| Summary: | 碩士 === 國立成功大學 === 會計學系碩博士班 === 95 === In Taiwan, the accounting procedures concerning employee bonus have been controversial for a long time. Because of the current laws, employee bonus is treated as “profit distribution” in Taiwan, which is different from the U.S. GAAPs. Since January 30, 2003, due to the emphasis on international accounting standards and information transparency, public firms have been required by Taiwan’s Securities and Future Bureau to disclose pro forma net income for expensed employee bonus in footnotes of the financial statements, and the recognition of employee bonus as expense will be enforced starting from January 1, 2008.
Although the disclosure of pro forma net income for expensed employee bonus can compensate the deficiency of financial statements, investors still doubt on information transparency. Only when employee bonus is recognized as expenses in the main body of income statement based on the U.S. GAAP, financial statements can fully reflect the net income in international sense. In addition to the reporting requirements of Taiwan authority, firms issued ADRs in the U.S. are required to prepare another set of financial statements (Form 20-F) in accordance with U.S. GAAP. Thus, investors can get two sets of financial information about the same corporation. This unique background provides us an intriguing setting for exploring the information content of employee bonus expenses in different reporting regimes. Because of different valuations in the U.S. GAAP and the R.O.C. GAAP, this study further investigates which set of accounting statements provide more useful information to investors in their investment decision-making.
The empirical results of this study show that only part of employee bonus expenses in disclosure regime is reflected in share price and part of employee bonus expenses measured with par value is also reflected in share price. These findings indicate that investors can’t fully realize the dilution effect of employee bonus expenses. It also indicates that Form 20-F can’t provide incremental information content to investors. Based on these findings, it may imply that Form 20-F lacks timeliness and understandability. Investors still judge the effect of employee bonus expenses only from financial statements according to the R.O.C. GAAPs.
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