Why More Forward-Looking Accounting Standards Can Reduce Financial Reporting Quality

A premise of standard setters and of much empirical research is that improving the quality of accounting standards and their implementation increases information in capital markets. This paper challenges this premise and shows that there are situations in which ‘better’, that is, more forward-looking, accounting standards reduce the information content of financial reports. The reason is that a forward-looking accounting standard affects the smoothness of reported earnings, which can conflict with the manager's smoothing incentive and her willingness to incorporate private information in the financial report. Although the manager could eliminate the effect by earnings management, it is too costly to do so. As a consequence, the capital market's ability to infer the financial and nonfinancial information in reported earnings declines. This finding should increase the awareness that an ‘improvement’ in accounting standards, without considering incentives and other information residing in firms, can adversely affect the quality of financial reporting.     

内部控制、研发强度与管理短视——基于中国上市公司的经验证据

研发投入具有长期性和不确定性等特征,企业的研发行为会降低当期会计盈余。在研究内部控制质量对企业研发强度影响的基础上,深入分析内部控制作用于企业研发活动的两个路径——抑制管理机会主义风险和抑制研发项目运营风险,结果表明：企业内部控制质量与研发投入强度正相关,内部控制能够显著降低企业的管理机会主义风险和研发项目运营风险,最终有利于提高企业的研发强度,这不仅揭示了内部控制在研发投入方面发挥作用的内在机制,也为我国上市公司的内部控制及研发活动提供了新的经验证据。     

An economic analysis of the earnings of industrial accountants

This paper explores hypothesized determinants of accountants' earnings using a conventional Mincer earnings function. Findings indicate that the CPA credential, MBA degree, and years of work experience increase earnings. Also presented is a more detailed analysis of the earnings gap between accountants employed in traditional accounting positions and those in finance-related positions.     

Social Accounting Research as If The World Matters

Abstract

This essay is intended as a self-reflective, auto-critique of the ‘social accounting community’. The essay is directed at the academic community of accountants concerned with social accounting. This `community' is predominantly concerned with English language accounting journals and is preoccupied with the social and environmental practices of the larger private sector organisations. The essay is motivated by a concern over our responsibilities as academics in a world in crisis and a concern that social accounting is losing its energy and revolutionary zeal. This community's social accounting endeavours have taken place in almost complete ignorance of the activities and developments in non accounting communities and, in particular, developments in the public and third sectors. The essay reaches out to the public and third sector work and literature as an illustration of one of the ways in which ‘our’ social accounting can try to prevent itself from becoming moribund.     

Business Involvement in Accounting: A Case Study of International Financial Reporting Standards Adoption and the Work of Accountants

Abstract

Although Byrne and Pierce [(2007) Towards more comprehensive understanding of the roles of management accountants, European Accounting Review, 16(3), pp. 469–498] found that an increasing regulatory burden may decrease accountants' chances of getting involved in business, little is known about corporate reporting practice and whether, and if yes how, regulation impacts on accountants' work. In order to fill this gap, the paper provides a case study analysis of International Financial Reporting Standards (IFRS) adoption and its impact on and implications for an accountant's role, positions, practices and work in a continental European context. This study describes how IFRS expect information preparers to take more responsibility for reporting than domestic accounting standards. Thus, the present study contributes to the literature by arguing that it depends on the set of accounting standards how they impact on accountants' work. The study shows why and how especially IFRS' requirement of ‘business involvement’ in accounting revolutionises accountants' work and how it has implications on their roles, practices and positions in the case firm. Finally, the paper explains how learning and knowledge creation required by IFRS adoption was made possible through communities of practice and hence how it was possible to clarify the responsibilities of divisional and group accountants in the case firm. Thus, the present study enhances our understanding of reporting activity by describing actual practices of and mechanisms used in corporate reporting.     

Accounting,economics and management in France: the slow emergence of an 'accounting science'

The relationship (or what might be better described as the absence of a relationship) between accounting, economics and management is an important feature of a French tradition built on a society in which accountants have been regarded as the ‘poor relations’ of the business community. This pattern is presented in the second part of the title of this article as ‘the slow emergence of an accounting science’. French business traditions have influenced accounting mainly through the property rights established by the French Revolution. The French bourgeoisie's concern with inheritance gave rise to a form of accounting which emphasized the balance sheet and inventory valuation, rather than cash flow analysis. Throughout the 19th century accounting in France was taught as a technical subject, secondary to the ‘noble’ disciplines such as engineering, law and later, economics. In the mid-20th century, the state, via the ‘Conseil National de la Comptabilité’ (the National Accounting Council) laid down accounting principles under the ‘Plan Comptable’. The separation between financial accounting and cost accounting reflected that between entrepreneurs or owners on the one hand and engineers or administrators on the other. Unlike the Anglo-Saxon countries, France did not recognize accountancy as a profession in its own right until recently. Recent years have seen a radical transformation of French accounting policies and conventions under the combined influence of the emerging requirements of financial markets, the globalization of business and the growing independence of the accountancy profession.     

Strategic interventions of management accountants: everyday practice of British and German brewers

A popular stereotype has it that German firms are somehow ‘long-term strategically oriented’ and British firms focus on short-term financial gain. Analysing ethnographic material from British and German brewers, this paper explores how management accountants in the two countries conceive of their relationship with processes of strategic formulation and how they seek to mobilize strategic arguments in their day-to-day contacts with operational management. The focus of this study is not on the strategy debates which one might expect among senior management, but on routine interaction between management accountants and managers in which the mundane events of organizational life are made to happen in the name of loftier ‘strategic’ priorities. From observations of such interaction and management accountants' reflections on them, contrasting ways of integrating management accounting expertise with operational knowledge of the firm are suggested for the British and German brewers studied. Those contrasts are developed by drawing on the relationship between time and the possibility for strategic intervention more generally.     

客户重要性与会计信息可比性 ——来自中国证券市场的经验证据

审计师的执业特征对被审计单位的会计信息质量有一定的影响。以审计师客户重要性为经,以会计信息可比性为纬,运用2005—2014年我国A股上市公司数据实证分析审计师客户重要性与会计信息可比性之间的相关性。实证结果表明：会计师事务所对某一客户的经济依赖越强,该客户的会计信息可比性越差;同样地,签字注册会计师的客户重要性与会计信息可比性呈现显著负向关系;并且,会计师事务所和签字注册会计师的客户重要性在对会计信息可比性的作用过程中存在互补关系。     

The correlation of spouses' permanent and transitory earnings and family earnings inequality in Canada

I develop a very flexible error-component model of family earnings dynamics to examine recent Canadian trends in the variance of family earnings and its components using the ‘permanent-transitory’ analytical framework. In contrast to most studies of family earnings inequality, the main focus of this paper is on the trends in the correlation between spouses' permanent and transitory earnings. I find strong evidence of an increase in the correlation of spouses' permanent earnings before 1993 and no evidence of such an increase after 1993. However, the correlation of spouses' transitory earnings steadily increased throughout the 1990s and well into the 2000s.     

Predictor relevance and extramarital affairs

We revisit Fair's ( 1978 ) ‘theory of extramarital affairs’ using robust nonparametric methods developed for the analysis of categorical data. We find evidence suggesting that the number of years married is not a relevant predictor of the propensity to engage in extramarital affairs having controlled for other factors. This finding runs counter to the prevailing wisdom gleaned from misspecified parametric models. Copyright © 2004 John Wiley & Sons, Ltd.     

Testing the Efficacy of Replacing the Incurred Credit Loss Model with the Expected Credit Loss Model

Abstract

We use a controlled laboratory environment to provide evidence on the potential efficacy of the replacement of the Incurred Credit Loss (ICL) Model of International Accounting Standard (IAS 39) by the Expected Credit Loss (ECL) model of IFRS 9 to account for credit impairment losses. We focus on the simplified version of the ECL model using an uncertain production environment as the context. We induce incentives consistent with the existing rigid rule-based ICL model and the proposed forward-looking principle-based ECL model. Our primary finding is that the combined effects of eliminating the minimum ‘probable’ threshold condition together with allowing managers to incorporate forward-looking information increase both the amount and adequacy of periodic reserve decisions. In addition, we analyze the effects of increased flexibility under the new credit-loss model on earnings management using three different compensation schemes. We find that while the replacement of the ICL model with the ECL model facilitates higher reserves, the resulting increased earnings management varies across compensation schemes, is less than predicted, and does not offset the potential of the ECL model’s positive effects. The results provide ex ante evidence on the likely intended and unintended consequences of implementing the ECL model.     

Accounting Insights from the Healthcare Sector

There has been a major debate on the merits of accrual accounting in the public sector in general. This paper is an implementation study of accrual accounting in local government. It examines this issue from an implementation perspective. The implementation perspective adopted draws on Matland's ambiguity–conflict model (1995). This research is informed by a combined methods approach: the analysis of public documents and debates; a survey of local authority capital accountants and case study information on management's perceptions of this accounting information. This research reveals a complex outcome of reformers' initiatives which has resulted in these accounting changes being retained within the accounting domain and having limited impact on wider potential users of this information.     

Thank you to Reviewers 2014

Enterprise resource planning (ERP) systems, such as SAP, have become widely used in recent years, especially in large companies. Although a considerable amount has been written about them in the professional accounting and computing literature, somewhat surprisingly comparatively little attention has been given to them in accounting research journals. However, the field studies which are beginning to appear suggest that ERP systems are having only a relatively moderate impact on the character of management accounting and the work of management accountants. However, it is argued in this paper that as such studies adopt a relatively 'static' approach, they do not explore the processes of management accounting change or study how opportunities are opened up by the implementation of ERP systems. The paper reports a longitudinal case study of the implementation of SAP in the European division of a large US multinational, in which management accounting change is viewed as an evolutionary process. In this case, although there were no fundamental changes in the nature of the management accounting information used following the implementation of SAP, there were changes in the role of management accountants - in particular: (i) the elimination of routine jobs; (ii) line managers with accounting knowledge; (iii) more forward-looking information; and (iv) a wider role for the management accountants. However, it is not claimed that SAP was the driver of these changes; rather it is argued that the characteristics of SAP (specifically, its integration, standardization, routinization and centralization) opened up certain opportunities and facilitated changes which were already taking place within the company. The paper ends with a call for further longitudinal case studies of the implementation of ERP systems to study how these characteristics facilitate and reinforce processes of management accounting change in other companies.     

Indigenous Cosmogony and Andean Architecture in El Alto,Bolivia

This essay applies Bourdieu's analysis of the formation of the ‘scholastic habitus’ in medieval times—elaborated in his 1967 afterword to his French translation of Erwin Panofsky's Gothic Architecture and Scholasticism—to the correspondence between indigenous mental categories and architectural innovation in the Bolivian ‘rebel city’ of El Alto. The principle of homology between mental categories and building layout (rooted in a shared habitus) can be used to interpret one of the most spectacular features of Bolivia's ‘emerging architectures’, known as chalets. The term chalet designates a hybrid structure consisting of a colorful and ornate penthouse and multi‐story dwelling erected on building rooftops. The chalets are architectural forms embedded within an economy of symbolic goods characterized by a ‘dual truth’: they are at once material and symbolic; they perform economic functions while seeking public visibility. The conspicuous lifestyle advertised by the construction of chalets can be understood by reference to the rising social power of the indigenous elites (cholos) dominating the thriving ‘ethnic economy’ of the city. The fraternities of El Alto emerge as the structural equivalent of the scholastic institution that Bourdieu associated with Gothic architecture: they are the site of production of a specific habitus, shared by native urban categories defined by similar residential locations, economic activities and forms of collective organization.     

Insights to be gained from the study of ancient accounting history: some reflections on the new edition of Finley's The Ancient Economy

Accounting historians have attempted to relate their knowledge of the variety of accounting practices at various points of time, and in various places, to wider questions of the role of accounting in reflecting and shaping not only business and management practice, but also economic and social organization more generally. Finley's classic The Ancient Economy, which analysed the embeddedness of ancient economic activity in the social structure, and in the status concerns of the free citizens, as constituting a brake on the development of profit-focused markets and correspondingly on technology and trade, saw the state of ancient accounting as itself making impossible sophisticated profit-oriented calculation and rational decision-making. In his monumental The Class Struggle in the Ancient Greek World, de Ste. Croix rejected Finley's analysis in terms of Weberian 'status' in favour of an explicitly Marxist analysis based on ‘class’. But he took up essentially the same argument about the economic impact of ancient accounting technique. Their argument in turn raises further questions about the general relationship between accounting practice and economic and social organization in the ancient world. This paper comments on Finley and briefly surveys the contribution to answering some of the ‘big’ questions concerning both accounting and history that has been made by recent research into ancient accounting history (most of which has been published outside the accounting and accounting history journals).     

Toggling with Taylor: A Different Approach to Reading a Management Text*

ABSTRACT This paper identifies influential, but previously unrecognized, subtexts in the writings of Frederick Winslow Taylor. Working with analytical methods developed from reader‐response theories of literary criticism, we look at the words of the text as we share the standard meaning‐making of the management community, as well as through the words of the text searching out the worldview that emerges from our particular reading of the subtext. We have described our approach to reading as ‘toggling’: that is, switching between reading text ‘rhetorically’ and reading it ‘philosophically’. We conclude that reader identification with textual voices may appear in philosophical as well as rhetorical reading outcomes – that Taylor's text may inveigle readers into accepting a moral worldview wrapped up in a seemingly rational argument – and that ‘toggling’ would empower management theory readers.     

The Stewardship Role of Analyst Forecasts,and Discretionary Versus Non-discretionary Accruals

We examine the interaction between discretionary and non-discretionary accruals in a stewardship setting. Contracting includes multiple rounds of renegotiation based on contractible accounting information and non-contractible but more timely non-accounting information. We show that accounting regulation aimed at increasing earnings quality from a valuation perspective (earnings persistence) may have a significant impact on how firms rationally respond in terms of allowing accrual discretion in order to alleviate the impact on the stewardship role of earnings. Increasing the precision of more timely non-accounting information (analyst earnings forecasts) increases the ex ante value of the firm and reduces costly earnings management. There is an optimal level of reversible non-discretionary accrual noise introduced through revenue recognition policies. Tight rules-based accounting regulation, as opposed to leaving firms more choice over non-discretionary accrual policies, may lead firms to rationally respond by inducing costly earnings management. More generally, regulating both earnings persistence and the tightness of admissible auditing policies may not result in less equilibrium earnings management.     

Publication trends in the Journal of International Financial Management and Accounting: A retrospective review

This study uses bibliometric analysis to assess Journal of International Financial Management & Accounting (JIFMA's) evolution between 1989 and 2021. In this retrospective review, we investigate the journal's performance, authorship trends, and intellectual structure. The journal's international focus is primarily on cross-country studies and the effects of country-level factors on various accounting and finance outcomes. The collaborative network of JIFMA's authors has also grown substantially consistent with rise in research collaboration in general across the world. We identify nine major themes making up JIFMA's knowledge structure: (1) value relevance of accounting information relating to the adoption of International Financial Reporting Standards, (2) voluntary corporate disclosure, (3) corporate use of financial derivatives, (4) corporate governance, (5) equity valuation, (6) stock return seasonalities, foreign equity ownership, and cost of capital, (7) earnings announcements and pecking order behavior, (8) triple-bottom-line disclosures, and (9) managerial ownership and earnings management. Our findings will likely benefit JIFMA's editorial board and other journal stakeholders including future researchers.     

True and fair in the Czech Republic: a note on local perceptions

With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.With the collapse of communism in Czechoslovakia’, and the subsequent desire of Czechoslovakia to join the European Union, in common with other countries in Central Europe, Czechoslovakia utilized the Fourth Directive as a ‘toolkit’ in designing part of its new accounting legislation. In incorporating the Fourth Directive, it has also included the requirement for financial statements to show a ‘true and fair’ view. Given the confusion over the exact meaning of ‘true and fair’ it is interesting to study how ‘true and fair’ has been introduced into the Czech Republic, and what it seems to signify for those who implemented it and for those who are preparing and using financial statements. Our initial findings indicate that ‘true and fair’ varies in its significance for the groups of individuals involved in preparing and using financial statements and that it may have particular significance for some groups of accountants who wish to secure specific advantage within the Czech economy.