A Mystery Note

The first few notes of the alarm clock prised open Amber's eyes and she stumbled out of bed, standing on an up-ended plug as she did so. She didn't have time for the pain; she had a Spanish test first thing and with a bit of luck she'd be able to catch the early bus to school so she could fit in a bit of revision before class. The floorboards creaked under her feet as she got changed. Everything here seemed to creak, the place was a wreck and she couldn't wait 'till she was old enough and more importantly have enough money to move out but that was unlikely. Amber's life had fallen apart bit by bit since the day she was born. Apparently her mum was put into a permanent coma after a car crash on her way to the hospital. Amber supposedly was a twin but something happened to her sister and that's how she ended up here, in an orphanage that looked like it was going to fall apart the minute another no-hoper walked through it's doors. â€Å"Get up Chloe,† Amber said, Shaking her roommate vigorously in attempt to wake her up. â€Å"I'll get up, just five more minutes,† Chloe murmured sleepily but Amber had to leave in a minute and she knew Chloe would probably never get up so she grabbed the covers and chucked them to the other side of the room. Satisfied, she grabbed her bag and the watch she got two weeks ago from Chloe for her fifteenth birthday and set off for school. Amber managed to squeeze in a few minutes of revision before the test but It wasn't exactly easy getting folders out because the wind had picked up and by the time she'd got to the classroom her usually neat black hair looked like something from ‘Jeepers Creepers.' The test took the best part of two hours – too long, thought Amber. She was relieved when the bell finally run and she practically sprinted out before Seniorita Belanto remembered about the homework due today. â€Å"Amber!† She nearly had a heart attack when the powerful voice of her manly P.E. teacher, Mrs Stevenson came booming at her. â€Å"Yes, Mr†¦I mean, Mrs Stevenson?† Amber said cheekily, wondering why the sudden need for her P.E. teacher to come rushing after her like an overweight lion. â€Å"Some guy passed a note onto me to give to you,† She grunted. She threw the piece of paper but Amber missed it and she had to crawl about the floor dodging numerous people who thought walking backwards as fun as walking normally. â€Å"Gotcha!† Amber shouted a little too loudly as everyone in the corridor stared at her on her hands and knees. She opened the piece of paper and read: Thanks a bunch for your help. I owe you one, Jay Connors â€Å"What the†¦?† She said. She looked around for Mrs Stevenson but she'd already been absorbed by the crowd. There must've been a mistake, she hadn't helped someone, had she? After school she decided to walk home and on the way she asked a few people from school if they knew who Jay Connors was. â€Å"Who?† Most of them said, but she hit the bonus when she asked the new kid in her Maths class. â€Å"You didn't think to ask me first, did you?† He replied, grinning. Amber looked puzzlingly at him but then he explained. â€Å"I'm Matthew Connors, Jay's brother,† he grinned. Amber realised then that she'd been stupid; who better to ask than the only person in school with the same surname as the mysterious Jay? â€Å"If your looking for Jay he'll be indoors by now.† He pressed the traffic lights button and the green man showed a few seconds later. Amber stood were she had been for the past few minutes looking like an idiot. What now? Did he expect her to follow him? Matthew looked back, â€Å"Come on then, what you waiting for?† Apparently Jay had been in a car crash yesterday and his car was a total wreck so he couldn't go to his work today. Amber was amazed at how he managed to cram every tiny detail into a space of two minutes. By the time they got there Amber seemed to know everything about Jay. They rang the doorbell and Jay answered. â€Å"Hey Matt, Alex! Nice to see you again.† He said â€Å"Alex? I'm not†¦I'm Amber.† This conversation was getting to be one of the most confusing of her life. â€Å"What†¦Ã¢â‚¬  Jay began but Matt butted in. â€Å"This is Amber, she's in my class.† Jay looked like someone had just put one of Einstein's maths problems in front of him. Just then someone was walking along the pavement and Jay and Matt both looked stunned. â€Å"Alex†¦Ã¢â‚¬  Amber turned around and couldn't believe what she was seeing. It was like she was looking in the mirror. It was her. Alex turned round and saw Amber, shock exploded on her face. Five minutes later Amber had forgot the shock because after a brief discussion with Alex, hope suddenly came into Amber sight. Was this her twin? Could this be possible? Could her mum be alive? She was, she had to be. â€Å"Alex, dinners out.† a figure emerged from a house but at the same time Amber heard a rumble and a huge shadow cast over her, all of the hope that had build up inside her was shattered as flight 755 rapidly lost altitude. In a split-second the world had turned black and she only caught one glimpse of her mother's face. That was the first and last time she ever saw it.

Fair Value or Cost Mode Drivers of Choice for Ias 40

European Accounting Review Vol. 19, No. 3, 461– 493, 2010 Fair Value or Cost Model? Drivers of Choice for IAS 40 in the Real Estate Industry A. QUAGLI? and F. AVALLONE ? Department of Accounting and Business Studies (DITEA), University of Genova, Genova, Italy and ? ? Department of Computer and Management Science (DISA), University of Trento, Trento, Italy (Received September 2008; accepted February 2010) ABSTRACT The IFRS mandatory adoption in European countries is an excellent context from which to assess the validity of accounting choice theory, which postulates that information asymmetry, contractual ef? iency (agency costs) and managerial opportunism reasons could drive the choice. With this aim, we test the impact of these factors to explain the adoption of fair value for investment properties (IAS 40) in the real estate industry, taking into account the ‘revaluation’ option offered by IFRS1 and using historical cost without revaluations as a baseline catego ry for comparison purposes. We select a sample of European real estate companies from Finland, France, Germany, Greece, Italy, Spain and Sweden, all ? rst-time adopters of the IFRS. Using a multinomial logistic model, we show that information asymmetry, contractual ef? iency and managerial opportunism could account for the fair value choice. Particularly, the most signi? cant ? ndings are that size as a proxy of political costs reduces the likelihood of using fair value while market-to-book ratio is negatively associated with the fair value choice. On the other hand, leverage, another typical proxy of contracting costs, seems not to in? uence the choice. This evidence con? rms the current validity of traditional accounting choice theory even if it reveals, in such a context, the irrelevance of the usual relations between accounting choice and leverage. . Introduction We analyse if the choice between cost or fair value for investment property under IAS 40 aims at (i) reducing agency costs (contractual ef? ciency Correspondence Address: A. Quagli, Department of Accounting and Business Studies (DITEA), University of Genova, Via Vivaldi 2, 16126 Genova (GE), Italy. E-mail: [email  protected] unige. it 0963-8180 Print/1468-4497 Online/10/030461–33 # 2010 European Accounting Association DOI: 10. 1080/09638180. 2010. 496547 Published by Routledge Journals, Taylor & Francis Ltd on behalf of the EAA. 462 A. Quagli and F. Avallone easons), (ii) mitigating information asymmetries, as standard setters claim, or (iii) allowing managerial opportunism, typical motives de? ned by accounting choice theory (Holthausen, 1990; Fields et al. , 2001). Using a multinomial logistic regression, we test these hypotheses using 73 observations from real estate companies located in European countries (Finland, France, Germany, Greece, Italy, Spain and Sweden) which do not allow the fair value method in the pre-IFRS mandatory period in order to eliminate the in? uence of pre-exist ing fair value adoption. All these ? rms are ? sttime IFRS adopters, enabling us to compare the same accounting choice in a similar situation (? rst-time adoption). The mandatory adoption of IAS 40 (Investment properties) by European listed companies offers a unique opportunity to verify managers’ behaviour in a composite context of accounting choice. In fact, IAS 40 allows two alternative methods for appraisal of investment property assets: the cost method or the fair value method with recognition of fair value changes through pro? t and loss. Additionally, taking into account the IFRS1 ‘fair value as deemed cost’ option, the cost choice could be split into two lternatives: (i) historical cost without revaluation, (ii) historical cost with the IFRS1 option to revaluate investment property. This second option could represent a partial substitute for the fair value method, showing its effects only in equity without in? uencing pro? t and loss. 1 Thus, our model as sumes the choice of applying historical cost without revaluating it as the referent outcome category to compare (Y ? 0), and forms logits comparing the choice of using historical cost with IFRS1 revaluations of investment property (Y ? 1) and fair value choice (Y ? 2) to it. Our ? dings suggest that all the rationales described by accounting choice theory (information asymmetry, contractual ef? ciency and managerial opportunism) drive the decision to adopt fair value. Indeed, regarding contractual ef? ciency reasons in particular, we ? nd that the larger the size (proxy of political costs), the less likely fair value is to be chosen, while leverage and consequent lenders’ protection seems to be insigni? cant for the choice. Furthermore, our results show that market-to-book ratio (MTBV) (proxy of information asymmetry) is negatively related to the fair value choice. This ? nding, that con? cts with existing literature, could be accounted for in the real estate industry due to the fact that high levels of MTBV in this context reveal growth opportunities associated with a fair estimation of investment properties and therefore with a low information asymmetry. Managerial opportunism behaviour, measured by a dummy variable for earnings smoothing, seems to have an in? uence on fair value choice. While all these variables seem to have an in? uence on the fair value choice, the same variables do not explain the choice of historical cost with the IFRS1 revaluation option in preference to the cost maintenance approach.This paper offers various contributions to current literature. Firstly, to the best of our knowledge, it is one of the ? rst papers speci? cally focused on the choice Fair Value or Cost Model? 463 between cost and fair value in the IFRS context. We perform the analysis using a sample of ? rst-time IFRS adopters from several European countries adopting only the cost method in the pre-IFRS phase in order to both not limit the research to the tradition al comparison between German and UK ? rms and eliminate the risk of in? uence from past experience.Secondly, this paper introduces to the accounting choice literature a research designed to analyse the in? uence of multiple motivations (contractual ef? ciency, information asymmetry and managerial opportunism) for a multiple-choice environment (cost, cost with IFRS1 revaluation or fair value through pro? t and loss), testing through a multinomial logistic regression all the possible causes. Previous research, on the contrary, usually overlooks a comparison of multiple motivations (Fields et al. , 2001, pp. 290 – 291).In other words, compared to existing studies we conduct an analysis using an innovative multiple motivations – multiple choices approach that better captures the complexity of accounting choices in management decisions. Finally, we contribute to the current debate on fair value showing which ? rm characteristics drive the choice of this method. While inform ation asymmetries are the most discussed motives for fair value, we demonstrate the in? uence of contractual ef? ciency motivation as well as managerial opportunism, and the actual choices by ? ms demonstrate only a ‘partial enthusiasm’ towards fair value, even in a sector where liquid markets exist. The paper proceeds as follows. Section 2 concerns the literature related to our analysis. Section 3 goes on to describe the main features of IAS 40 and the preIFRS domestic GAAP of the countries sampled. Section 4 illustrates the development of our hypotheses, while Section 5 provides details on the empirical model design, variable de? nition, sample selection and data. Finally, Section 6 describes descriptive statistics, the main ? ndings and the robustness of the results. . Theory and Relation to Existing Research The choice between fair value and cost is a central topic in the current debate on accounting. Fair value is generally preferred due to the fact that ?nancial s tatements reveal a higher level of information (CFA Institute Centre, 2008),2 even if its adoption requires speci? c conditions: liquid markets, large database of available prices (Barth and Landsman, 1995; Ball, 2006), as well as new competencies in developing measurement models in the absence of liquid markets, making it possible to enhance estimate reliability (Schipper, 2005).On the other hand, the reliability of fair value estimates is the most critical point (Martin et al. , 2006; Watts, 2006; Whittington, 2008), with the potential damage brought to the stewardship function of ? nancial statements. More generally, the demand for fair value has to be evaluated in its speci? c country context. The demand for fair value and the related preference for a higher level of information vs. reliability of ? nancial statements in Common law countries is quite different from the same demand in Code law countries (see Ball et al. 2000). 464 A. Quagli and F. Avallone Alternatively, a cost m odel seems more ef? cient in a contractual perspective because it reduces agency costs generated by creditors’ protection, political visibility, taxation and litigation (Watts, 2003; Qiang, 2007). Recent studies, however, seem to ignore the importance that the analysis of the adoption of IFRS evaluation alternatives could have in providing some more explanations for managers’ accounting choices and, consequently, for the progress of accounting choice theory.Therefore, the choice between cost and fair value is a central topic in this sense. Following the framework of Francis et al. (2004), fair value and cost affect the properties of accounting numbers in a very different way. Fair value is more value relevant,3 and provides more predictable and timely earnings ? gures because it is more oriented towards future cash ? ows (derivable by the current value of some assets); on the contrary, the cost method approach supports conservatism, smoothness and the accrual quality, due to the recognition of value changes only if realized.While it is dif? cult to suppose the impact on earnings persistence, depending on the size of fair value changes, the aforementioned aspects will give rise to different accounting behaviours. The information about future cash ? ows derived by fair value will be more appreciated in ? nancial markets (analysts and equity investors), because it will contribute to mitigate information asymmetries. On the other hand, the cost method is less costly and has more utility for income smoothing and contractual ef? ciency for which conservatism is a precious support.In other words, each of these methods has, at a theoretical level, pros and cons and the actual choice will likely depend on ? rm-speci? c circumstances. The different impact of these two methods strongly implies the need of the accounting choice theory to investigate the topic. A powerful starting point for accounting choice investigation is offered by Holthausen (1990; see a lso Watts and Zimmerman, 1978; Fields et al. , 2001) who classi? ed in: (i) contractual ef? ciency (agency costs), (ii) information asymmetry and (iii) managerial opportunism, the reasons for accounting choices. i) Expectations derived from the accounting choice theory concerning the impact of fair value on contractual ef? ciency could lead to a supposed negative relationship: the choice of fair value could increase agency costs for several reasons. The greater income ? uctuations induced by fair value compared to the cost model could enhance the perceived risk by investors (European Central Bank, 2004) and, consequently, the cost of capital, as the high level of reported pro? ts could increase political costs due to higher company visibility (Hagerman and Zmijewski, 1979). Additionally, the doubtful veri? bility of fair value compared to cost measures, in some contexts (illiquid markets) could increase litigation and its related costs (Watts, 2003), as well as the fact that fair va lue through pro? t and loss could anticipate taxation costs. Furthermore, we can infer from the contractual ef? ciency reasons regarding lenders’ protection contrasting hypotheses on fair value preference. On the one hand (Watts, 2003; Qiang, 2007), lenders prefer Fair Value or Cost Model? 465 conservatism (thus the cost method) because it reduces the risk of distributing ? rm value through dividends.On the other hand, fair value represents the current value of assets and it could be more ef? cient in negotiating for debt covenants. In this sense Christensen and Nikolaev (2008), basing their research on a sample of French and German multi-industry companies, ? nd that the fair value method is preferred by companies with high leverage and they account for this through information asymmetry: the current value of ? xed assets gives more thorough information about the ? rm’s solvency capability. In this sense, IFRS1 revaluation option could be a ‘partial’ subs titute of IAS 40 fair value, that is, ? ms could use the conservative cost approach to guarantee lenders’ protection but they could opportunistically revaluate investment assets through IFRS1 to beat covenants or to give a signal about their solvency capability. In other words, while IAS 40 fair value is a ‘long-term strategy’ whose effects are uncertain (fair value could give rise to future revaluations or impairments), the IFRS1 option could be seen as a ‘short-term strategy’, the accounting consequences of which could be made available before its adoption (the revaluations ex IFRS1 option must exist at the transition date, that is, one year before the ? st exercise IFRS compliant). In this sense, this option would encourage opportunistic (and aggressive) accounting behaviour. All these propositions, however, could fail to be applied if we take into account that covenants use, on average, to exclude revaluation reserves in ? nancial ratios. (ii) Lo oking at asymmetries for market participants, measured by market-tobook ratio (MTBV), fair value could be preferred to cost method because of its higher and updated level of information divulgated to ? nancial statement users.This is the main argument supporting the fair value primacy from a current standard setters’ viewpoint (Barlev and Haddad, 2003; Ball, 2006; Danbolt and Rees, 2008; Whittington, 2008). For this hypothesis, IFRS1 option could be a partial substitute for IAS 40 fair value, because of its in? uence on equity and, consequently, on MTBV. (iii) When a ? rm is choosing between cost and fair value, the managerial opportunistic accounting behaviour, previously demonstrated by income smoothing practices (Barth et al. , 1999; He? in et al. 2002; Graham et al. , 2005) is less likely with fair value through pro? t and loss, which obliges large earnings impact due to the volatility of market prices. However, the choice of the IFRS1 option in this sense should be irrel evant (thus not competing with fair value through pro? t and loss method), because this accounting option in? uences only equity and has no impact on pro? t and loss. Our objective is to test empirically how these multiple, and in part controversial, reasons (managerial opportunism, contractual ef? iency and information asymmetries) account for the choice of either fair value or the cost model due to the recent mandatory adoption of IFRS. In the typical discussion about IFRS, in 466 A. Quagli and F. Avallone fact, the power of fair value is recognized speci? cally regarding its potential to reduce information asymmetries (Whittington, 2008). Our analysis is based on the assumption that recognition is more value relevant than simple disclosure. Since IAS 40 requires footnote disclosure of fair value investment properties for ? ms adopting cost (see Section 3), it could be assumed that the choice between cost and fair value is not relevant, because the information about fair value is available for ? nancial statement users whatever the accounting policy chosen for investment properties. Nonetheless, our paper poses disclosure not equivalent to recognition according to the prevailing literature4 (for a review see Schipper, 2007). In all probability, the reasons can be found in a different reliability of data included in the footnotes relating to the balance sheet measures (Schipper, 2007). As af? med by Cotter and Zimmer (2003), speci? cally for revaluations of ? xed assets, ‘the value relevance of recognized revaluations is not due to recognition per se, but rather to the fact that the assets being revalued are more reliably measured’ (p. 1). 3. Main Features of IAS 40 and Differences with the Domestic GAAP of Countries Sampled IAS 40 is concerned with investment property that is property (land or a building) held to earn rentals or for capital appreciation or both, rather than for use as a site in which to run a manufacturing business or as a good to sell in the ordinary course of business.The most relevant feature for our interests in IAS 40 is the evaluation method. IAS 40 permits evaluation of investment properties choosing alternatively: . fair value model, by which an investment property is measured, after an initial measurement, at fair value with changes in fair value recognized in the income statement and with no depreciation; . cost model, with the same rule as in IAS 16 (the property is to be measured after initial recognition at depreciated cost less any accumulated impairment losses).This feature makes IAS 40 unique within the IFRS because it represents the only case where the two main evaluation criteria, fair value and cost, are alternatively admitted in their ‘pure’ form; the IAS 40 fair value re? ects its changes from one period to another in the income statement and not directly in an equity reserve as established by IAS 16 or IAS 38. As a consequence, managers are conscious that the choice betwe en these accounting methods implies substantial variations in accounting results. As reported in the Basis for Conclusions, in the 2003 IAS 40 revision (par.BC 12), the IASB discussed whether to eliminate the choice between the fair value model and cost model, thus implicitly enforcing the former as the only evaluation Fair Value or Cost Model? 467 method allowed. However, it was decided to leave the choice between the two approaches for two main reasons: the ? rst was to give preparers and users time to acquire experience before using a fair value model. Obviously, with regard to the practice of fair value assessment the second was to allow time for countries with less-developed property markets and valuation professions to mature.The IASB planned to reconsider the option of using the cost model at a later date, in the light of ‘fair value supremacy’ pervading the International Accounting Standards. Nonetheless, the fair value primacy is notable for its disclosure clau se, requesting the fair value of the investment property for the entities that choose the cost model, this means that an entity is obliged to assess fair value in all cases, which is a logical premise to permitting an easier transition to the fair value method at a later date.Additionally, the entity has to declare in notes whether it applies the fair value model or the cost model and the methods and signi? cant assumptions applied in determining the fair value, including a statement whether the determination of fair value was supported by market evidence or was more heavily based on other factors (which the entity should disclose) relating to the nature of the property and the lack of comparable market data. The fair value method benchmarked by IAS 40 is a novelty for several European countries.Our sample looks at domestic accounting rules; it is made up of companies from countries which allow only the cost method for investment property: Germany (Deloitte & Touche, 2001), Finland (KPMG, 2003a), France (KPMG, 2003b), Greece (Tsalavoutas and Evans, 2009), Italy (PWC, 2005), Spain (Perramon and Amat, 2007), Sweden (KPMG, 2005). More speci? cally, in Spain and Italy an asset revaluation credited to equity is permitted only if a special law allows it. In France a revaluation to equity is permitted only if it embraces all ? ed assets and the long-term ? nancial assets. In Greece, it is possible to revaluate ? xed assets to equity every four years following a revaluation index established by the Government. In Germany no revaluations are allowed. Finnish and Swedish GAAP permit a revaluation of properties credited to equity if their fair value exceeds cost in a permanent, signi? cant and reliable way. The choice of countries using only the cost model in the pre-IFRS mandatory phase allows us to eliminate the in? uence of any pre-existing in? ence of fair value adoption. 4. Hypothesis Development Following Section 2, we develop our hypotheses concerning: (i) ef? cie ncy reasons, in terms of both the reduction of political costs and the lenders’ protection, (ii) information asymmetry and (iii) managerial opportunism. 468 A. Quagli and F. Avallone (1) Contractual Ef? ciency Following the hypothesis that conservatism accounting should reduce agency costs through a greater lenders’ protection (Watts, 2003; Qiang, 2007), we suppose a negative correlation between leverage and fair value method.We do not conjecture the opposite assumption (Holthausen and Leftwich, 1983) that in order to beat covenants, higher leverage could induce earnings increasing policies (like, in our speci? c context, the choice of fair value through pro? t and loss) because covenants usually do not take into account fair value revaluations (Citron, 1992; Christensen and Nikolaev, 2008). Thus, H1: The probability of choosing fair value decreases if company has a high leverage ratio level before IFRS adoption.We do not posit any assumption on the relationship betwee n leverage and the choice of historical cost with the IFRS1 option for the aforementioned exclusion of revaluation reserves in ? nancial ratios used by covenants. As already described in the part of Section 2 that looks at political costs, we can suppose from the literature that conservative accounting reduces political costs because the high level of reported pro? ts could affect them due to higher company visibility (Hagerman and Zmijewski, 1979; Watts, 2003). In order to verify the impact of political cost on fair value choice, we adopt the ? m size as an independent variable. The size per se has been mentioned speci? cally as a criterion for actions against corporations since several studies document that the magnitude of political costs is highly dependent on the size of corporation (Watts and Zimmerman, 1978). Thus, we conjecture that the political costs increase according to the company size; the larger it is the higher are the political costs and the lower is the probability that is advantageous to choose a fair value approach. Accordingly, our research proposition is: H2: The probability of choosing fair value decreases with the size of the ? m. Even in this case, we do not suppose any relationship between political costs and the choice of historical cost with the IFRS1 option, because this option has no impact on pro? t and loss. (2) Information Asymmetry If information asymmetry exists in the speci? c context investigated, managers could choose fair value in order to clearly inform the market about the ‘true’ value of the ? rm. So, under the assumption that disclosure is not equivalent to recognition (Schipper, 2007), a positive association between the choice of the fair value method and information asymmetry is assumed.Fair Value or Cost Model? 469 Many studies (Smith and Watts, 1992; Amir and Lev, 1996) use market-tobook ratio (MTBV) as a proxy for information asymmetry, starting from the intuition that while market value captures the present value of growth opportunities, the book value approximates the value of assets in place. As a result, we posit that MTBV is positively related to information asymmetry and, consequently, positively related to fair value choice. Therefore, we assume: H3a: The probability of choosing fair value increases the more marked is the difference between market value and the book value of equity.We could also develop a concurrent hypothesis to H3a, on the basis that, in this case, the choice of historical cost with IFRS1 option, in? uencing equity, could be a ‘partial’ substitute of fair value through pro? t and loss. Thus, we expect a positive association between the choice of historical cost with IFRS1 option and information asymmetry, as measured by MTBV ratio. H3b: The probability of choosing historical cost with IFRS1 option increases the more marked is the difference between market value and book value of equity. (3) Managerial OpportunismFrom the theory we derive t hat managerial opportunistic accounting behaviour is demonstrated by income smoothing practices (Barth et al. , 1999; He? in et al. , 2002; Graham et al. , 2005) and we thus suppose that fair value through pro? t and loss with its volatile changes contrasts smoothing policies. So, a negative association between fair value choice and pre-IFRS earnings smoothing is expected. Hence: H4: The probability of choosing fair value decreases if managers reduce the variability of reported earnings using accruals.We do not suppose any relationship between managerial opportunism estimated by earnings smoothing and the choice of historical cost with IFRS1 revaluation, because this option has no impact on pro? t and loss. 5. Research Design Empirical Model and Variable De? nitions Two statistical procedures are used in our analysis: (i) the non-parametric Mann – Whitney two-sample rank-sum test is used to analyse the difference in explanatory variables between the group of ? rms that have a dopted the fair value model or cost model with the IFRS1 revaluation and the group that have chosen the cost 470A. Quagli and F. Avallone model (the cost group has been taken as a referent category). Additionally, (ii) we use a multinomial logistic regression model (MNL) to test the relationship between the ? rm accounting choice for investment properties and the hypothesized explanatory variables. Under the multinomial logistic model with three outcome categories (0, 1 and 2), p covariates and a constant term (b) denoted by the vector x, two logit functions are described as follows (Hosmer and Lemeshow, 2000): g1 (x) = ln[P(Y = 1| x)/P(Y = 0| x)] = b10 + b11 X1 + b12 X2 + . . . + b1p Xp (1) and 2 (x) = ln[P(Y = 2| x)/P(Y = 0| x)] = b20 + b21 X1 + b22 X2 + . . . + b2p Xp . (2) It follows that the conditional probabilities of each outcome category given the covariate vector are: P(Y = 0| x) = 1/1 + eg1 (x) + eg2 (x) P(Y = 1| x) = eg1 (x) /1 + eg1 (x) + eg2 (x) (3) P(Y = 2| x) = eg2 ( x) /1 + eg1 (x) + eg2 (x) . Our model assumes the choice to use historical cost without revaluating as the referent or baseline outcome category to compare (Y ? 0), and forms logits comparing the choice to use historical cost with the IFRS1 revaluation of investment properties (Y ? 1) and fair value choice (Y ? 2) to it.Furthermore, the model assumes the following relation between the proposed explanatory variables and the fair value accounting choice: ln[P(Y = FV| x)/P(Y = COST| x)] = b0 + b1 LEV + b2 SIZE + b3 MTBV + b4 SM + b5 CNT + b6 EPRA + b7 ACT + 1 (4) where b ? CHOICEi ? bFV; dependent variable equal to 2 if the ? rm i adopts fair value model under IAS 40 in ? rst-time adoption (FTA), 1 if ? rm i adopts the historical cost and uses IFRS1 to revalue investment properties and 0 if the ? rm i adopts the historical cost without revaluating; Fair Value or Cost Model? LEVi ? SIZEi MTBVi ? ? SMij ? CNTi ? EPRA ? ACT ? 471 he average debt to asset ratio for ? rm i, measured over tw o years before FTA; log of the average total asset over the two years before FTA; market-to-book value of ? rm i calculated over the last month of the FTA year since the market is in? uenced by the IFRS immediately after the FTA year; dummy variable coded 1 if ? rm i has an earnings smoothing index . the average index of earnings smoothing in country j (? rm’s country of domicile) and 0 otherwise; dummy variable coded 1 if ? rm i has an external market capitalization on GNP . the average external market capitalization on GNP for his legal country of origin (from La Porta et al. 1997) and 0 otherwise; dummy variable coded 1 if ? rm i is a member of the European Public Real Estate Association (EPRA) and 0 otherwise; ratio between total rents and total operating income estimated over the ? scal year preceding the IFRS mandatory adoption. Following Leuz et al. (2003) and Burgstahler et al. (2006) our proxy to capture earnings smoothing policies in the pre-IFRS period is computed as the ratio of the standard deviation of operating income divided by the standard deviation of cash ? ow from the operation, both measures being computed over the four years before IFRS mandatory adoption.The ratio is then multiplied by 2 1 so that higher values are associated with higher earnings smoothing policies. Moreover, in order to capture the real signi? cance of the smoothing ratio (only values around zero denote strong earnings smoothing activities but the more the values decrease the more the smoothing signi? cance disappears), in our analysis for each ? rm we only measure the distance from the average value of the same ratio for the country of origin as measured in Burgstahler et al. (2006). So, the resulting dummy variable is equal to 1 if the ? m has an earnings smoothing index higher than the average index estimated for the country of origin and 0 otherwise. This procedure enables us to capture the peculiarity of each country due to the different local GAAP adopted b efore IFRS (Leuz et al. , 2003; Burgstahler et al. , 2006). We control for three variables we conjecture to affect the fair value choice by including them as independent variables in the model. Controlling for both the country of origin and the EPRA (European Public Real Estate Association) membership allows us to include two exogenous factors that could affect the fair value choice.The former factor is considered because the differences in the nature of ? nancial systems around Europe are innate factors for international divergences in accounting (Nobes, 1998), thus in? uencing the fair value choice as well. The 472 A. Quagli and F. Avallone latter factor is considered because the EPRA’s Best Practices Committee encouraged the members to adopt fair value accounting to enhance uniformity, comparability and transparency of ? nancial reporting by real estate companies (EPRA, 2006). Additionally, it makes sense to control for the ? m activity since the business segments within t he real estate industry could be considerably different (long-term investments, trading activity, development or services). With reference to the country (CNT), we do not use the distinction between Code Law Countries and Common Law Countries (Ball et al. , 2000), because our sample is entirely made up of Code Law Countries. Since accounting practices usually adhere to ? nancing systems (systems based on banks are generally more conservative than systems based on markets), we decided to capture the country effect with the level of ? ancial market development. So, following Nobes (1998), we theoretically classify countries included in our sample in two groups: countries where the role of ? nancial markets is more developed (capital market-based systems) and countries where ? nancial markets are less developed (credit-based systems). We can assume that the adoption of the fair value method should be easier in capital market based systems, where the indirect cost of information product ion should be lower and the more developed market could better appreciate the informative content of fair value estimates. In order to summarize ? ancial market development, we use the same variable and values as in La Porta et al. (1997). Speci? cally, we ? rstly computed the ratio of stock market capitalization held by minorities to gross national product. Hence, the higher ratio value is associated with highly diffused equity and, as a consequence, with more ? nancially developed markets. Therefore, we adopt a dummy variable coded 1 if the ? rm has an external market capitalization on GNP higher than the average external market capitalization on GNP for its legal country of origin (from La Porta et al. , 1997) and 0 otherwise.The stock market capitalization held by minorities is computed as the product of the aggregate stock market capitalization and the average percentage of common shares not owned by the top three shareholders in the 10 largest non-? nancial, privately owned do mestic ? rms in a given country. The lack of availability of certain data forced us to use the same values estimated by La Porta et al. With reference to the EPRA membership, we only use a dummy variable (EPRA) that takes a value of 1 for ? rms that are EPRA members and 0 otherwise. Lastly, we control for ? rm activity (ACT).Particularly, since real estate companies could operate in many businesses (renting out investment properties, services, trading of investment properties and development), we use a variable to discriminate the ? rms which generally rent out investment properties from ? rms that operate in trading, services and development. Thus, we use the ratio between total rents and total operating income as a proxy of ? rm activity. So, the high values of the ratio suggest that the renting activity may be considered the company’s core business while low values of the ratio express the opposite.Both rents and total operating income are hand-collected from ? nancial sta tements for the ? scal year preceding the IFRS mandatory adoption and the latter Fair Value or Cost Model? 473 has been computed as the sum of rents, services, realized gains/losses on investment property sales and other operating revenues. In terms of empirical predictions, we conjecture a positive relationship between the fair value choice (CHOICE) and both ? nancial market development (CNT) and EPRA membership (EPRA). The present work makes no prediction with respect to the other control variable (ACT).Table 1, Panel A presents the proxies used for independent variables and the predicted sign of each relation between covariates and fair value choice for investment properties under IAS 40. Moreover, Table 1, Panel B only shows the relations between independent variables and the choice to use historical cost with IFRS1 revaluation, if theoretically signi? cant. Sample and Data Our study focuses on a sample of real estate ? rms from countries where a systematic use of fair value mod el was not allowed for investment property assets by pre-IFRS domestic GAAP.A sample of 76 companies was selected from a population of 216 European real estate companies listed in their own country of origin in December 2007 in the following stock markets: Finland, France, Germany, Greece, Italy, Spain and Sweden. In December 2007, the Datastream International database revealed 216 real estate ? rms from the countries that were analysed (235 items, of which 19 were paid rights, preferred share, etc. ). This sample was then screened against a set of conditions: (i) the availability of the full version of the ? rst ? ancial statement complying with IFRS, obtained from the corporate website or via a speci? c request to Investor Relators, (ii) investment property assets on the balance sheet (as de? ned by IAS 40) not equal to zero, and (iii) the full data availability in the Datastream International database. Of the original 216 ? rms, 40 had neither website nor IR contact, 26 had ? nan cial statements not complying with IFRS in the period of analysis (2005– 2007), 7 had no investment properties, 27 failed to respond and 40 ? rms did not have complete availability of data in ? nancial statements or in the Datastream database.Thus, only 76 ? rms had suf? cient information for the above-mentioned explanatory variables to be included in the sample. Table 2, Panel A shows the sample selection procedure. The described procedure clearly illustrates that our sample consists of the maximum number of companies for which it is possible to obtain suf? cient information for the analysis, starting from the initial number of companies identi? ed in the database (N ? 216). Nevertheless, our analysis could have introduced a selection bias if an association between ? rms’ disclosure policies (e. g. assuring the availability of the full ? ancial statement on the corporate website or replying to a speci? c request) and the accounting choice had existed. In order to remo ve any doubts, we test whether there is a difference in drivers of choice used in our analysis between ? rms that provide an annual report or disclose it 474 A. Quagli and F. Avallone Table 1. Proxies and predicted signs for explanatory variables. The variables are grouped according to the main hypotheses for fair value choice and for the choice to use historical cost with IFRS1 revaluation Hypotheses Predicted sign Proxies Explanatory variables Panel A: explanatory variables and fair value choice 1) Contractual ef? ciency The probability of choosing (H1) 2 Debt/asset LEV fair value model decreases (leverage) with higher leverage The probability of choosing (H2) 2 Log of total asset SIZE fair value model decreases with the size (2) Information asymmetry The probability of choosing (H3a) + Market-to-book MTBV the fair value model value increases the higher is information asymmetry (3) Managerial opportunism The probability of choosing (H4) 2 Earning SM the fair value model Smoothing decreases with the extent to Index (dummy which corporate insiders variable) reduce the variability of eported earnings (earnings smoothing) (4) Control variables Firm’s country of origin + External cap/ CNT (? nancial markets GNP (dummy development) variable) EPRA members (European + Yes/no (dummy EPRA Public Real Estate variable) Association) Firm activity ? Total rents/total ACT operating income Panel B: explanatory variables and historical cost with the IFRS1 option (2) Information asymmetry The probability of choosing (H3b) + Market-to-book MTBV the historical cost with value IFRS1 option increases the higher is the information asymmetry after request (the sample) and those that do not.Of course, we could only test the difference between the variables we collected from the Datastream database because we do not have access to the ? nancial statements of non-disclosing ? rm. Thus, we do not control if a difference exists in ? rm activity (ACT) between sampled and non-sampl ed ? rms. Fair Value or Cost Model? 475 Table 2 . Sample selection procedure and breakdown by country Number Panel A: sample selection procedure European Real Estate Firms listed in their own country of origin in December 2007 in the following stock markets (source: Datastream): Finland, France,Germany, Greece, Italy, Spain and Sweden (countries where systematic revaluation of investment properties was not allowed before the IFRS adoption) Excluding the ? rms: – not reporting under IAS/IFRS in the period of analysis (2005– 2007) – with no investment property assets (or with investment properties equal to zero) – with neither website nor IR contact – failing to respond – with insuf? cient data to estimate equation (3) (in ?nancial statements or in Datastream database) Per cent 216 100% 2 26 12% 27 3% 2 40 2 27 2 40 18. 5% 13% 18. 5% Final sample 76 35% Panel B: breakdown of sampled ? ms by country and the number (percentage) of companies sele cting fair value, cost with the IFRS1 revaluation or cost method Country No. of sampled Weight Fair value Cost with the Cost (%) companies (%) (%) IFRS1 (%) Finland France Germany Greece Italy Spain Sweden Total 4 26 22 4 8 4 8 76 5 34 29 5 11 5 11 100 4 (100) 11 (42) 12 (55) 3 (75) 2 (25) 0 (0) 8 (100) 0 (0) 4 (16) 4 (18) 1 (25) 1 (12) 3 (75) 0 (0) 0 (0) 11 (42) 6 (27) 0 (0) 5 (63) 1 (25) 0 (0) Panel B shows the breakdown by country of the sample and the proportion of companies that select fair value, cost with IFRS1 revaluation or cost method without revaluating in each country.We considered companies listed in: Helsinki (Finland), Paris (France), Frankfurt and Munich (Germany), Athens (Greece), Milan (Italy), Madrid (Spain) and Stockholm (Sweden). Of the original 67 non-disclosing ? rms (which have neither website nor IR contact or failed to respond), 34 ? rms did not have complete data availability on the Datastream database. Thus, only 33 ? rms had suf? cient information to be included in the test. For non-disclosing ? rms, we collected data using the same rules as applied in the sample and considering 2005 as a reference date unless companies were still not listed.In that case the reference date has been considered as the listing year. The results show that disclosing ? rms (the sample) are not statistically different from the non-disclosing ? rms in terms of the explanatory variables we selected except for the size ( p-value of 0. 000). 476 A. Quagli and F. Avallone This result is consistent with the literature that shows disclosure levels are usually positively correlated with ? rm size because of the decrease in the cost of disclosure (Lang and Lundholm, 1993). However, we keep the variable in the analysis for two reasons. Firstly, the ? m size (our proxy for political costs) could have both a possible negative relationship with fair value choice and a positive relationship with earnings smoothing (Watts and Zimmerman, 1978). If we do not include the ? rm size in the analysis, a signi? cant negative relation between earnings smoothing and fair value choice could be observed even if the size were the true explanatory variable. Secondly, even if a difference between sampled ? rms and non-disclosing ? rms exists in terms of size, summary statistics show a deviation in size within the sample that does not affect the results of the analysis.With reference to the control variables, among the non-sampled ? rms only one company is an EPRA member. This is an expected result because the EPRA’s objective is to establish best practices in reporting and to provide high-quality information to investors. The result, however, does not introduce a selection bias in the analysis because the sample is made of both EPRA’s members (34 ? rms, around 45% of the sample) and companies that are not (42 companies, 55% of the sample). For these reasons, the results validate our sample and suggest that the sample selection did not introduce a bias into the analysis.We relied on two sources for obtaining data for tests: (i) the ? rst ? nancial statement compliant with IFRS and (ii) the Datastream database. The former source enables us to verify the ? rms’ fair value or cost method choice for investment properties (IAS 40), the choice of ‘fair value as deemed cost’ under IFRS1 and to hand-collect from notes the portion of revenue that is a result of rental activities. The latter source provides all the accounting and non-accounting data we need to de? ne the other explanatory and control variables.Non-accounting data includes market-to-book ratio while the accounting data consists of leverage (debt to asset ratio), total asset, operating income and cash ? ow from the operation (the last two accounting numbers have been used to estimate the earnings smoothing ratio) and the revenues that come from rents. Since the aim of this study is to ? nd out why fair value might be preferred to cost under IAS 40, we have commonly used data which is not in? uenced by the choice. In order to make sense of this key assumption, we referred to different periods for market records and information collected from ? ancial statements when collecting data. Market data refers to the end of the FTA year because the market is in? uenced by IFRS immediately after the FTA year. In other words, immediately after the FTA ? nancial data under IFRS is actually disclosed in ? nancial statements (which explains why the market-to-book value is collected during the last month of the ? rst-time adoption ? scal year). Financial data was collected over the two ? scal years before the FTA. Two years of ? nancial data rather than one year is considered to be more representative of a ? rm’s general characteristics and, in particular, able to reduce the effectsFair Value or Cost Model? 477 that might occur from any unusual or abnormal data from a single year. Only the earnings smoothing ratio required a longer perio d of time; we used a four-year time period before the FTA for both operating income and cash ? ow from operation in order to estimate the related standard deviations. These two values were then compared to detect any earnings smoothing propensity. Financial information about the Swedish ? rms is converted into euros on the date of download from Datastream. Market data was automatically converted by the Datastream database. 6. Analysis of Results Summary StatisticsTable 2, Panel B shows the sample by country breakdown and displays both the number and the proportion of companies that select fair value, fair value with IFRS1 or cost model, respectively, in each country. At ? rst glance, Table 2, Panel B seems to reveal some national patterns in explaining the selection between fair value, historical cost with IFRS1 and cost model without revaluating investment properties. Despite the relatively small number of companies selected in some countries, it has still been possible to observe that companies from Finland, Greece and Sweden are extremely prone to adopting the fair value method.Conversely, Italian companies seem to prefer historical cost without revaluating, Spanish companies have a preference for historical cost with the IFRS1 choice to revalue investment properties, while companies from France and Germany, the main countries in our study in terms of number of companies examined, do not show an a priori preference. Thus, the results justify our choice to control for a country variable through the multivariate analysis. Table 3 presents summary statistics for the full sample of 76 ? rms.It should be noted that the two variables, market-to-book value (MTBV) and leverage (LEV), give rise to outlying observations implied by the values in the minimum and maximum columns of the table. One ? rm in particular had problematic values of both MTBV (value below zero) and LEV (value above one), due to a negative book value and this observation was removed from the anal ysis. Additionally, we isolate the outlying observations by means of the three sigma (standard deviation) rule (Barnett and Lewis, 1994), thus separating companies which have x ? m(x) ? 3s(x) (5) where s(x) is the standard deviation of the variable (x).To remove the possible effects of the outliers on the results, we present both the nonparametric analysis and the multinomial logistic regression excluding these values (N ? 73). 478 Variable Explanatory variables: LEV SIZE MTBV SM Control variables: CNT EPRA ACT Mean Std. dev. Minimum Q1 Median Q3 Maximum 0. 5881 12. 7876 1. 4739 0. 3684 0. 2802 1. 6774 1. 1350 0. 4855 0 8. 2765 2 0. 17 0 0. 4829 11. 9451 0. 965 0 0. 6015 12. 9058 1. 3 0 0. 7235 13. 9800 1. 615 1 2. 07 16. 6882 8. 94 1 0. 4736 0. 4473 0. 4999 0. 5026 0. 5005 0. 3492 0 0 0. 1834 0 0 0. 4551 1 1 0. 7778 0 0 0 1 1 1 LEV ? leverage; SIZE ? og of total asset; MTBV ? market-to-book value; SM ? earnings smoothing (dummy); CNT ? ?nancial market development (dummy); EPRA ? EP RA member (dummy); ACT ? ?rm activity. A. Quagli and F. Avallone Table 3. Summary statistics of explanatory variables for sampled ? rms (n ? 76) Fair Value or Cost Model? 479 Nonparametric Mann – Whitney Test To begin by analysing the characteristics of the ? rms that adopt the fair value method or the historical cost with the IFRS1 revaluation in comparison to those that adopt the historical cost without revaluation, we use a Mann–Whitney twosample rank-sum test.In view of the small size of the three groups, a nonparametric alternative to a conventional t-test is justi? ed because of the less challenging assumptions it requires, although this test has some limitations of its own, including being somewhat less powerful than the t-test. Table 4 shows evident differences across our independent variables, some of which appear statistically signi? cant. Consistent with the information asymmetry hypothesis (H3a), the output shows that there is a statistically signi? cant di fference in MTBV between real estate ? ms that choose the fair value method and real estate ? rms that adopt historical cost without revaluation (difference signi? cant at 0. 000 level). The analysis of both means and median for fair value and cost groups makes the direction of the difference clear (for the fair value group, a mean of 1. 203 and a median of 1. 11 against 1. 775 and 1. 49 for the cost group). The output exhibits a negative relation between the MTBV and the fair value choice, contrary to the prediction derived by the traditional meaning of MTBV as proxy for information asymmetry.In fact, the usual interpretation of high MTBV ratios as a signal of information asymmetry is based on the existence of growth options well known by managers, not revealed by accounting rules and, consequently, not identi? ed by investors. In theory, more growth options for high-tech ? rms in particular, are supposed as a consequence of a large bulk of intangibles whose recognition in ? nancia l statements is not allowed, even though investors can estimate their importance (Smith and Watts, 1992; Amir and Lev, 1996).However, in the real estate industry the relevance of intangibles seems less important than in high-tech ? rms. The main assets are investment properties, whose fair value could be easily estimated by ? nancial analysts. In this context, the meaning of high MTBV ratios might be in direct con? ict with the original intuition. In the cost accounting systems before IFRS adoption, higher values of MTBV ratios revealed growth opportunities associated with a fair estimation of investment properties and therefore with a lower information asymmetry. Conversely, lower MTBV ratios for real estate ? ms adopting the cost method could feasibly be the effect of information asymmetries on investment properties value and managers could prefer to use fair value method to reduce these asymmetries. In more precise terms, under the assumption that disclosure is not equivalent to recognition (Schipper, 2007), lower MTBV ratios estimated before the IFRS adoption for real estate ? rms adopting historical cost should be the result of information asymmetries on investment properties value. Thus, lower MTBV ratios could justify the managers’ preference to the fair value method in order to reduce the asymmetries.This reasoning makes it possible to demonstrate the validity of the hypothesis (H3a), even if the sign of the variable is opposite to the traditional interpretation of the relationship between MTBV and information asymmetry. 480 A. Quagli and F. Avallone Table 4. Mann– Whitney two-sample rank-sum test. Fair Value Group vs. Cost Group (NFV ? 38; NCOST ? 16) and Cost with IFRS1 revaluation vs. Cost Group (NIFRS1 ? 19; NCOST ? 16) Group Explanatory variables: LEV SIZE MTBV SM Control variables: CNT EPRA ACT Z-Statistics Pr . |Z| FV vs. COST IFRS_1 vs. COST FV vs. COST IFRS_1 vs. COST FV vs. COST IFRS_1 vs. COST FV vs. COSTIFRS_1 vs. COST 2 0. 11 4 1. 192 0. 682 0. 762 3. 543 1. 258 0. 814 2 1. 185 0. 909 0. 233 0. 495 0. 446 0. 000 0. 208 0. 415 0. 235 FV vs. COST IFRS_1 vs. COST FV vs. COST IFRS_1 vs. COST FV vs. COST IFRS_1 vs. COST 2 2. 018 2 1. 931 2 1. 007 0. 040 2 3. 523 2 0. 364 0. 043 0. 053? 0. 314 0. 968 0. 000 0. 715 This table presents the Mann–Whitney two-sample rank-sum test for both explanatory and control variables. ? , and indicate statistical signi? cance at less than 10%, 5% and 1% level, respectively. The sample (excluding the outliers) comprises 73 companies from seven countries, split into three groups: ? ms that adopt the fair value model (NFV ? 38), ? rms that choose the historical cost and use the IFRS1 option to revalue investment properties (NIFRS1 ? 19) and ? rms that adopt the cost model without revaluating (NCOST ? 16) for investment properties under IAS 40. LEV ? leverage; SIZE ? log of total asset; MTBV ? market-to-book value; SM ? earnings smoothing (dummy); CNT ? ?nancial market de velopment (dummy); EPRA ? EPRA member (dummy); ACT ? ?rm activity. Furthermore, both the ? nancial market development (CNT) and the ? rm activity (ACT) appear statistically signi? ant as well, with a difference signi? cant at 0. 043 and 0. 000 levels, respectively. The analysis of the means and median for CNT (mean of 0. 5526 and median of 1 for the fair value group against a mean of 0. 25 and median of 0 for the cost group) also shows a direction for the difference consistent with our assumption. Particularly, more developed ? nancial markets (estimated as in La Porta et al. , 1997) with the ratio of stock market capitalization held by minorities to GNP) seem to facilitate the adoption of fair value. Hence, the companies from countries where the role of ? ancial markets is more developed (capital market based systems) appear to view the fair value method more favourably than companies from countries where the markets are less developed (credit-based systems). With respect to the ? rm activity (ACT), we made no prediction of the sign. Both the output and the analysis of the mean and the median (mean of 0. 6558 and median of 0. 7507 for the fair value group against a mean of 0. 3005 and median of 0. 2756 for the cost group) show a positive direction of the difference. The result suggests that the predominant activity of the ? rms that choose the fairFair Value or Cost Model? 481 value model seems to be investment properties’ rental instead of other activities such as development and trading. Renting out properties implies a longer time period than other activities like development or trading, where assets would typically be sold in a shorter time. Thus, we could interpret the relation with fair value choice as the ? rms need to show the market value of their properties on the balance sheet when their realization will be in a longer time (rental activity). This would reduce the information asymmetry otherwise existing if properties were evaluated at cost. Conversely, when the business is more concentrated on development and trading, the need for fair value recognition is less strong, due to a shorter time horizon for the realization of these assets. Further explanatory variables, such as leverage (LEV), dimension (SIZE) and earnings smoothing (SM), appear not to be signi? cant in the univariate analysis. However, even if not signi? cant it seems interesting to highlight that for both the size (SIZE) and the earnings smoothing (SM) the analysis of the mean and median reveals differences coherent with our research proposition, hence larger size and earnings smoothing for ? ms adopting historical cost (for size, mean of 12. 781 and median of 12. 905 for the fair value group against mean of 13. 167 and median of 12. 932 for the cost group; for earnings smoothing, mean of 0. 263 and median of 0 for the fair value group against mean of 0. 375 and median of 0 for the cost group). Except for the ? nancial market development (CNT), neither ex planatory nor control variables seem to explain the managers’ choice to adopt the historical cost with the IFRS1 option to revalue investment properties rather than opting for historical cost without revaluation.As for fair value choice, the analysis of the means and median for CNT (mean of 0. 578 and median of 1 for the IFRS1 group against a mean of 0. 25 and median of 0 for the cost group) shows a direction for the difference consistent with the idea that in countries where the role of ? nancial markets is more developed (capital market based systems), companies seem to view the revaluation of investment properties allowed by IFRS1 more favourably than in countries where the markets are less developed (creditbased systems). Multivariate AnalysisBefore presenting the results of the multinomial logistic regression, we report the Spearman (rank) correlation coef? cients for the variables (Table 5). Considering the following multinomial logistic regression analysis, the depende nt variable has been split into three variables: (i) CHOICE, equal to 0 if companies adopt the historical cost, 1 if companies adopt the historical cost with the IFRS1 revaluation and 2 if ? rms embrace the fair value; (ii) FV vs. COST that only regards as fair value choice (Y ? 1) and historical cost (Y ? 0) and (iii) IFRS1 vs.COST that only takes into account the choice to adopt historical cost with the IFRS1 revaluation (Y ? 1) and the historical cost (Y ? 0). With reference to the dependent variable, Table 5 con? rms the previous univariate 482 Variables CHOICE FV vs. COST IFRS1 vs. COST LEV SIZE MTBV SM CNT EPRA ACT CHOICE – – – 0. 0552 2 0. 0620 2 0. 4343 2 0. 1728 0. 1890 0. 1462 0. 4707 FV vs. COST IFRS1 vs. COST – – 0. 0122 2 0. 0978 2 0. 4745 2 0. 0983 0. 2499? 0. 1356 0. 472 – 2 0. 2045 2 0. 1306 2 0. 2131 0. 2033 0. 3311? 2 0. 0068 0. 0625 LEV SIZE – 0. 1780 0. 1657 2 0. 1818 2 0. 312 0. 0895 2 0. 1136 – 0. 0915 0. 0781 0. 2874 0. 3638 0. 0239 MTBV SM CNT EPRA ACT – 0. 0633 – 2 0. 0826 0. 2091? – 0. 1176 0. 2734 0. 0400 – 2 0. 2627 2 0. 0525 0. 4447 0. 1659 – This table provides Spearman (rank) correlation matrix for both explanatory and dependent variables. Considering the following multinomial logistic regression analysis, dependent variable has been split into three variables: CHOICE, equal to 0 if companies adopt historical cost, 1 if companies adopt historical cost with the IFRS1 revaluation and 2 if ? rms adopt the fair value; FV vs.COST that only regards the fair value choice (1) and the historical cost (0) and IFRS1 vs. COST that only takes into account the choice to adopt the historical cost with IFRS1 revaluation (1) and the historical cost (0). Values indicated in bold show statistically signi? cant relationship between variables. ? , and indicate statistical signi? cance at less than 10%, 5% and 1% levels, respectively (two-tailed). Pearson corr elation shows similar results. LEV ? leverage; SIZE ? log of total asset; MTBV ? market-to-book value; SM ? earnings smoothing (dummy); CNT ? ?nancial market development (dummy); EPRA ?EPRA member (dummy); ACT ? ?rm activity. A. Quagli and F. Avallone Table 5. Spearman (rank) correlation matrix Table 6. Multinomial logistic regression results Panel A: model summary – goodness of ? t Number of obs. ? 73 LR chi2 (14) ? 41. 81 Prob . chi2 ? 0. 0001 Pseudo-R2 ? 0. 2799 Log-likelihood ? 2 53. 766523 Panel B: estimated coef? cients Variable Hypothesis 1 LEV SIZE MTBV SM CNT EPRA ACT Constant LEV SIZE MTBV SM CNT EPRA ACT Constant – – (H3b) – – – – 2 (H1) (H2) (H3a) (H4) Predicted sign + 2 2 + 2 + + ? Coeff. 2 0. 6117228 2 0. 4409383 2 0. 6115429 0. 2741504 1. 900273 0. 8488012 2 0. 708886 6. 279216 1. 734055 2 0. 6789767 2 1. 662586 2 1. 692808 1. 510263 2. 449269 2. 263975 8. 836272 Std. err. 1. 681102 0. 2748586 0. 5957133 0. 8804852 0. 9 408805 1. 124734 1. 421061 3. 866769 1. 715306 0. 289514 0. 6609104 0. 9636362 0. 949826 1. 124299 1. 353768 3. 969725 z 2 0. 36 2 1. 60 2 1. 03 0. 31 2. 02 0. 75 2 0. 68 1. 62 1. 01 2 2. 35 2 2. 52 2 1. 76 1. 59 2. 18 1. 67 2. 23 P . |z| 0. 716 0. 109 0. 305 0. 756 0. 043 0. 450 0. 494 0. 104 0. 312 0. 019 0. 012 0. 079? 0. 112 0. 029 0. 094? 0. 026 95% conf. interval 2 3. 906621 2 0. 9796511 2 1. 779119 2 1. 451569 0. 0561811 1. 355637 2 3. 756117 2 1. 299512 2 1. 627883 2 1. 246414 2 2. 957947 2 3. 5815 2 0. 3513614 0. 2456834 2 0. 3893613 1. 055755 2. 683176 0. 0977746 0. 5560336 1. 99987 3. 744365 3. 053239 1. 81434 13. 85794 5. 095992 2 0. 1115397 2 0. 3672257 0. 1958842 3. 371888 4. 652855 4. 91731 16. 61679 483 (Continued ) Fair Value or Cost Model? LOGIT 484 Panel C: estimated odds ratios LOGIT Variable Odds ratio 1 LEV SIZE MTBV SM CNT EPRA ACT LEV SIZE MTBV SM CNT EPRA ACT 0. 5424156 0. 6434324 0. 5425132 1. 315413 6. 68772 2. 336844 0. 3787464 5. 663571 0. 5071357 0. 189 6479 0. 1840021 4. 527923 11. 57988 . 621254 2 Std. err. 0. 9118557 0. 1768529 0. 3231823 1. 158201 6. 292345 2. 628327 0. 5382217 9. 714756 0. 1468229 0. 1253403 0. 1773111 4. 300739 13. 01925 13. 02494 z 2 0. 36 2 1. 60 2 1. 03 0. 31 2. 02 0. 75 2 0. 68 1. 01 2 2. 35 2 2. 52 2 1. 76 1. 59 2. 18 1. 67 P . |z| 0. 716 0. 109 0. 305 0. 756 0. 043 0. 450 0. 494 0. 312 0. 019 0. 012 0. 079? 0. 112 0. 029 0. 094? 95% conf. interval 0. 0201083 0. 3754421 0. 1687867 0. 2342026 1. 057789 0. 2577831 0. 0233743 0. 1963449 0. 2875341 0. 0519254 0. 0278339 0. 7037294 1. 278495 0. 6774894 14. 63149 1. 102714 1. 743742 7. 388093 42. 8214 21. 18385 6. 137025 163. 3658 0. 8944559 0. 6926533 1. 216386 29. 13348 104. 884 136. 6346 Choice ? 0 (historical cost) is the base outcome. This table presents coef? cients/odds ratios from multinomial logistic regression (MLN). Our model assumes the choice to use the historical cost without revaluating as the baseline outcome category to compare (Y ? 0), and fo rms logits comparing the choice to use the historical cost with the IFRS1 revaluation of investment properties (Y ? 1) and their fair value choice (Y ? 2) to it. We present Wald statistics, log-likelihood and McFadden pseudo-R2. , and indicate signi? cance at less than 10%, 5% and 1% level, respectively. LEV ? leverage; SIZE ? log of total asset; MTBV ? market-to-book value; SM ? earnings smoothing (dummy); CNT ? ?nancial market development (dummy); EPRA ? EPRA member (dummy); ACT ? ?rm activity. A. Quagli and F. Avallone Table 6. Continued Fair Value or Cost Model? 485 analysis results. Our proxy for information asymmetry, the market-to book ratio (MTBV), has a strong negative association with fair value choice, thus discriminating the fair value model group from the cost model group.The result con? rms the above-mentioned interpretation of this sign. Furthermore, both the ? nancial market development (CNT) and the ? rm main business (ACT) condition the choice as well. Conversely , the choice to adopt the historical cost with IFRS1 revaluation is not accounted for by the explanatory variables except for the ? nancial market development (CNT). With reference to independent variables, Table 5 shows that some statistically signi? cant

Subsea construction Research Paper Example | Topics and Well Written Essays - 2250 words

Subsea construction - Research Paper Example For instance it is genuinely correct to use the word ‘submarine’ or ‘undersea’ but it is not right to say ‘undermarine’ or ‘subsea’ (Palmer, 2008). The services of Subsea Construction include Offshore Services, Vessels, and Shoreboard Services. In gas fields and deepwater oil all over the world, this subsea construction provides work proposals for laying pipes, and also manifold tiebacks and subsea tree and also various others particularly applications of subsea. Fast speeds of transit and huge range of pipeline capabilities which worked for ten thousand feet is also an advantage of flexible construction of subsea fleet. Many experienced engineers are known with leading technology of the technology are an important part of many world-renowned class projects in the frontiers of deep water. The underwater vessels improve economics, execution, and safety (Palmer, 2008). These capacities include enhanced effective operation of tiny-diameter of pipelines, flexible risers, umbilicals, and flowlines. Furthermore, huge diameter pipes are laid out in the bottom of the sea having a six to thirty inch OD; also a S-laid pipe is installed with a radius of seventy to three hundred radius. Six hundred metric ton equipment is consumed to a depth of ten thousand feet. Also a muti-service with an open deck is bolstered with four thousand metric tons of variable load available and the transit speeds provided are as high as fourteen knots (Robinson, 1996). The offshore wind power is an important constituent of Subsea Construction. The infrastructure of transmission of power makes use of many technologies of subsea construction for the maintenance and installation of transmission cables of submarine power and many other equipments of electrical energy. Also, there are monopole basis of fixed bottoms of wind turbines and fastening the cable structures of these hanging wind turbines as they are examined on a regular basis using diversity of

Will The Middle Class survive in the United States Term Paper

Will The Middle Class survive in the United States - Term Paper Example Alternatively, a counterargument is presented to the effect that the middle class does not exist. The most important rhetoric of the modern society is perhaps based on the financial integrity and performance and the interplay with benefits and liabilities presented to individuals’ financial abilities. While social stratification may not be a welcome idea in the modern society, economic potential unfortunately creates an imprint of social classes dependent primarily on the economic status of individuals. Among the five presumed socioeconomic classes is the middle class which can be defined as the class comprising of between one-third to a fifth of employees in an economy and has white-collar employees, junior managers, small and middle entrepreneurs. In the apparent social stratification and classification, there are two lower classes ranking below the middle class and two classes higher in ranking than the middle class. From the table above, Weston (2011) tries to illustrate the definition of the various socioeconomic classes based on the range of earnings that they make and the position of the middle class has been highlighted in bold. Below and above this class, there are two socioeconomic classes with a possibility to move up and down the classes being dependent on the performance on earnings and individuals’ financial status. Depending on the general performance of the national economy, the distribution of the classes across the population may depict certain patterns. As an illustration, in the developed economies, the population in the advanced classes is higher than in the lower classes, which is the exact opposite in developing economies. Equally, the possibility of movement up and down the classes is reminiscent of the prevailing economic environment. It therefore implies that the middle class is composed or relatively better

Local Economic Development Project Case of Walsh Ranch Study

Local Economic Development Project of Walsh Ranch - Case Study Example The area designated for the mixed-use growth community in Fort Worth has also been merged into the Walsh ranch project (Walsh ranch). Development Vision The Walsh ranch aims to be the first planned mixed use growth community model; a balanced and planned community that will have an identity of its own, it will be the model community for others to follow with places of work, playing, shopping, praying, learning and recreation all incorporated into one community (LDR, HNTB 2). With its open and park space, the Walsh ranch will also contribute to and enhance the ecological features of land, water and air (Walsh ranch). Walsh ranch aims to be a technologically smart community with investment protection and enhancement for ensuring a flourishing economy for the community at large (Walsh ranch). History of Walsh Ranch A piece of land rich in natural beauty and known for the Walsh family name, Walsh ranch, a cattle ranch has been at the centre of ranching operations for the Howard Walsh fam ily for 60 years (LDR, HNTB 1). Mr. and Mrs. Walsh are known philanthropists in Fort Worth, with Walsh ranch now to be another example of their commitment and love of the community, traditions, and environment of Fort Worth (Walsh ranch). Purposes Served by the Walsh Ranch Mixed-use Community Walsh ranch will serve to strengthen the community by addressing the needs of the community and the people; it will aim at providing multiple sustainable solutions within one community (Walsh ranch). The project will focus at (Walsh ranch): Economic growth Expanding population needs Development of centres for multiple growth 1. Economic Growth Economic growth will be... This paper outlines numerous economic advantages of the realization of Walsh Ranch project. Benefits of sustainable economic development include innovative use of all possible resources, that leads to jobs increase, new income sources, and high rate of productivity for the people. For the ecology the benefits result from the promotion of use of clean and renewable energy. The economy benefits from all the above leading to growth in economy, which will improve the living standards, jobs, incomes and will provide opportunity to expand businesses The objectives that are attained or are to be met by such economic development are known as the four greens namely; savings, opportunities, talent, places Walsh Ranch is a master planned community that is aimed at achieving sustainable economic development. It is the largest planned community in north Texas; the ranch is located west of Fort Worth. Walsh ranch will retain most of the resources and natural features of the ranch by the use of native landscape treatments; the natural environment of the ranch will be retained to deliver a unique living experience. Walsh ranch will serve to strengthen the community by addressing the needs of the community and the people; it will aim at providing multiple sustainable solutions within one community The Walsh ranch with all its other utility provisions should also look into providing, medical facility, fire extinguishing facility and a library within the Walsh ranch area. Such initiatives will ensure the convenience and health of the community.

Write about Maslow Essay Example | Topics and Well Written Essays - 500 words

Write about Maslow - Essay Example He laid out five major classes of human needs; psychological needs, safety and security needs, love and belonging (social) needs, esteem needs and finally self-actualization. Psychological needs primarily entail the basic human needs, for example, water, air, sleep, rest, sex, and food nutrients among other needs. Maslow described these as individual needs. Safety and security needs are those that drive humans to search for safe living circumstances, protection from harm and stability. Love and belonging needs follow after the psychological and safety needs have been taken care of. These needs are characterized by a human feeling of the need for community and relationships with fellow humans. Esteem needs were categorized into two types by Maslow; low and high self-esteem. People with low self-esteem are characterized with need for respect and recognition of others, fame, and attention. Conversely, people with high esteem are characterized by their need for self-respect that is demonstrated by high confidence, independence, and freedom. Finally, Maslow described the highest level of human needs as self-actualization. Humans who have reached this level ar e described as having lower needs to take care about, and thus have all other needs in their life covered. The segment of the human population who are have reached this class are believed to be very small (Armstrong, 2007). After describing the hierarchy of needs, Maslow followed to assert that individuals at a certain level in the hierarchy pyramid are motivated by the unsatisfied needs in their life in order to move to the next level. According to him, the five needs categories can be grouped into two main groups; higher-order needs and the lower-order needs. Through these needs, managers in an organization can understand how to work with their human resources. For example, giving the employees appropriate salaries and

Media Consumption Essay Example | Topics and Well Written Essays - 750 words

Media Consumption - Essay Example The intentional media is the one we look at knowingly because it entertains us or interests us. Unintentional media consumption is the one take in without our knowledge. My daily schedule after the alarm snoozes at six am is to look at my Facebook and my twitter accounts so as to catch up with what my friends have said. On Facebook as one scrolls down to read people’s posts, I bump onto 4 ads from Samsung, eBay , KFC and GM. All these are pages I have liked on Facebook.nI can call this intentional because I have liked their pages and I want to get the latest updates about their products and services. After looking at my smartphone, it is now time to get out of bed and prepare for the day. I take a quick shower take a quick breakfast as I am standing with the TV on. Here I bump into more ads that I had not intended to look at. I leave my apartment and head to the subway. Here I encounter more ads on billboards, posters, and sign boards. When I get to work I check my emails, log on to Twitter again. I look through food blog, a friend’s blog, and Literary Magazine. I read an interview- Anderson Cooper interviewing Donald Sterling- that my friend has sent to me that very morning. I also happen to have an email folder for newsletters from which I get headlines from The Washing ton Post, The Boston Globe and The Wall Street Journal. I look at Facebook notifications and do not click on any links that seem to talk about the NFL draft and such and spend less than a minute looking at the news feed. I also get from my folder news on what my friends have read from Goodreads. I do not check the weather from Weather.com and was rained on in the evening. During the lunch break I go out to take a sandwich and encounter about seven billboards advertising several products such as vodka, McDonalds, and IKEA. I head back and read a chapter of The Opposite of Loneliness by Marina Keegan from my kindle. I continue with my work

Impact of Management on Organizations Term Paper

Impact of Management on Organizations - Term Paper Example This paper is an attempt to explore the various dimensions and dynamics of the impact of management on organizations. Whether positive or negative and internal or external, the paper will critically analyze this impact. During this discussion, this paper will touch various sub topics under the umbrella of such as strategic management, leadership, and managing change. Body/Discussion Before even initiating the discussion about management and its impact on organizations, it is imperative to present the basic idea and definition of management. According to its definition, management refers to the process of achieving organizational goals and objectives effectively and efficiently by engaging in â€Å"the major functions of management, which are planning, organizing, leading, and controlling†. Planning is â€Å"the process of setting goals and deciding on the best possible methods of achieving them† (Hamel & Breen, 2007). Without goals, objectives, and targets, management cannot even exist. The first task of management is to set a vision and create objectives about what the organization intends to achieve and how it intends to achieve the same (Daft & Lane, 2009). Consider the example of Whirlpool, a Fortune 500 company which is celebrating its 100 birthday this current year, to understand the importance of planning as the function of management and its impact on the overall organization. The overall objective of the company, during the 1990s was to achieve the best possible performance in delivering the shareholder value. The company went on to define that as achieving the target of revenues of 15 billion US dollars annually from their existing level of 7 billion US dollars (Hamel & Breen, 2007). Whirlpool and its executives and managers knew that this is an imper ative yet difficult task and something had to done effectively in order to achieve this target. The company initiated intensive efforts to understand the needs, wants, demands, expectations, ideas, and thoughts of the customers so that the company could introduce the best possible products, which are in line with the needs of the

Unit 2 Equlity, Diversity and Rights Essay Example for Free

Unit 2 Equlity, Diversity and Rights Essay Discriminatory practice is infringement of rights. This means that you are not respecting individual’s rights or beliefs. (Mills, 2013) There are many ways that people can discriminate against others. Discrimination can involve making a judgement on someone; whether it be for race, gender, sexuality or disability. Discrimination is an unfair act based on prejudice. Sexuality: There are many different sexualities. These include straight, lesbian, gay and bi sexual. A service provider may discriminate against a service user’s sexuality. If a gay, elderly man in a care home needs to be washed, a male member of staff might refuse to do this because it may make him feel uncomfortable knowing the man’s sexuality. This would be seen as discriminatory practice. Disability: Many care homes have service users that may have a form of disability. This can be anywhere from a learning disability, to a physical disability. Some service providers may not approach the service user (if they have a disability) to inform them something, they might just approach the nurse/carer beside them. Service providers would do this because they wouldn’t know if the service user would be able to understand. This would be discriminatory practice. Age: In a Health and Social care environment, only people under a certain age may be allowed on day trips. This would be done and the activity could involve too much physical strength and ability for the elderly service user. This would be seen as discrimination to the elderly. Social class: In a health and social care setting, people may be discriminated against due to their social class. A service user may be treated with more respect because of their higher social c lass than someone who has a low social class. For an example, someone who was very successful in life may be treated with more respect be seen as more important than others. This would be discrimination against the elderly. Religion: In a caring and social environment, religion should always be accepted and respected. In some cases it is not. Because of stereotyping, a care/social worker may refuse to deal with a service user because of their religion. For example, if a service user is muslin, a service provider may refuse to deal with them, purely because of their religious beliefs. This would be seeing as a discriminatory practice. Describe the potential effects of discriminatory practice on those who used health or social care services All of the discriminatory practises stated above would have a huge, negative impact on the service users. Sexuality: Social workers may not recommended a foster family to foster children if they are a gay couple. There would be no reasonable excuse for this act. This would be discrimination against the couple. It is likely that this would strongly affect the couple and possibly ruin their self-esteem and their confidence. Disability: In the example stated before, by not approaching the service user directly, it is indicating that you think the service user is unable to respond to what you are saying. This is discriminatory practise. This could leave the service user feeling depressed, isolated and ignored. Age: In the example used previously, if you are leaving people over a certain age out of an activity, this is limiting them to what they can do. You are leaving them out of an activity, likely to leave them feeling lonely. This is unfair and discriminatory practice. Therefore the service user may end up feeling isolated (because they aren’t involved in the group) and lose self-confidence which could affect other areas of their life. Social class: An example of someone with a low social class feeling isolated would be a former prisoner who has now moved into a care home. Service providers may assume the worse of him and therefore treat this service user with little respect. This may cause the service user to become isolated. Religion: Another discriminatory practice would be sex. If a Muslim lady was in a care home, they could be discriminated against by insisting that they would have to be dealt with by a male service provider. Another would be to offer a menu with the main meat on the dishes being pork as it is against the Muslim belief to eat pork. This would not be respecting their religious beliefs and therefore would be discriminatory practic e. This could cause the service user to suffer low self-esteem (which means that someone is losing their self-worth and self-esteem), humiliation, and worthlessness. Asses the effects on those using the services of three different discriminatory practices in health and social care settings Sexuality: If a homosexual couple were recommended to not foster children, and this did cause them to lose confidence in adopting, it could lead to depression and anxiety at their status in society. They may then feel it necessary to hide their sexual orientation. This could then make them feel unworthy in life which could lead to severe depression. Social class: If a former prisoner in the care home did feel isolated, it wouldn’t be surprising if they may rarely join into group activates. This would ultimately lower their self-confidence and mean that they would withdraw more over time. If this was to happen, they could find themselves being depressed and having very low self-esteem. Religion: If a Muslim woman was forced to be treated by a male doctor, even after asking not to be, she would be unable to use the service, purely because of her religious beliefs. This would be discriminatory practice. She would then feel humiliated, which would ruin her self-confidence. If this happened then she may not have the confidence to use the health service again which could end up with serious consequences.

What Extent Is English A Global Language?

What Extent Is English A Global Language? There are numerous different languages are being used throughout the world. Since there are too many different languages, a global language is produced. A language can achieve this status only when it is important to the world activities such as communication between countries, trading between different countries across the world and culture. It plays an important role and it is recognized by every country (Crystal, 2003). Crystal (2003) reports that English has already reached this stage and there are nearly a quarter of the worlds population around 1.2 to 1.5 billion people is already know and use English. Nowadays, English is the most widely spoken language in the world. English has become a global language not because of it is both easy to learn and is superior to other language but it has strong power base. The thesis of this essay is divided into a few parts, first look at what is a global language and what makes a language global then why English become a global language. Global language means a language which is using around the world and it is important to the world operation and influencing the domains of the human activity in the world. For example, global language is usually uses to write songs, use to trading throughout the world and communication between countries in the world. Global language is important to the world operation and a global language is needed in the world. A language has two mains ways to become global. It can be an official language and foreign language of countries. Official language means a language which wildly used as medium of communication, such as media, the domains as government and the education system (Crystal, 2003). It also can be the first language of few countries. Crystal (2003) claims that a language can have a global status when it is used by other countries around the world. Since a language cannot become global only use by itself. Foreign language means a language teaching in school which has no official status. A mother-tongue language becomes the foreign language and the official language is the step to make the language become global since a language cannot have a global status when it is not taken by the other countries. And English has finished the step to become an international language. English has become an international language not because it is easy to learn. There is no language is easy to learn and better, the difficulty of a language is depend on different learner and Lutz (2010) points that it depends on which level of the learner want to achieve, the higher level, the more difficult. Ellis (1985) says that age, aptitude, cognitive style, motivation and personalities are the five main aspects which separate individual learner differences in a different level. This means the difficulty of language are depends on learner. Ellis (1985) reports that aptitude is a main factor to divides the language learner to different level. If a learner has a good aptitude and a effective way to study a second language, the language will become easier. Learner motivation also is a important factor that make a learner learn a second language success. A learner can likely learn a second language to be success when the motivation is high. Crystal (2003) reports that the intrinsic structural properties, the size of its vocabulary or it has been a vehicle of a great literature in the past or it was once associated with a great culture or religion are the motivation of some learner to learn a language but not the reasons make the language become global. English has become an international language also not because it is superior to other language. Crystal (2003) says that there are many people claim that a language can become global because its sense beauty, clear expression or religious standing and these are the misleading beliefs. Language can become a global language not because the beauty of the language and the number of people who speak it but who speak the language. There are some properties of English makes it become global appealing but the characteristics of the language are not the main reason to be worth to learn but the relative importance between the language characteristics and the internationally value. This make a language be more appealing but not superior to the other languages. English may be more appealing than other languages but not superior to languages. Crystal (2003) says that language can become a global language not because the beauty of the language and the number of people who speak it but who speak the language. English can become a world language mainly because of the strong military power and economic power. Crystal (2003) shows that a language cannot become global without strong power-bases, such as political power, military power and economic power. These are the dominance of the language which makes a language become global. The military power is the main reason to make a language become a global language. When a country has a strong military power, the others need to listen to the language spoken by the people in that country. Which means it makes that language is used in many countries. Between the world war two, Britain set up a lot of colonies. English became the official language and foreign language of the colonies. This is very important to be the official language and foreign language of the colonies because it is a important step to make a language become global. English must be taken by others countries to become global because a language cannot become global when it is only use by the countries which English is the mother-tongue. So English become the official language and foreign language of the colonies becomes the base of English to become a global language. an economic power is still needed to maintain and expand the status of the language. Economically power became a main aspect which maintain and expand the status in the start of twentieth century. The economic start to growth and develop around the world and there are many new markets were born. There were many new technology are invent. Communication between countries is needed to develop the economic and market. Country has a stronger economically power, the first language of that country will become more important and it can maintain it longer and expand it to larger through the economy. Crystal (2003) claims that Britain had be come the worlds headmost industrial and trading country at the beginning of the nineteenth century. The growth of economy of the English is the fastest in the world. These built the foundation of English in the world through the colonies and the economy. These are the two mains reasons to give English a global status. In conclusion, English has become an international language is not because it is both easy to learn and is superior to other language because there is no language is superior to other language and the difficultly of a language is depend on the individual learner differences. The reasons why English can become a global language because the military and the economic power of the countries which speak English And English was in the right place at the right time. (Crystal, 2003:7-10) English set up the base to the world through out the world by Britain colonies. English is also maintained and expended by the economically power and military power of Britain and USA. That the reason why English can become the global language and why English can still be the global language until now. (1262 words)

Optimum Temperature for Catalase in Potato

Optimum Temperature for Catalase in Potato Hydrogen peroxide is a common by-product produced during metabolism in living organisms. On accumulation, hydrogen peroxide can have various implications on living cells such as skin disorders (Schallreuter Rokos 2006). Decomposition of hydrogen peroxide gives out harmless water and oxygen, as shown by the equation 2H2O2 (aq) ÃÆ' ¯Ãƒâ€ Ã¢â‚¬â„¢Ãƒâ€šÃ‚   2H2O (l) + O2 (g). The rate of decomposition of hydrogen peroxide is low and it can be increased by an enzyme called Catalase. An enzyme is essentially a biological catalyst that can increase the rate of reaction but remains chemically unchanged at the end of the reaction (Pang 1997, p.63). Catalase readily speeds up the breakdown of hydrogen peroxide at a rate of millions of hydrogen peroxide molecules per second (Goodsell 2004). It is particularly important in liver cells and kidney cells for removal of any toxins present in the blood stream to maintain health (Alberts et al. 2002). By varying the temperatures using water baths and measuring the time taken for first bubbling and when bubbling remains constant, the rate of breakdown of hydrogen peroxide can be calculated by the reciprocals of the measured time. The temperature at which the reaction rate is the greatest is referred to as optimum temperature (Pang 1997, p.70). That is the say, enzyme catalase catalyses the breakdown of hydrogen peroxide the most effectively at this temperature. Aims In this experiment, the influence of temperature on the activity catalase is examined. We aim to find out how its activity changes over a range of temperatures, in order to establish the optimum temperature of this enzyme catalysed reaction. Methods Equipment Water bath (10 °C, 35 °C, 45 °C, 60 °C) Ice Beakers x2 (for the ice bath) Thermometer (to ensure that the ice bath is Test tubes x10 Non-permanent marker Timer Hydrogen Peroxide x200mL Cork Borer Scalpels Watch glasses Aluminium Foil Ruler Potato Pipettor Safety Hydrogen Peroxide (H2O2) is corrosive and hence safety glasses must be worn to prevent eye contact. The decomposition of Hydrogen Peroxide would produce pure oxygen so combustible materials must be kept well away. Experimental procedures Set up the following apparatus according to the following conditions: Test Tube Temperature A B 35 °C C 45 °C D 60 °C E Room temperature Label the test tubes to be used, according to the above table. Cover the stock H2O2 with aluminium foil to prevent decomposition under light. Prepare enzyme catalase by inserting through the centre of the potato, with aid of a cork borer. Using the scalpel and ruler, cut 1cm pellets of potato that was extracted with the cork borer. Half-fill a beaker with tap water and add in crushed ice to make water bath for A. Wait for several minutes to allow stabilization of temperature. Insert test tube A, leave for a 3 minutes before using the 10mL pipette to add 8mL H2O2 to the test tube. Add the 1cm pellet of potato to the test tube. Start the timer and record the time required for the first bubbling to occur and the time when the amount of bubbles produced remain constant. Record all observations. Repeat steps 6-8 for test tubes B to E but without addition of ice. Put them directly into the water baths available in the laboratory. Repeat steps 4-10 twice, recording all observations and results. Average the results obtained for test tubes A-E in each experiment (ignoring outliers), and plot your results against temperature. Extrapolate the graph to determine the optimum temperature for enzyme activity. Discussion To achieve results with greater accuracy, we have taken several precautions. Firstly, I was the person who recorded the time throughout the experiment and this could avoid discrepancy caused by different reaction times among individuals. Secondly, the use of cork borer might ensure uniform sizes of potatoes so that the amount of catalase would be relatively the same. Thirdly, stock H2O2 solution was wrapped to reduce unwanted decomposition under light. Fourthly, test tubes with potatoes were put into the water baths for a few minutes before adding H2O2 and this allowed the temperature of the content to reach that of the water baths. Lastly, no temperature was applied to tube E (at room temperature) and it acted as a control to show that the changes in activity of catalase resulted from changes in temperatures. From our results, enzyme activity is low at very low (0.5 °C) and high (61.2 °C) temperatures. At very low temperatures, substrate and enzyme molecules lack energy for collisions and hence binding to catalase reactions; and at very high temperatures, the alteration of the binding site of enzyme sets in and the denatured enzyme catalyses reactions with decreasing efficiency (Pang 1997, p.70). The optimum temperature for catalase activity was around 35.3 °C, as indicated by the peak in figure 2. This agrees with the research conducted by Yumoto et al. (1999, p.67), in which catalase works the best at about 30 °C. However, this does not agree with our findings from figure 1 (optimum temperature at around 40 °C), whereas the peak activity occurs at 35.3 °C and 43.5 °C. This might be explained by the fact that first bubbling occurred within a few seconds on addition of H2O2 to potato and it was difficult to measure this time precisely. Therefore, the time taken for bubbling remained constant might be a better representation of our experimental outcomes. As regards the observations, it is evident that the colourless gas bubbles are oxygen and the reason why potato sank to the bottom might be explained in terms of density. As dilute H2O2 solution was used, the density of solution can be assumed to be equal to water, which is approximately 0.9970gcm-3 at room temperature (Aylward Findlay 2008, p.154). It is reasonable to predict that potato is essentially denser than water and thus it sinks. However, the gaseous oxygen produced on the surface of the potato can produce an upthrust to push the potato upwards (Goodwin 2002). Therefore the potato temporally floats on the surface. When the gaseous oxygen is discharged at the surface, the effect of density takes priority again, causing the potato to sink. Despite of careful design of our protocol, some experimental errors could have arisen. The 8ml H2O2 was added on a 4ml basis by a pipettor and the timer was started at the first addition. In other words, the measured time could have differed from the actual one by several seconds. This inaccuracy might be improved by the use of graduated pipette so that the 8ml solution could be added via one addition without any delays. Moreover, we forgot to dry the test tubes completely in some of our trials and this could have caused dilution of the H2O2. This error could be fixed by the use of long cotton sticks to dry the inner parts of the test tubes. Furthermore, the judgements of whether or not the amount of bubbles remained relatively the same might be subjective and this problem could be solved by addressing our focus on the volume of oxygen evolved instead. For example, we might collect the oxygen over water and measure the volume of it every 30 seconds for 5 minutes with a calibrated syr inge (Morris 2006). In this way, we might achieve a better measurement of the reaction rate. From this defect in the design, I realized the importance of consulting more sources rather than relying on our own knowledge as we lack experience in experimental design. Conclusion In conclusion, enzyme catalase exhibits low activity at low temperatures (0.5 °C) and high temperatures (61.2 °C). Its activity is the greatest at around 35 °C. The experimental set-up was generally satisfactory to minimize errors except of some defects such as the methodology in measuring the rate of the reaction. It is suggested that more research should be done in designing the experimental protocol.