TUREAC Author-Name: Anca Gabriela TURTUREANU Title: Treasury Flows Overview Abstract: The balance sheet presents the liquidities balance and the liquidity equivalents of the company at the end of the period. By examining the balances referring to the two consecutive periods, it can be stated that if the liquidities and the liquidity equivalents have increased or have decreased during the period. But the balance does not indicate why these balances have varied during the exercise. The profit and loss balance presents the information related to incomes, expenses and the results due to the different activities - key-points regarding the sources and the use of the liquidities and the liquidity equivalents, but this financial situation does not explain why the respective elements have increased or decreased. Even further, not on fewer occasions behind some significant profits, the profit and loss balance can hide serious treasury problems of the company. Keywords: Liquidity, Treasury Flows, Painting Flows, Balance Sheet Classification-JEL: M41 Pages: 64-76 Volume: 2009 Issue: 3 Year: 2009 File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=73.pdf File-URL: http://www.vse.cz/efaj/73 File-Format: text/html Handle: RePEc:prg:jnlefa:v:2009:y:2009:i:3:id:73:p:64-76 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlefa/references/73 Template-Type: ReDIF-Article 1.0 Author-Name: Zuzana TUČKOVÁ Title: Knowledge Services as a Basis of Enterprise Growth Abstract: During 20th century principles of the work division were used in the business activities of the companies. These principles took advantage of the knowledge of scientific management production. These principles were also transferred to the management sphere itself. The principles worked and supported the company economics in the mass manufacture period of standard products till the market was saturated. The companies grew to giant dimensions and integrated all what was needed for the manufacture. The activities divided by the work division were centralized in big hierarchical structures of the firms which realized the changes with difficulty. At the end of the 20th century the market was saturated and it was no more sufficient for the customers of what the mass manufacture was offering them. The customers asked the manufacturers for the products which they want to have themselves. They asked for the products and services according to their own wishes, namely: high-quality, cheap and at once if possible. Large manufacturers met with the requirements with difficulty and there were others entering into the market that were able to react (respond) to the customers´ standards. Big firms had to react to this situation. The embracive competition forces the manufactures to substantial costs reduction. Therefore more and more of what the manufactures are not able to produce, they buy from other manufactures all over the world. In the globalize world on one hand considerable quantity of opportunities comes up continually, on the other hand the useless activities cease continually as well. The enterprisers respond to these opportunities and many new companies come up and cease continually. Keywords: Knowledge, Services, Professional Services, Intensive Services, Knowledge Intensive Services Enterprises Classification-JEL: L80 Pages: 77-86 Volume: 2009 Issue: 3 Year: 2009 File-URL: http://www.vse.cz/efaj/download.php?jnl=efaj&pdf=74.pdf File-URL: http://www.vse.cz/efaj/74 File-Format: text/html Handle: RePEc:prg:jnlefa:v:2009:y:2009:i:3:id:74:p:77-86 X-File-Ref: http://www.vse.cz/RePEc/prg/jnlefa/references/74