Financial reporting for sustainable development: Critical insights into IFRS implementation in the European Union

By adopting a political economy perspective to accounting, this paper provides an overall post-implementation assessment of International Financial Reporting Standards (IFRS) adoption relative to the European Union’s (EU’s) fundamental goal of sustainable development. The paper questions the consistency of the International Accounting Standards Board’s business view with the EU’s and provides some critical insights into the potential long-run effects of IFRS on the European economy and society. Therefore, it raises several doubts about unquestioned accounting standardization at a global level and makes some suggestions for future policymaking and research.     

The determinants of reserves disclosure in the extractive industries: evidence from Australian firms

This paper examines the determinants of reserves disclosure (RD) in the Australian extractive industries. Our regression results indicate that RD are positively associated with variables relating to corporate governance, foreign listing, existence of reserves in foreign jurisdictions, pledging of reserves in debt covenants, leverage and external (Big 4) auditor, after controlling for firm size, subindustry, shareholder concentration and development/production stage. Additional regression testing shows that the existence of reserves in foreign jurisdictions is the most important determinant of RD in Australia. This paper contributes to a better understanding of the extent and rationale behind the RD practices of Australian resource firms.     

Mandatory Environmental Disclosures by Companies Complying with IASs/IFRSs: The Cases of France,Germany, and the UK

This study investigates whether the adoption of a single set of accounting standards, such as IASs/IFRSs, guarantees the harmonization of accounting practices within a country and across countries, or whether differences in reporting practices persist because of dissimilarities in reporting habits and institutional settings. To this end, we investigate whether the level of environmental disclosure under IFRSs is related to the size of the reporting firm, and the strength of legal and regulatory constraints on environmental disclosures in the country where the firm is domiciled. Results indicate (1) that environmental disclosures imposed by IFRSs increase with firm size, and (2) that firms domiciled in countries with constraining environmental disclosure regulations (i.e., France and the UK) report more on environmental issues than firms domiciled in countries with weakly constraining regulations (i.e., Germany). This suggests a strong impact of national regulations on IFRS reporting. Taken as a whole, our results support the view that IFRSs are not applied consistently across firms and across countries, notably because of persistence of reporting traditions and discrepancies in national legal requirements.     

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).

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.     

Accounting-based regulation in emerging markets: The case of China's seasoned-equity offerings

In China, listed companies are required to achieve a minimum return on equity (ROE) before they can apply for permission to issue additional shares through seasoned-equity offerings (SEO). We document two benefits of this accounting-based regulation in China. First, this regulation limits the increase in the supply of shares and the dilution of existing share prices. The Chinese stock market reacted positively to the announcement of this accounting-based regulation. Moreover, investors' reactions to SEO, announcements are less negative since the accounting-based regulation was introduced than before the regulation was enacted. The second benefit is that the regulation reduces adverse selection in SEO, as shown by the finding that prior to this regulation, firms below the ROE threshold underperformed the market after their SEO, much like what has been observed in other markets; while those above the threshold outperformed the market. Thus, although positive accounting theory predicts that regulations based on accounting numbers create incentives for managers to manipulate their accounting numbers, accounting-based regulations in China seem to serve some useful purposes.     

The adoption of International Financial Reporting Standards in a non-colonized developing country: The case of Nepal

The purpose of this paper is to provide a systematic and rigorous analysis of the accounting environment in Nepal. Based on the accounting ecology framework developed by Gernon and Wallace (1995) and interviewing selected key stakeholders, it critically examines issues related to the adoption of International Financial Reporting Standards (IFRS) in Nepal. It contributes to the literature by examining issues associated with the adoption of IFRS in a non-colonized developing country. This study finds that the decision to adopt IFRS in Nepal is not driven by the needs of local organizations and is rather imposed by donor organizations such as the Asian Development Bank, International Monetary Fund and World Bank. The findings of this study provide evidence that the adoption of IFRS is likely to be problematic due to the country's contextual environment. Specifically, there is a severe lack of qualified accountants in Nepal and the accounting profession is not ready to adopt IFRS. The study also finds that social problems such as widespread corruption and fraud are likely to cause problems for the adoption of IFRS.     

The Disciplinary Role of Financial Statements: Evidence from Mergers and Acquisitions of Privately Held Targets

This study examines whether requiring the disclosure of audited financial statements disciplines managers’ mergers and acquisitions (M&As) decisions. When an M&A transaction meets certain disclosure thresholds, the Securities and Exchange Commission (SEC) requires the public acquirer to disclose the target's audited financial statements after the merger is completed. Using hand‐collected data, I find that the disclosure of private targets’ financial statements is associated with better acquisition decisions. Furthermore, I find that this disciplining effect of disclosure is more pronounced when monitoring by outside capital providers is more difficult and costly, and when other disciplining mechanisms are weaker. Finally, these findings are robust to several alternative explanations, such as monitoring from blockholders and voluntary disclosures. In sum, the evidence suggests that the ex post mandatory disclosure of private targets’ accounting information disciplines managers’ acquisition decisions and improves acquisition efficiency.     

20 years of studies on the balanced scorecard: Trends,accomplishments, gaps and opportunities for future research

Robert Kaplan and David Norton introduced the Balanced Scorecard in their 1992 Harvard Business Review article. 2012 marks 20 years since that article. This anniversary has motivated me to review the state of research on the balanced scorecard, to highlight gaps in that research and to outline some ideas for further research. To this end, I reviewed 114 articles published in 25 accounting journals and 67 articles in business and management journals in the period 1992–2011. The findings of this literature review are presented in three parts. First, the reviewed articles are categorised by topics, research settings, theories, research method, and primary data analysis techniques. Second, the contributions of research to the field and the lessons learned from these studies are discussed. Third, knowledge gaps in existing balanced scorecard research are identified, leading to consideration of several ideas for future research. The last section offers my final remarks.     

Corporate Social Responsibility,Institutional Environments,and Tax Avoidance: Evidence from a Subnational Comparison in China

We examine the association between mandatory corporate social responsibility (CSR) disclosure and economic contribution (tax payments) in China, where we expect this association to be affected by a region's institutional attributes. Exploiting a dataset that shows cross-regional variations in institutions, we find that in regions with lower institutional quality, firms claiming to be socially responsible actually avoid taxes, whereas CSR disclosure in other regions is more aligned with the social responsibility aspect of tax compliance. Our study contributes to the literature by demonstrating that in the absence of proper institutions, CSR disclosure is likely to remain a form of window dressing.     

Pressure and Politics in Financial Accounting Regulation: The Case of the Financial Conglomerates in the Netherlands

This article examines the political process of promulgating two controversial laws which pertain to the reporting of Dutch financial conglomerates. Central to the study is the exploration of the lobbying efforts observed during the process, and the interaction between the government, the supervisors of banks and insurance companies, the industry and its associations, and the users and auditors of annual reports of financial conglomerates. Previous studies in accounting-rule development have often ignored influences that do not fall within the formal regulatory procedures. By adopting an inductive research approach, this study explores in some detail the behaviour of participants, including their use of informal lobbying methods. Pluralist theory is used to explain the nature of the political process and the behaviour of interested parties. The findings indicate that the Dutch political process in accounting matters is indeed pluralistic. Although auditors and producers of accounts seem to have greater possibilities to participate, the users of corporate reports are able to voice their opinion effectively. Overall, the users' preferences were acknowledged in the final rules governing the reporting by financial conglomerates.     

Accounting policies in the public sector: Characteristics and consequences of accounting for capital assets

We study the evolution of American state and local governments’ capital asset accounting policies from the initial adoption of Governmental Accounting Standards Board Statement No. 34 through the fiscal year ending in 2016. We document substantial cross-sectional and time-series variation in capital asset accounting policies, which potentially diminishes the comparability of capital asset accounting information across governments and over time. We also explore the economic implications of those policies in terms of capital investment decisions and capital asset condition ratios, as reported in governments’ annual financial reports. Our findings, which are relevant to the Governmental Accounting Standards Board and its constituents, extend prior research examining the adoption and application of generally accepted accounting principles in the public sector.     

Accounting Quality and Loan Pricing: The Effect of Cross-country Differences in Legal Enforcement

This study examines whether the strength of legal enforcement at the country level plays a role in the value-relevance of accounting quality for loan pricing determination, using an international sample of firms reporting under IFRS. The underlying hypothesis is that stronger vs. weaker enforcement should affect the informativeness of financial statements, due to their increased credibility, and thus results in a stronger influence of accounting quality on loan pricing, in case this information is considered more reliable by potential lenders. Evidence indicates that accounting quality is consequential for the determination of loan spread only in combination with the level of legal enforcement, and this only holds for the countries with stronger legal enforcement. This evidence indicates that financial statement quality information is value-relevant and has a significant impact on the determination of loan pricing only if this information is considered to be credible enough by loan providers in a country, and this is the case when legal enforcement is stronger.     

The relative information content of operating and financing cash flow in the proposed cash flow statement

This study compares the relative information content of the new specifications of operating and financing cash flow as proposed jointly by the IASB and the FASB with the specifications in SFAS No. 95. A unique feature of the study is the use of the Siegel and Biddle (1994) test of relative information content. The results indicate that the proposed operating cash flow measure has less relative information content than the current measure, and the results for financing cash flow are consistent with equity investors finding no significant difference between the current and proposed measures.     

The Development of Accounting Regulation in Iraq and the IFRS Adoption Decision: An Institutional Perspective

This paper reviews the historical development of accounting regulation in Iraq and analyzes, from an institutional perspective, both the decision to adopt International Financial Reporting Standards (IFRS), and the factors likely to impact the expansion of IFRS application beyond listed companies. We find that all three forms of institutional isomorphism (coercive, mimetic, and normative) explain the initial decision to adopt IFRS. The most significant force in the decision to adopt IFRS is coercive pressure, from western forces following the fall of the Ba'ath regime, and from international aid organizations. Further, we find that the accounting system in Iraq is likely to be further advanced due to mimetic and normative pressures from Iraq's trade partners, multinational corporations, and the accounting profession. The paper concludes with a discussion of lessons that can assist other developing nations, and in particular countries in the Middle East in their decision to adopt IFRS. It is important that IFRS adoption is accompanied by reform to governance and investor protection regimes, together with investment in education and training to support ongoing implementation. Otherwise, IFRS adoption may be perceived as merely symbolic.     

Enhancing the Accessibility of Accounting and Business Archives: The Role of Technology in Informing Research in Accounting and Business

The application of advanced digitization technologies to accounting and business archives has created new opportunities for accounting and business historians. The joint American Accounting Association and European Accounting Association Task Force (2006–2010) that examined digitization confirmed this. This paper explores these opportunities, along with some attendant challenges and cautions, with reference to the digitization of two significant archives located in Australia. The first is the archive of CPA Australia, a professional accounting association that has its beginnings in 1886 and which today has over 132,000 members. The second is the archive accumulated by the pre‐eminent accounting scholar Raymond Chambers during his long and extraordinarily productive tenure at the University of Sydney. Studies of surviving business records, biography and institutional history provide examples of scholarship that is enabled by digitization technology and which has the capacity to inform contemporary issues and debates.     

Disclosure and cost of equity capital in emerging markets: The Brazilian case

In this paper, we conjecture that the weak association between disclosure and cost of equity capital found in the literature (Botosan, 1997) can be caused by the high-level corporate disclosure environment found in the United States. We hypothesize that in low-level corporate disclosure environments the variability in disclosure practices across firms will be larger than in the United States, and, consequently, the marginal effect of voluntary disclosure policies will be higher. Using a newly developed Brazilian Corporate Disclosure Index (BCDI), our results confirm this hypothesis. Disclosure is strongly associated with ex ante cost of equity capital for Brazilian firms. The results are more pronounced for firms with less analyst coverage and low ownership concentration, as expected.     

中国财政分权问题研究:一个文献综述

伴随着中国改革开放后经济的持续快速增长,越来越多的国内外学者围绕中国的财政分权问题展开研究。财政分权问题涉及到诸多因素,对其研究必须采用多层次的视角。既有的研究成果多囿于财政分权的某个局部层面,尚未见一个能够解释、分析中国财政分权问题的完整理论框架出现。     

Firm life cycle and the disclosure of estimates and judgments in goodwill impairment tests: Evidence from Australia

The goodwill impairment disclosure literature examines the association between firm-and country-level factors and the disclosure of estimates and judgments used in the goodwill impairment test under International Accounting Standard 36. Although the accounting literature provides competing predictions about the relation between firm life cycle and these disclosures, prior studies did not explore the role of firm life cycle in these disclosures. This paper fills in this gap in the literature, and documents that, in Australia, these disclosures vary by life cycle stages and that firm size moderates this association. We, however, find that the differences are more pronounced for some disclosure items than for others.     

The Purpose of Financial Reporting: The Case for Coherence in the Conceptual Framework and Standards

This paper proposes a basis for progress in the development of the conceptual framework (CF) as a foundation for developing accounting standards. This topic has gained increased prominence following the IASB's (2013) release of its Review of the Conceptual Framework for Financial Reporting (RCFFR) proposing changes to the CF. In this paper the broad socio‐economic environment is seen as determining the primary purpose of General Purpose Financial Reporting (GPFR), which, in turn, establishes the high‐level properties of a CF suitable to meet that primary purpose. This is to support market stability and efficiency through the provision of an account of the financial position and performance of an entity that accords with economic reality. The case is made that the primary purpose of a CF is to provide the principles for the development of accounting standards that will result in GPFR that is useful. This requires theoretical coherence. The CF should drive the standards and if standards depart from the CF principles, such departures should be justified. This proposal is consistent with the position adopted in the RCFFR. However, in contrast to the RCFFR, this paper accents the purposive approach and links the formation of standards directly to the CF. This approach implies that standards are subordinate to CF principles; therefore compliance with standards should not provide a basis for compromising the faithful representation of economic reality. From the purpose identified for GPFR, the paper argues for a default presumption in favour of Fair Value Accounting, a retreat from the asset/liability approach, and a re‐casting of the income statement to focus on operational flows.