This note discusses metrics that have been used frequently during the coronavirus pandemic: (i) the growth in the number of cases and deaths; (ii) the time they take to double; (iii) the re-infection ratio, generally known as the reproduction ratio R; and (iv) the excess mortality above the norm. The analysis here compares the UK with other countries in Europe, and is based on the daily counts disclosed by the relevant government agencies. Compound daily growth rates are extracted from weekly changes in order to smooth out short-term fluctuations; the visualisation of doubling is made clearer with a log base 2 plot; and comparability is improved by weighting for population, by standardising starting times, and by accounting for excess deaths with respect to the previous year. It is shown how growth curves behave as they converge to zero, the point at which there will have been no new cases for an entire week. It is also shown how the effects of the epidemic peaked when the doubling time lengthened to about two weeks, and the rate of growth in the total number of deaths fell to about 5% per day. A simple benchmark for R is constructed as the ratio of this week's new cases to last week's new cases, which reaches zero when the number of confirmed infections stabilises.

In this short note, excess mortality during the coronavirus epidemic in 2020 is calculated for the five largest countries in Europe on a one-year basis, and then compared with the comparative estimate in the previous year. The results highlight not only Germany’s much lower mortality in 2020 but also its much higher mortality in 2018, when influenza was particularly severe in that country. This suggests that the standard method of excess mortality estimation based on a norm that is averaged over a number of prior years can conceal interactions between years.

This paper develops a structural system for estimating accounting variables, within which the deterministic relationships inherent in financial statement articulation are clearly defined in the econometric model. The key proposition of the paper lies in the treatment of the financial statements as a matrix of codetermined information constrained by double entry, where the expected value of each of the individual items that comprise the financial statements will be mirrored elsewhere in the system with a different sign. Given that the change in net operating assets shares the same variation as the change in net financial claims, it is shown, by formally identifying the articulation, that empirical application will yield increased precision and improved efficiency by comparison to the more traditional methods that fail to specify the structural double entry property.

This paper shows how the expected rate of return (ERR) on equity may be estimated using only published accounting results, based on the information dynamics of reported earnings. As accounting-based valuation models conditional upon financial statement articulation lead to a rank deficient system of estimating equations, the paper introduces a nonlinear constraint on the articulation that allows the information system simultaneously to produce an estimate for the ERR by iteration, together with predictions for the key clean surplus forecasts of net earnings, net dividend, and the book value of equity. Further decomposition produces estimates of expected capital gain, expected earnings, and the expected change in equity book value, and by rearrangement, the expected change in unrecorded goodwill. The clean surplus relation is maintained in the forecast variables. Exploratory data methods are used to examine the nonlinear relationship between components of the accounting-based ERR and realized stock returns. Findings show that realized returns are higher (lower) than estimated ERR in expansionary (recessionary) periods, with evidence of a stronger returns impact in recessionary periods. For the large majority of firms, realized returns revert to the estimated ERR, and the time-varying accounting components are strongly related to future realized stock returns, consistent with time variation in the ERR around a long-run average. Predicted earnings and dividends provide useful additional information on short-run variations in the ERR.

A statistical model is developed for an audit of the assessments of a panel of experts when little information is made available beyond a final announcement of the individual assessed ratings given. The application is to the process for the research assessment exercise for UK universities. Based on the proportions of the publications a panel deems to be International standard, National standard or Unclassified, a department’s research output is rated by the panel on a seven point scale. The expert panel’s remit is carefully interpreted and the given ratings are modelled via an underlying trinomial random variable with a bivariate Normal approximation. A likelihood function is developed and maximised in order to obtain fitted ratings for all units of assessment. The model’s fitted values for the given ratings explain outcomes remarkably well and there are few mis-classifications; but there are some surprising outliers that do still require some explanation. The procedure illustrates well how Statisticians, surprisingly, might be able to model and audit for consistency the work of experts even if little or no information is provided, beyond vague prior published guidelines for the assessments and the final ratings given.

Motivated by comments by the FASB, IASB and CFA Institute on the need for greater articulation in financial reporting, this paper explores a model design for explicitly articulated financial statement variables. The estimation of articulated earnings components described in this paper uses a system of structural regressions, where the framework of simultaneous linear equations allows for the most basic property of accounting – double entry – to be incorporated within the model as a constraint that recognizes the zero-sum articulation of financial statement variables.

Contemporary Accounting ResearchVolume 31, Issue 2 p. 609-628 Article The Double Entry Constraint, Structural Modeling and Econometric Estimation† Demetris Christodoulou, Demetris Christodoulou University of SydneySearch for more papers by this authorStuart Mcleay, Stuart Mcleay University of SydneySearch for more papers by this author Demetris Christodoulou, Demetris Christodoulou University of SydneySearch for more papers by this authorStuart Mcleay, Stuart Mcleay University of SydneySearch for more papers by this author First published: 04 April 2013 https://doi.org/10.1111/1911-3846.12038Citations: 11 †Accepted by Jeffrey Callen. We acknowledge the helpful comments from participants in the annual meetings of the MEAFA research network (Methodological and Empirical Advances in Financial Analysis) at the University of Sydney. We further acknowledge the beneficial comments received from Robert Bartels, Richard Gerlach, Steven Huddart, Stephen Penman and Scott Richardson. We would also like to thank Jeffrey Callen and three anonymous reviewers of Contemporary Accounting Research. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL References Arya, A., J. Felllingham, J. Glover, D. Schroeder, and G. Strang. 2000. Inferring transactions from financial statements. Contemporary Accounting Research 17 (3): 365– 85. Arya, A., J. Felllingham, B. Mittendorf, and D. Schroeder. 2004. Reconciling financial information at varied levels of aggregation. Contemporary Accounting Research 21 (2): 303– 24. Baltagi, B. 2005. 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The key proposition of the paper lies in the treatment of financial statements as a matrix of endogenous information codetermined by double entry. To account for the highly structured information set in econometric estimation, we develop a generalised structural system for use with accounting variables, within which the deterministic relationships governing financial statement articulation are clearly defined. The framework is used to formulate fully identified models that are consistent with the underlying duality that characterises the generating process of accounting data. To demonstrate the efficacy of the approach, we consider the model of equity pricing in Penman and Yehuda (2009), and the model of investment sensitivity to operating cash flow in Fazzari, Hubbart and Petersen (1988) and Kaplan and Zingales (1997). By comparison with the more traditional estimation methods, the structural system is shown to yield estimates with increased precision that adhere to double entry rules.

The key proposition of the paper lies in the treatment of financial statements as a matrix of endogenous information codetermined by double entry. To account for the highly structured information set in econometric estimation, we develop a generalised structural system for use with accounting variables, within which the deterministic relationships governing financial statement articulation are clearly defined. The framework is used to formulate fully identified models that are consistent with the underlying duality that characterises the generating process of accounting data. To demonstrate the efficacy of the approach, we consider the model of equity pricing in Penman and Yehuda (2009), and the model of investment sensitivity to operating cash flow in Fazzari, Hubbart and Petersen (1988) and Kaplan and Zingales (1997). By comparison with the more traditional estimation methods, the structural system is shown to yield estimates with increased precision that adhere to double entry rules.

This paper examines the role of disclosure in assisting market participants to form expectations of future earnings from the accrual content of reported earnings. Using the Transparency and Disclosure ratings prepared by Standard and Poor’s, we show how disclosure and accruals jointly affect the earnings expectations that are incorporated in current stock returns, depending on the magnitude and sign of the changes in net current and net noncurrent operating assets.

This paper provides an academic perspective on the development of the EU's harmonisation project based on International Financial Reporting Standards (IFRS), on the costs and benefits of IFRS adoption in Europe, and on the research challenges that arise. The paper reviews the accumulating academic evidence, emphasizing the effectiveness and transparency of the enforcement framework, and documenting the main lessons to be learned from the research programme on EU IFRS implementation conducted within the INTACCT network. Results on the consequences of IFRS adoption and the quality of implementation are far from uniform across Europe, and depend on factors reflecting preparer incentives and the effectiveness of local enforcement. The paper also outlines a possible alternative proposal for the organisation and development of enforcement activities in Europe.

Purpose - Prior accounting research views impression management predominantly though the lens of economics. Drawing on social psychology research, this paper seeks to provide a complementary perspective on corporate annual narrative reporting as characterised by conditions of "ex post accountability". These give rise to impression management resulting from the managerial anticipation of the feedback effects of information and/or to managerial sense-making by means of the retrospective framing of organisational outcomes.Design/methodology/approach - A content analysis approach pioneered by psychology research is used, which is based on the psychological dimension of word use, to investigate the chairmen's statements of 93 UK listed companies.Findings - Results suggest that firms do not use chairmen's statements to create an impression at variance with an overall reading of the annual report. It was found that negative organisational outcomes prompt managers to engage in retrospective sense-making, rather than to present a public image of organisational performance inconsistent with the view internally held by management (self-presentational dissimulation). Further, managers of large firms use chairmen's statements to portray an accurate (i.e. consistent with an overall reading of the annual report), albeit favourable, image of the firm and of organisational outcomes (i.e. impression management by means of enhancement).Originality/value - The approach makes it possible to investigate three complementary scenarios of managerial corporate annual reporting behaviour: self-presentational dissimulation, impression management by means of enhancement, and retrospective sense-making.

This paper proposes a finite limits distribution for scaled accounting earnings. The probability density function of earnings has been the subject of a great deal of attention, indicating an apparent 'observational discontinuity' at zero. Paradoxically, the customary research design used in such studies is built on the implied assumption that the distribution of scaled accounting earnings should approximate a continuous normal variable at the population level. This paper shows that such assumptions may be unfounded, and, using large samples from both the US and the EU, the study provides alternative evidence of a consistently asymmetric frequency of profits and losses. This casts further doubt on the interpretation of the observed discontinuity in the distribution of earnings as prima facie evidence of earnings management. A particular innovation in this paper is to scale the earnings variable by the magnitude of its own components, restricting the standardised range to [-1, 1]. Nonparametric descriptions are provided that improve upon the simple histogram, together with non-normal parametric probability estimates that are consistent with the scalar that is proposed. A notable advantage of this approach is that it avoids some of the statistical shortcomings of commonly used scalars, such as influential outliers and infinite variances.