Financial Reporting Practices of Listed Philippine Firms

Arthur S. Cayanan and Helena S. Valderrama

This article summarizes the results of a study undertaken to determine the degree of compliance by Philippine firms to the rules and principles of financial reporting contained in Philippine generally accepted accounting principles (GAAP).  A second objective of the study was to determine the users’ degree of satisfaction with financial statement information.

In general, the researchers found that firms in the study complied with generally accepted accounting principles.   A majority of the firms studied, however, were inclined to follow only the minimum disclosures required by GAAP.  Prevalent instances of non-compliance were noted for the required financial disclosures relating to consolidated financial statements, long-term investments, earnings per share (EPS) computations, and operating expenses.  There were also significant instances of violations of specific rules uncovered which have the potential of resulting in damage to investors and other users who rely on the information in these reports.  

The user survey produced the following :  (1)  Users of financial statement information expressed an “average” level satisfaction over the content and amount of disclosures in firms’ financial reports.   (2) While relying heavily on audited financial statements as a source of financial information, users believe that window-dressing or manipulation of certain financial statement items occurs most of the time and the degree of window-dressing is perceived as significant to very significant.  (3) On whether or not external auditors are impartial/objective, users are divided almost equally although they do place much importance on the auditor’s opinion.  This, despite the fact that a significant majority of them believe that auditors primarily serve the interests of the audited firm rather than the public.

Some recommendations are offered for the improvement of financial reporting practices in the Philippines.

Capital Budgeting Practices of Listed Philippine Firms

Erlinda S. Echanis and George W. Kester

The paper examines the disparity between theory and practice in the use of quantitative techniques in the evaluation of capital expenditures by publicly-listed Philippine firms.  Survey questionnaires were mailed to all 185 publicly-listed Philippine firms in 1996 of which forty-one firms responded representing 22.2% of the total.  The questionnaire focused on :  1) the constraints on the size of the firm’s capital budget; 2) the quantitative evaluation techniques used in the evaluation of capital investments; and 3) determination of discount rates for evaluating proposed capital investments.

Results of the survey showed that publicly-listed Philippine firms apply the same quantitative techniques applied by firms in such developed countries as the U.S and U.K. in the evaluation of capital expenditures.  Between the NPV and the IRR, more Philippine firms use the IRR.  The popularity of the payback period method was also confirmed by the survey results in this study.  The payback period method ranked second to IRR while NPV ranked third only.

Lastly, respondent firms selected discount rates that were easier to determine or simpler than the WACC.  These are:  the cost of specific capital used for the project and the t-bill rate plus premium.

Human Resource Management Practices in the Philippines

Emerlinda R. Roman

Seventy six human resource (HR) managers of public and private firms participated in a survey about human resource management (HRM) practices.  Two of the more notable findings of the study are:  1)  although HR departments continue to be strongly involved in traditional, bureaucratic personnel management functions (recruitment, selection, record-keeping, etc.), there are indications of their increasing participation in strategic decision-making of their firms (development of HR strategies, initiation and implementation of strategic HR programs); and 2)  HRM is increasingly recognized as somewhat of a profession with a body of specialized knowledge, a service objective, a code of ethics and an organized professional society or association.  The challenge facing HR managers is how to sustain efforts to develop HR departments into strategic partners playing a vital role in pursuing the firms’ strategic directions.

Technological Adoption in the Philippines Advertising Industry

Elvira A. Zamora and Eloisa H. Lingan

This study was conducted in order to determine how technology for the production of television advertisements is adopted in the Philippine advertising industry.  An analysis of the industry structure showed that digital technology acquisition and adoption are more the concerns of commercial production and post-production houses than of advertising agencies, which subcontract most of the work to these advertising suppliers.  A test of two technology adoption models showed that the psychographic model, more than the benefit-cost model, better reflected the decision making process involved in the acquisition and adoption of digital technology. Results show importance and productivity are the better predictors. Perceived importance of the new technology is  the primary consideration, while factors such as price and effect on quality and productivity appear to play a secondary role.

Value Orientations, Work Opinions and Job Satisfactions among Students and Professional Accountants

Jasmin E. Acuña and Lina J. Valcarcel

This exploratory study is on the way in which the professional accountants differed from the accounting students on value orientations, work opinions and job satisfaction. Out of the four value orientations; namely  power distance, individualism, masculinity, and uncertainty avoidance,  we found that  only one, masculinity, had a significant main effect on subgroups of professionals and students.  Gender was also significant for masculinity.  Males were found to be more significantly masculine than females.

On work opinions only one of the five factors had a  significant effect for subgroup.  This factor was labeled doing one’s job and profit.  Students and private accountants viewed doing one’s job and  profit as related; while academicians and private accountants scored  significantly lower on this scale.  

And lastly, on job satisfaction only one of the three factors was significant for the four subgroups.  This factor was on the material benefits and rewards of the job.   The academicians were the most dissatisfied with the material benefits of their job.  The students and the public accountants  were not significantly different from each other, but the scores of students were significantly different from the private accountants and the academicians. There were no gender differences on job satisfaction.