The Effect Of Accounting Regulations On Recognition And Disclosure Of Intellectual Property Rights (IPR) In Uzbekistan And China Within The Silk Road Economic Belt Initiative

Recently,China and Uzbekistan have agreed to strengthen alignment of their development strategies and comprehensively deepen cooperation in various fields.Uzbekistan is ready to seize the opportunity of the joint construction of the Silk Road Economic Belt(SREB)and the 21 st Century Maritime Silk Road to push for more concrete achievements in bilateral cooperation to benefit the two countries.Besides,Uzbekistan and China have signed the "Agreement on Cooperation of IPRs Protection"(further-Agreement).The cooperation between the Parties in the Intellectual Property(IP)field included coordination of issues related to the Intellectual Property Protection(IPP),exchange of legal information and experience in the application of IPP measures and in international cooperation,organization of exhibitions and seminars.This legislative move is aimed to improve IPP in both Uzbekistan and China.IPP is an important issue for these two countries as according to the research companies in such emerging markets engage in recognition and disclosure practices in order to compete for funds on equal terms with other companies originating from developed economies in international markets(Wang & Claiborne,2008;Purushothaman et al.,2000;Meek et al.,1995).Therefore,the focus of the study is on one particular type of recognition and disclosure that has become popular in recent years;the information about Intellectual Property rights(IPR)which refer as intangible assets(IA)in accounting context.IPR such as patents,trademarks,copyrights and results of R&D that generate cost savings for companies can be defined as IA in accounting.The relatively recent growth of the service sector and of information technology-related businesses,along with the dramatic increase in the number and size of international mergers and acquisitions,has made accounting for IPR very significant(Lev,2001;Saudagaran,2001).Moreover,Uzbekistan and China are emerging economies and companies listed on their the stock exchange use a mixed form of corporate governance that includes less formal and more relationshipbased governance mechanisms(Melkumov,2009),which derives primarily from their cultural tradition,e.g.reliance on external relationships,government,and banks(Black et al.,2000),as compared to a more formal and more market-determined mechanisms apparent in western system,e.g.reliance on stock markets,board supervision,and internal control.As a result,in transition economies,accounting system is weak,due to the lack of transparency,limited protection of property rights(Mickiewicz,2006),laws poorly enforced and distorted stock markets(Adachi,2008).Consequently,this also leads to IPR violation which numerous negative outcomes.Indeed,there are few comprehensive guidelines for corporations in either International Financial Reporting Standards(IFRS)or in domestic GAAPs on how to report IA in company financial statements.That is,while the importance and the necessity of such assets in creating and maintaining corporate value have been widely accepted,traditional financial reporting frameworks unfortunately do not capture many of these value drivers(Jenkins & Upton,2001;Upton,2001;Lev & Zarowin,1999)due to the "non-physical" nature of IPR and the subsequent uncertainties associated with their "future benefits." It may be na?ve to assert that total transparency regarding IA would automatically enhance the quality of corporate information being distributed to external stakeholders;however,given the increasing importance of IPR in driving corporate value,it can be argued that companies should nonetheless voluntarily communicate relevant and useful information on IA to 3rd parties.While the concept of IPR management and reporting practices in developed economies has been examined in the previous literature,the comparative study in the emerging economies between China and Uzbekistan has not,especially within "One Belt and One Road" initiative.This strategy initiated by the government of China is aimed to enhance cooperation and bilateral trade between China,Central Asia and other countries.Considering the intensifying trade in high value added goods and services it is important to understand the concept of IPR management and reporting practices in the context of globalization and integration as copyright infringement is detrimental to innovation in the long run.Therefore,this study examines the recognition and disclosure practices of Uzbek and PRC emerging market companies in respect of information about IPR.Specifically,we develop a questionnaire based on the unique environment of IPR according to the framework of Nkundabanyanga et al.(2013)to investigate both its effectiveness,which has not been assessed empirically,and the extent of IPR recognition and disclosure practices.The questionnaire was distributed among the chief accountants and CEOs of high tech companies across China and Uzbekistan.Data analysis was conducted using Statistical Package for Social Sciences(SPSS)version 23 and AMOS version 21.Exploratory factor analysis(EFA)was employed to test the unidimensionality of the constructs and thus select and asses the final items to be used for hypothesis testing.Multiple Linear Regression Moderation(MLRM)model(Baron & Kenney,1986)was used to find out the effectiveness of accounting principles of the proposed research model and investigated the moderating effect of regulation on relation between recognition and disclosure of IPR.Thus,it actively engages in disclosure practices to publicize mainly quantitative IPR information to their global stakeholders or attract FDIs.The results from empirical modeling showed that the correlation between IPR recognition and disclosure was statistically negative and significant which confirms our hypothesis only for Uzbekistan,while that effect was positive and significant for China,which means that current Chinese GAAPs closely converged with the IFRS and are mature enough not to have a significant information gap between IPR recognition and disclosure practices.For Uzbekistan it is the opposite: if initial identification of IP is low,then it is in the interest of the managers of companies to disclose information on their IP to solve the problem of distortion of their financial information due to the non-recognition of IPR investments as assets by current accounting standards.The effect of regulation on disclosure in Uzbekistan was negative and significant,while in China it was positively significant.In other words,in Uzbekistan the higher the level of regulations the less a high-tech company discloses information on its IP.In Chinese companies,results show that disclosure and regulation are positively correlated.It means that the respondents perceive that compliance with regulations is more likely to ensure the quality of financial reporting through disclosure.Furthermore,the results of regression analysis confirmed the hypothesis that new introductory regulation in the field of IP will have significant impact on effective disclosure of IPR.Findings reveal that impact of regulation effect was not equivalent in both countries: Chinese firms responded in opposing directions(in terms of recognition and disclosure)to the imposition of stricter accounting regulation while Uzbek firms responded otherwise.Thus,an important insight from this interesting comparative study of two market oriented emerging economies is that the IPR accounting can be different in similar market settings.In particular,while both Uzbekistan and China are similar in terms of market-related parameters,they differ significantly in terms of the development of external financing opportunities,enforcement of existing legal statutes,and institutional arrangements.These differences appear to generate diverse behavior and business practices of attracting/enhancing FDIs and there's the need for a new policy that can enable the development of intangibles disclosure culture in Uzbekistan.Practical implications of the paper are mainly for improving consistency in research,but they also support practice for consciousness and awareness.The insights provided by the comparison of the guidelines and frameworks are likely to be helpful for practitioners wanting to adopt or develop an IPR reporting model for their company,and for policy makers and standard setters-for rethinking of inclusion of IPR disclosure in annual reports as compulsory items.Also,this thesis provides a useful review for academics.