Trends in research on international accounting harmonization

International harmonization of financial accounting standards has been the goal of many professional and academic accountants during the last 40 years. As of January 1, 2005, international accounting harmonization entered a new and perhaps decisive phase. From that date, all companies domiciled in the European Union with shares listed on securities exchanges are required to prepare their consolidated accounts in accordance with International Financial Reporting Standards (IFRS). This landmark event presents an opportunity for accounting researchers to assess the status of research on international accounting harmonization. In this paper, we review articles published in major English language accounting journals during the period from 1965 through 2004 in order to trace thematic and methodological trends in this line of research and to assess where the research may evolve from here.     

Financial statement effects of adopting international accounting standards: the case of Germany

Using a sample of German firms, we investigate the financial statement effects of adopting International Accounting Standards (IAS) during 1998 through 2002. We find that total assets and book value of equity, as well as variability of book value and income, are significantly higher under IAS than under German GAAP (HGB). In addition, book value and income are no more value relevant under IAS than under HGB, and HGB (IAS) income is highly persistent (transitory). Finally, we find weak evidence that IAS income exhibits greater conditional conservatism than HGB income. Our results are consistent with the fair-value (income smoothing) orientation of IAS (HGB).

Lessons from misclassification in international accounting

Classification is a central activity in many sciences, such as chemistry. In social sciences, we cannot achieve the high precision and usefulness of the Mendeleev table of elements, but we can try to avoid poor classification. This paper sets out a method for identifying mis-classification in any field, drawing on the qualitative characteristics for useful information set out in the conceptual framework for financial reporting, particularly faithful representation and relevance. The method is applied first to various scientific fields and then to many classifications in international accounting and to other classifications used by accounting researchers. The causes of poor classification are examined; for example, some classifications are untrue, some are unfair and some are unlikely to be relevant for any important purpose. The implications for researchers are proposed.     

Accounting Community of Practice pedagogy: a course management invention for developing personal competencies in accounting education

This paper reports the findings of an exploratory qualitative study using the implementation of Wenger’s [(1998). Communities of practice: Learning, meaning, and identity. Cambridge, MA: Cambridge University Press; Wenger, E. (2000). Communities of practice and social learning systems. Organization, 7(2), 225–246] Theory of Communities of Practice to develop an Accounting Community of Practice (ACOP) pedagogy. Students from eight accounting courses who participated, in the120 narratives and 280 surveys used as data, practice and develop critical real-world professional accounting competencies by linking three structural foundations: (1) accountability to joint enterprise, (2) mutual engagement, and (3) shared repertoire of communal resources. Competencies promoted by the AICPA [(1999). Core competency framework of entry into the accounting profession. Retrieved from http://www.aicpa.org/edu/corecomp.htm; AICPA. (2006). Core competency framework of entry into the accounting profession. Retrieved from http://www.aicpa.org/edu/corecomp.htm); International Federation of Accountants (IFAC). (2003). International education standard No. 3, professional skills. Retrieved from www.ifac.org; IFAC. (2015). Meeting future expectations of professional competence: A consultation on the IAESB’S future strategies and priorities. Retrieved from www.iaesb.org; ICAEW. (1996). Added value professionals: Chartered accountants in England and Wales. London: Author], and other professional bodies include problem-solving, leadership, project management, and interaction. ACOP strategy is effective in maintaining dynamic learning environments, increasing students’ awareness of trust, open communication, and creative thinking. Meaning and knowledge are owned in ACOP where the focus of the class shifts from instructor to students. This study adds to limited empirical research in communal forms of learning in accounting.     

How is the IFRS for SME accepted in the European context? An analysis of the homogeneity among European countries,users and preparers in the European commission questionnaire

In this paper we analyze the answers to the “Questionnaire on the public consultation of the IFRS for SMEs”, promoted by the European Commission. Our aim is to evaluate the homogeneity among respondents, according to the different perspectives of analysis between both users, preparers and also in European Countries. Results show a substantial diversity among respondents. In particular, preparers demonstrate a strong opposition to the IFRS for SMEs, while users are more favorable. Concerning Country classification, German-speaking Countries and Latin Countries show much less appreciation for that standard with respect to Anglo − Nordic Countries. Relevant consequences for European public policy issues and for accounting studies on differential reporting arise from this result, concerning respectively the role of European accounting system and the acceptance of “user primacy” principle.     

Effective controls for research in international accounting

Numerous studies have examined the value relevance and other characteristics of international and country-specific accounting standards. This paper evaluates the experimental designs of selected studies with respect to the controls essential for effective research. Both cross-country and within-country research designs share a common need for controls. Perhaps the most distinctive element of effective design in these studies is the control for institutional, cultural, and structural differences between countries. Previous research shows that the key outputs of various country-specific accounting standards are functions of a variety of factors including accounting-related issues, legal origin, shareholder protection, the information environment, financial markets, and enforcement of these standards. In addition, effective studies of country-specific or international accounting principles require control for firm and industry-specific effects and for self-selection bias, as in conventional within-country examinations. When controls are not sufficient, observed differences in the outputs of alternative accounting standards may result from differences between countries or firms rather than from different accounting principles. We review a sample of recent research with attention to these control considerations.     

The implications of unverifiable fair-value accounting: Evidence from the political economy of goodwill accounting

I study the evolution of SFAS 142, which uses unverifiable fair-value estimates to account for acquired goodwill. I find evidence consistent with the FASB issuing SFAS 142 in response to political pressure over its proposal to abolish pooling accounting. The result is interesting given this proposal was due in part to SEC concerns over pooling misuse. I also find evidence consistent with lobbying support for SFAS 142 increasing in firms’ discretion under the standard. Agency theory predicts such unverifiable discretion can be used opportunistically.     

Accounting standards and value relevance of financial statements: An international analysis

Using 17,743 firm-year observations of industrial companies in 21 countries from 1991 to 1997, this paper finds that the use of accrual accounting (versus cash accounting) negatively affects the value relevance of financial statements in countries with weak shareholder protection. This negative effect, however, does not exist in countries with strong shareholder protection. These findings are consistent with the belief that shareholder protection improves the effectiveness of accrual accounting, and suggest the importance of considering shareholder protection when formulating accounting policies related to accruals.     

Valuation-based accounting research: Implications for financial reporting and opportunities for future research

This paper discusses the relation between financial reporting research and practice, particularly standard setters. Many studies addressing financial reporting issues use a valuation approach. The paper describes alternative approaches to valuation research and summarises the findings relating to four major current issues: fair value accounting for financial, tangible, and intangible assets, cash flows versus accruals, recognition versus disclosure, and international harmonisation of accounting standards. The summaries include identifying what standard setters and others would like to learn from research, what we have learned, and what is left to learn. The paper concludes with observations about future financial reporting academic research.     

Goal‐efficacy framework: an examination of domestic and international accounting students' academic performance

This study considers the psychological influences on academic performance using a goal‐efficacy framework. Data were gathered using a survey questionnaire (N = 375). The paper is motivated by a repeated high failure rate for a second‐year core accounting unit and anecdotal evidence that international students perform poorly in comparison with domestic students. The results demonstrate the role of self‐regulated learning strategy as a mediating variable for goal orientation and academic performance. While the analyses suggest no significant differences between domestic and international students with respect to the main psychological variables and academic performance, further analyses reveal that four specific factors of the main psychological variables are significantly different between domestic and international students.     

Firm characteristics and selection of international accounting software

We report the results of a survey of international U.S. companies focused on the selection of international accounting software. We investigate the relationships among firm characteristics (size and degree of internationalization), international features of accounting software (multicurrency, multireporting, and multilingual), and general selection criteria (support and security, hardware and operating platforms, and flexibility and cost). We find that firms’ reported preferences for international features differ depending on size and degree of internationalization. However, the relationship between firm characteristics and general selection criteria is not significant. The implication from our results is that firm characteristics should be an important consideration in the selection and design of international accounting software.     

Student performance in tertiary-level accounting: an international student focus

The present paper provides empirical evidence regarding the academic performance of university students studying accounting. In particular, the effect of student origin is investigated by comparing the accounting performance of resident and international students. The present study controls for a number of other key variables, including ability, anxiety, work experience in accounting, accounting study prior to university and enrolment status. The question of whether international student performance improves over time through an acculturation effect is also investigated. Bivariate analyses revealed higher anxiety and lower general ability for international vis‐à‐vis resident students yet no significant difference in accounting performance between the two groups. After controlling for key variables, an association was observed between student origin and accounting performance with superior performance reported for the international student cohort. Statistically significant relationships were also observed between accounting performance and ability, anxiety, employment experience in accounting, enrolment status and accounting study prior to university. An acculturation effect was not clearly evidenced.     

Agenda formation and accounting standards setting: lessons from the standards setters

There are many studies on lobbying of accounting standards, but the technical agenda of regulators is taken as ‘given’ and why a particular topic was admitted to the agenda is not investigated. Agenda formation is important as control of the agenda determines which topics get regulated and the form of the regulatory response. A few studies have explored agenda formation across regulatory institutions but are largely silent on the role of individual decision makers and technical staff. However, the standards setters have sought to explain their agenda processes. This paper reviews statements by the members of accounting standards setting agencies about their experiences of agenda formation. It identifies insights gained from standard setters and makes some suggestions for future research.     

Value relevance of international accounting standards harmonization: Evidence from A- and B-share markets in China

Applying both the price-levels model and the lagged-price-deflated returns model, we investigated the incremental value relevance of the reconciliation of accounts from the Chinese Accounting Standards (CAS) to the International Accounting Standards (IAS) by those Chinese listed companies that have simultaneously issued A-shares and B-shares. In addition, we examined the usefulness of accounting numbers (earnings and book values) and their value relevance to the A- and B-share markets in China. The study finds that earnings and book values of owners’ equity determined under CAS are more relevant accounting information for the purpose of determining the prices of A- and B-shares. The CAS-based earnings changes were reflected in stock returns in the B-share market, while the CAS-based earnings were closely associated with stock returns in the A-share market. However, the study found that the reconciliation of earnings and book values from CAS to IAS basis is partially value-relevant, mainly to stock prices in the B-share market, while the earnings reconciliation is generally not value-added to stock returns in either the A- or the B-share market. The study results suggest that accounting numbers based on domestic accounting standards, in contrast to IAS, are more value-relevant in the Chinese stock market at present.     

Regulatory flexibility and management opportunism in the choice of alternative accounting standards: an illustration based on large French groups

Due to the flexibility of domestic accounting regulations, French groups are entitled to refer to international or American standards for their consolidation. The objective of this research paper is to focus on the choices made by the 100 largest French companies during the last 16 years (1985-2000). In practice, apart from the French rules, three “alternative” sets of standards are used: the International Accounting Standards (IAS), “international principles,” and the U.S. GAAP. The percentage of companies referring to alternative (i.e., non-French) standards rose in the first part of the period, then fell. Additionally, while the number of companies choosing U.S. GAAP increased over the period as a whole, the number preferring IAS or “international principles” has been in sharp decline since 1994-1995. Our results show that in this voluntary move towards international accounting harmonization, the choices made by French companies have clearly varied according to developments in French accounting regulations and the changing power balance between the International Accounting Standards Committee (IASC) and the SEC-FASB. This indicates a certain degree of opportunism by the management, who clearly keeps one eye constantly on the cost-benefit trade-off.     

New development: The conceptual underpinnings of international public sector accounting

The conceptual underpinnings of accounting standards are potentially very important for the future of public sector accounting internationally. The authors explain why and comment on the implications for public sector accounting.     

The influence of the nature of government accounting and reporting in decision-making: evidence from Switzerland

A key objective of government accounting and reporting has been to achieve accountability and its use in that respect has been well documented, however its use for decision-making has had less coverage. This article addresses the latter issue, providing evidence from Switzerland that the accounting basis used (accrual versus cash) influences decision-making. This is the result of the effect that the different approaches have on the nature of the information used for decision-making. Switzerland was among the first western democracies to adopt accrual accounting at both state (canton) and local levels of government in the 1980s. The Swiss federal government followed in 2007. The main examples of the use of accrual information in decision-making are: the focus on self-financing of investments in order to control borrowing, as well as the fiscal policy targets of debt reduction and maintenance of capital. All three require accrual basis information. Therefore accrual basis information is key in fiscal decision-making in Switzerland.     

Influences on the supply of accounting graduates in Australia: a focus on international students

This paper examines the influences on the potential supply of accounting graduates in Australia with reference to the personal and social influences on the decision to major in accounting using the Theory of Reasoned Action and focusing on differences between local and international students. Responses from 437 accounting majors’ found that personal attitudes linked to ‘intrinsic interest’ and ‘extrinsic interest’ was influential in choice of major. ‘Reference groups’ were an important social influence for international students. The findings have implications for government policy and the accounting profession in terms of attracting students and particularly international students, who are sufficiently interested in accounting as a career choice to address the skill shortage in Australia.     

Lobbying on accounting standard setting in the parliamentary environment of Germany

This paper employs an expertise framework to analyze the case of lobbying on the modernization of German accounting regulation between 2007 and 2009. The parliamentary context of accounting standard setting in Germany provides a unique opportunity for an examination of lobbyists’ and parliamentarians’ use of rhetoric in the form of arguments and myths in the presence of an expertise gap between both parties. Lobbyists successfully follow rhetoric strategies of providing knowledge and demonstrating expertise to parliamentarians in the form of using a mixed approach of conceptual and self-referential arguments when expressing a neutral opinion. Apart from their argumentative rhetoric, lobbyists also create myths that transfer knowledge in a more subtle way by employing signifiers that are disentangled from the underlying message to be communicated. Parliamentarians respond by using self-referential arguments in cases where they support the regulatory proposals and enrich their arguments by continuing and amplifying the myths created by lobbyists. Parliamentarians’ adoption of these strategies demonstrates the effectiveness of the transfer of knowledge and provides evidence of the strategic exploitation of the expertise gap by lobbyists.     

Gender differences in the first course in accounting: An achievement goal approach

We examine whether gendered patterns can be observed in first-year students' achievement goals in an introductory accounting course; a question largely overlooked by prior literature. This investigation is motivated by perceptions of accounting as a masculine field involving gender role stereotypes and business schools as competitive and performance-oriented environments. Our findings suggest that male students tend to adopt performance-approach goal, implying that they are more competitive than female students, and that their performance is thus driven by a desire to outperform others. Our findings further suggest that male students' expectations of learning accounting are higher than those of female students. The expectations explain the gender differences in the performance-approach goal. Finally, we find that this performance-approach goal mediates gender differences in course performance depending on the mode of assessment; male students received higher grades for exams but not for teamwork. Overall, our study highlights the importance of considering contextual aspects related to competitiveness, masculinity, and the mode of assessment on an accounting course when addressing students’ achievement goals and expectations of learning accounting. We thus contribute to the understanding of how learning environment, accounting pedagogy, and the broader field of professional accounting intersects with individual student attributes, creating differential learning outcomes.