Changing the Concepts to Justify the Standards*

In this paper, I discuss the current project to converge the IASB and FASB conceptual frameworks, specifically efforts to purge the converged framework of concepts that hinder the promotion of balance sheet valuation using fair values. I discuss why I believe these efforts to be misguided, based on how investors who analyze financial statements employ accounting information. I focus on stewardship, reliability, and earnings — terms either demoted in importance or at risk of being eliminated in the framework convergence project. I explain their salience to financial statement users and argue against their deletion or demotion.     

CAP Forum on E‐Business: The Management of Financial Disclosure on Corporate Websites: A Conceptual Model*

This paper addresses the impact of Internet financial reporting (IFR) on financial accounting theory by incorporating it into the general Gibbins, Richardson, and Waterhouse (GRW) (1990) disclosure‐management framework. The GRW model assumes that the firm has a relatively stable process of disclosure management. This process varies between two positions: one ritualistic and the other opportunistic. These dimensions can coexist in the same firm but, on average, the policy of a firm will be either more ritualistic or more opportunistic. Our survey of the financial information disclosed in traditional financial reporting (TFR) as compared with the website disclosures of a random sample of Canadian companies documents a significant difference between TFR and IFR, as well as a wide variability among the sample firms in their use of IFR content, format, and technology. We interpret this variability in the incremental difference of IFR over TFR as an indication that a firm's ritualistic or opportunistic behaviour under IFR is not different from its behaviour under TFR. Thus, the adapted GRW (1990) conceptual model appears to have the potential to support future research in the management of financial disclosure on corporate websites.     

From Accounting to “Forecounting”*

Using Ross Skinner's 1995 CA Magazine article, “Judgment in Jeopardy", as a stepping stone, we revisit the meaning of professional judgment in accounting in light of developments in standard setting, financial markets, and business operations that have taken place over the past two decades. We argue that it is time to change the view that accountants' professional judgment is the application of accounting‐based knowledge and experience in the selection of an appropriate accounting method. Accountants now face a standard‐setting context that emphasizes the estimation of future cash flows as well as new business and financial realities. This context implies that, in exercising their professional judgment to choose between forecast alternatives, accountants must rely on knowledge and experience from other disciplines (even though this is not well integrated into accounting). Hence, accounting must evolve from its traditional stewardship role to the new role of “forecount‐ing” (the estimation of future cash flows). The implications as well as the challenges of that evolution are discussed.     

Exploring attitudes to financial reporting in the Australian not‐for‐profit sector

The current level of satisfaction among different stakeholders about the current approaches and practises of financial reporting of not‐for‐profit (NFP) entities is underexplored ( Christensen and Mohr, 2003 ; Lee, 2004 ; Gray et al., 2006 ; Parker, 2007 ). This paper uses content analysis to examine submissions to the 2008 Australian Senate Economics Standing Committee for its inquiry into the disclosure regimes of charities and NFP organisations, which aimed to explore attitudes about financial reporting in the NFP sector. Financial reporting is viewed as an important part of accountability, but the sector identifies deficiencies in the current regime in terms of consistency, efficiency and transparency. Respondents to this inquiry believed that a sector‐specific accounting standard was important. Financial reporting standards, regulations and legal structures should be uniform across the entire sector, but with some variation allowed for smaller NFPs. The cost of complying with standards was a significant issue for smaller NFPs.     

Earnings Quality under Rules‐ versus Principles‐based Accounting Standards: A Test of the Skinner Hypothesis / LA QUALITÉ DES RÉSULTATS SELON QUE LES NORMES COMPTABLES SONT AXÉES SUR LES RÈGLES OU SUR LES PRINCIPES: VÉRIFICATION DE L'HYPOTHÈSE DE SKINNER*

We provide preliminary evidence, consistent with Skinner (1995), that Canada's relatively principles‐based GAAP yield higher accrual quality than the United States' relatively rules‐based GAAP. These results stem from a comparison of the Dechow‐Dichev (2002) measure of accrual quality for cross‐listed Canadian firms reporting under both Canadian and U.S. GAAP. However, we document lower accrual quality for Canadian firms reporting under U.S. GAAP than for U.S. firms, which are subject to stronger U.S. oversight, reporting under U.S. GAAP. The latter results suggest that stronger U.S. oversight compensates for inferior accrual quality associated with rules‐based GAAP. Consistent with the positive effect of Canada's principles‐based GAAP and the offsetting negative effect of Canada's weaker oversight, we find no overall difference in accrual quality between Canadian firms reporting under Canadian GAAP and U.S. firms reporting under U.S. GAAP. Our results imply that (1) policymakers who wish to compare the effectiveness of oversight across jurisdictions must control for the GAAP effect; and (2) accounting standard‐setters who wish to compare the effectiveness of principles‐ versus rules‐based GAAP must control for oversight strength.     

The Ontario Securities Commission on Accounting and Auditing from the 1960s to 2008 – Part 1: 1960s to 1985*

We present Part 1 of a historical review and analysis of the role played by the Ontario Securities Commission (OSC) in accounting and auditing from the 1960s onwards. Part 1 deals with the period from the 1960s to 1985. Parts 2 and 3 will treat the roles played by the first five Chief Accountants, from 1986 to 2008. As the principal Canadian stock exchange in recent times has been the Toronto Stock Exchange, the OSC has been the most important securities market regulator in Canada. Prior to this article, the academic and professional accounting literature has been largely barren on the OSC’s evolving role on accounting and auditing issues.     

The Ontario Securities Commission on Accounting and Auditing from the 1960s to 2008–Part 2: The First Four Chief Accountants, 1986–1996*

This article, Part 2 of a historical review and analysis of the Ontario Securities Commission (OSC), describes the role played by the first four Chief Accountants in the regulation of accounting and auditing from 1986 to 1996. Part 1 dealt with the period from the 1960s to 1985. Part 3 will treat the role played by the fifth Chief Accountant, from 1996 to 2008. As the principal Canadian stock exchange in recent times has been the Toronto Stock Exchange, the OSC has been the most important securities market regulator in Canada. Prior to this article, the academic and professional accounting literature has been largely barren on the OSC’s evolving role on accounting and auditing issues.