ACCOUNTING FRAUDS AND EVALUATIVE DISCRETION AREAS: ANOMALIES IN THE ADOPTION OF THE IAS 36

Pietro Pavone ()
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Pietro Pavone: eCampus University, Italy

Eurasian Journal of Social Sciences, 2018, vol. 6, issue 2, 37-45

Abstract: The importance of the balance sheet as an instrument aimed at reducing the information asymmetry between people who manage a company from the inside and who are interested in its economic and financial dynamics from the outside is a key topic in current economics. However, in the balance sheet, which is by nature an administrative document originated from the accounting, all its weakness is also hided, since it is exactly in accounting processing that could be lurked risks of tampering. In fact, the balance sheet is mostly composed of accounting representations of subjective values. It is therefore understandable not only the risk of possible violations of evaluative discretion from who draws up the balance sheet, but also another one, even more “silent”, which involves the final accounting coverage of some given evaluating anomalies, that cannot be tracked later. After a brief theoretical paragraph about the informational value of the financial statement, starting from the clearly essential role of the use of discretion in the balance sheet drafting process, this study focuses on the misuse of this discretion and on the following distorting effects, in terms of alteration of the information process, which is the basis of the relationship between the company and the external environment. The description of a case study about the misuse of IAS 36 in the evaluation of a shareholding gives some significant concrete evidence about the previously formulated theoretical considerations.

Keywords: Balance Sheet; Accounting; IAS 36; Impairment; Devaluation; Evaluative Discretion; Accounting Fraud (search for similar items in EconPapers)
Date: 2018
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