The aim of this paper is to discover potential sources and methods how earnings management could happen within OMV.
To discover the methods, the authors will briefly look at the outline of the company and its history. The main part of this work will be dealing with accounting policies of the company as well as the CEO change in 2015. The CEO change will be the focus of our research in discovering potential methods and tools for earnings management.
In detail, the authors will focus our work on the years 2014, 2015 and 2016. All the information will be taken from the official annual reports of OMV, which are all available for the public.
Table of Contents
2. Introduction
3. Company description
3.1. History of the company
3.2. Owners’ structure
3.3. Company structure and business areas
3.4. Subsidiaries and shareholdings
4. Economic Environment
4.1. Branch description in general
4.2. Oil price
4.3. Gas price
4.4. Political instability in countries where OMV is involved
4.5. Gas crisis related to the conflict between Russia and Ukraine
5. Accounting information
5.1. Key accounting policies
5.2. Accounting flexibility
5.3. Likely earnings management motivations
5.4. Accounting strategy and disclosure quality
6. Red flags in the annual report of OMV
6.1. The use of Impairment and deferred taxes for real earnings management
6.1.1. Impairment of “Oil and gas assets”
6.1.2. The importance of deferred taxes for real earnings management
6.1.3. Assets and liabilities held for sale and their effect on earnings
6.1.4. Misstatements in the annual report of 2014
6.2. Other possible red flags which are an indicator for real earnings management
7. Conclusion and final statement
Research Objectives and Thematic Focus
This paper investigates potential earnings management practices within OMV, focusing specifically on the impact of management changes and economic factors on corporate financial reporting during the years 2014, 2015, and 2016.
- Analysis of OMV's accounting policies and valuation methods.
- Assessment of the correlation between CEO change and earnings management.
- Examination of impairment losses and deferred tax impacts on net income.
- Evaluation of disclosure quality in annual financial reports.
Excerpt from the Book
6.1. The use of Impairment and deferred taxes for real earnings management
The following part will be focussing on red flags in the annual report, which are signals for real earnings management. In fact, it will be an outline of how the impairments of property, plant and equipment affect the earnings of OMV. In the years 2014 to 2016 there were huge amounts of impairments in the field of “Oil and gas assets” (these assets are important for the exploration of new possibilities for e.g. building new refineries). Impairments of such assets are really hard to understand, because they are in the opinion of the company itself. When OMV says they “Oil and gas assets” are not profitable enough they are able to write the assets down. Who can say if this is reflecting reality? In the following paragraphs, you will see that the there are some points which are not clear from an outsiders’ perspective on OMVs annual report.
Summary of Chapters
2. Introduction: Outlines the scope of the study regarding OMV's earnings management activities during 2014–2016, specifically highlighting the influence of the 2015 CEO transition.
3. Company description: Provides an overview of OMV's history, ownership structure, and its business divisions within the upstream and downstream sectors.
4. Economic Environment: Describes the external factors impacting the company, such as oil and gas price volatility, geopolitical risks, and the Russia-Ukraine gas conflict.
5. Accounting information: Examines OMV’s accounting policies, flexibility in estimation, earnings management motivations, and the quality of their corporate disclosures.
6. Red flags in the annual report of OMV: Analyzes specific financial indicators, such as impairment losses and deferred taxes, that may suggest active earnings management.
7. Conclusion and final statement: Summarizes the findings, noting the complexity of detecting earnings management from an external perspective and the influence of strategic management decisions.
Keywords
OMV, Earnings Management, Financial Statements, Impairment, Deferred Taxes, CEO Change, Upstream, Downstream, Oil Price, Gas Price, Accounting Policy, Disclosure Quality, Annual Report, Audit, Valuation
Frequently Asked Questions
What is the primary focus of this research?
The paper examines whether and how OMV performed earnings management during the years 2014 to 2016, particularly in relation to the CEO change in 2015.
What are the central thematic fields covered?
The core themes include the company's business model, volatile economic environments in the energy sector, specific accounting policies for assets, and the analysis of potential "red flags" in financial reporting.
What is the main objective of the study?
The goal is to identify methods and motivations for earnings management by analyzing public annual reports, specifically looking for discretionary accounting choices.
Which scientific methods are employed?
The researchers utilized a qualitative content analysis of OMV's official annual reports, focusing on financial data, impairment disclosures, and changes in management assumptions.
What aspects are discussed in the main part?
The main part covers the company's structural background, the impact of market volatility on the energy industry, and a technical deep dive into impairments, deferred taxes, and pension provision valuations.
Which keywords best characterize this work?
Key terms include Earnings Management, OMV, Impairment, Financial Statements, and Corporate Governance.
How does the change of CEO relate to the reported earnings?
The authors suggest a "big bath" strategy in 2015, where the new CEO may have used large write-offs to clear the decks, thereby making future financial performance appear better by comparison.
What role do deferred taxes play in the findings?
Deferred taxes are identified as a crucial tool for earnings management, as impairments directly affect the tax position and, consequently, the final net income statement.
- Arbeit zitieren
- Daniel Schreiber (Autor:in), Jasmin Karner (Autor:in), Andreas Schlager (Autor:in), 2017, The balance sheet analysis of the OMV AG. The description, economic environment and accounting information of the company, München, GRIN Verlag, https://www.hausarbeiten.de/document/373554
