Please use this identifier to cite or link to this item: https://hdl.handle.net/1959.11/6799
Title: Accounting Standards and Small Firm Debt and Equity: An International Research Agenda
Contributor(s): Gibson, Brian  (author)
Publication Date: 2006
Handle Link: https://hdl.handle.net/1959.11/6799
Abstract: Notwithstanding exemptions provided through professional accounting bodies around the world, standards and procedures applicable to publicly traded firms are often used to identify and analyse financial information about privately held firms. Such approaches may not always be applicable. In an environment of emerging international standardisation and differential reporting for small enterprises, the focus of this paper is on one potentially inappropriate procedure that relates to the identification of debt and equity. In many instances the debt reported in the financial reports of privately held firms is provided to the firm only because the owner's personal assets have been provided as debt collateral. Such a circumstance means the amount involved has more of an equity characteristic than a debt characteristic because the owner's personal wealth is put at risk for an uncertain return. For this reason the existence of debt secured by personal collateral is often referred to as quasi-equity. The presence of unrecognised quasi-equity generates two significant types of problem. Firstly, a potential investor analysing the financial reports of a firm in which reported debt is really quasiequity may assess the firm to be a poor investment opportunity because it has an apparently high reliance on debt in its financial structure. The second problem is that there is an increasing reliance on the content of the financial reports of privately held firms by researchers gathering and analysing data to inform and guide policy. By aggregating that data without recognition of the quasi-equity characteristic of such debt, invalid understandings of the nature of the equity and debt funding of privately held firms might be emerging. Unfortunately the accounting profession has not recognised the existence of these problems and, apart from the special reporting requirements in the United Kingdom, there does not appear to be any attempt to ensure reports prepared for privately held firms identify the presence of quasiequity.
Publication Type: Conference Publication
Conference Details: Rencontres de St-Gall 2006, Wildhaus, Switzerland, 18th - 21st September, 2006
Source of Publication: Understanding the Regulatory Climate for Entrepreneurship and SMEs: Papers presented to the Rencontres de St-Gall 2006, v.Topic D: Research in Progress
Publisher: University of St Gallen, Swiss Institute of Small Business and Entrepreneurship (KMU-HSG) [Universität St Gallen, Schweizerisches Institut für Klein-und Mittelunternehmen (KMU-HSG)]
Place of Publication: St Gallen, Switzerland
Fields of Research (FoR) 2008: 150314 Small Business Management
150304 Entrepreneurship
150103 Financial Accounting
Socio-Economic Objective (SEO) 2008: 910402 Management
910203 Industrial Organisations
HERDC Category Description: E2 Non-Refereed Scholarly Conference Publication
Publisher/associated links: http://www.kmu.unisg.ch/rencontres/RENC2006/Topics06/D/Rencontres_2006_Gibson.pdf
http://www.kmu.unisg.ch/rencontres/RENC2006/band2006.html
Appears in Collections:Conference Publication

Files in This Item:
3 files
File Description SizeFormat 
Show full item record

Page view(s)

1,000
checked on Mar 7, 2023
Google Media

Google ScholarTM

Check


Items in Research UNE are protected by copyright, with all rights reserved, unless otherwise indicated.