Applicability Of The Conservatism Accounting Convention in China: Empirical Evidence

“Conservatism” is a widely accepted accounting convention in the industrialized world, but it has long been slated and prohibited in China under the orthodox ideological influences. To date, the conservatism convention has not been fully adopted or implemented in Chinese accounting although the Chinese government has made substantial efforts to reform its accounting system to bridge the gaps between the accounting practices in China and other industrialized countries in recent years. This study has, through a wide range questionnaire survey, empirically investigated the applicability of the conservatism accounting convention in China. We found that the survey respondents (consisted of business accountants, management, government officials, bank loan officers, investment analysts and auditors), in general, held no negative attitudes against the conservatism convention under the changing business environment in the country. There is clear evidence that various interested parties of business accounting would support an expanded adoption of “conservatism” in Chinese accounting. The study findings will facilitate a proper assessment of the future development of accounting standards and practices in China.     

Governmental Accounting in Spain and the European Monetary Union: A Critical Perspective

During the last twenty-five years, the changes in Spanish accounting have been radical and significant, especially since 1986 when Spain joined the European Union. Those changes were first introduced in business accounting, following the patterns of the Fourth Directive, but governmental accounting has also been affected by structural reforms that have modified the financial reporting system, the accounting standards and the accounting principles to be applied. However, the governmental accounting system needs further improvement, particularly given the EMU framework and the relationship between governmental accounting and national accounting.     

抓住机遇 巩固成果 全面推进我国的会计改革

近十年来，我国的企业会计改革取得了重大进展，在国际上得到了广泛认可，与国际会计准则委员会所倡导的会计国际化的宗旨是一致的。然而，从目前情况看，会计人员整体素质尚不能完全适应会计改革的要求，《企业会计制度》及相关会计准则的实施范围还不广泛，还存在一些执行中的问题。面对加入ＷＴＯ，我们应当抓住有利时机，巩固成果，全面推进我国的企业会计改革。     

Japan’s New Special Zones for Regulatory Reform

Japan’s Special Zones for regulatory reform were established in 2003 as an endeavor to enhance nationwide regulatory reforms based on local government initiatives. These Special Zones are not like the free trade zones inviting foreign capital that have been taken on as national projects in Ireland or China. In fact, this scheme acts to stimulate regulatory competition between municipalities to attract new business activities by both foreign and domestic firms in the local areas. This approach is a significant step towards mobilizing local government initiatives under a highly centralized administrative system in Japan, and marks a shift toward a more market-based economy.JEL Code: H77, K20     

The Use and Abuse of Accounting in the Public Sector Financial Management Reform Program in Australia

Accrual accounting has been central to financial management reforms designed to promote greater efficiency, effectiveness and accountability in the Australian public sector. This is the setting for the article; however, the issues covered apply to all nations that have reformed their public sectors over recent years. The results of the reforms have been mixed. While accrual accounting has had some beneficial results for the above purposes, the benefits have been offset by aspects of accounting misuse resulting largely from adoption of the business model of accrual accounting, termination of the former cash accounting system, and adoption of some questionable marketization reforms which appear to be more driven by the objective of reducing the size of government rather than enhancing efficiency of operations. Because Treasury believed that the business model was not appropriate for budget fiscal policy purposes, it introduced a second combined accrual and cash accounting system—the Government Finance Statistics system. The use of two accrual accounting systems reporting different results caused much confusion in parliament.     

企业合并会计的经济后果分析——兼论我国会计准则体系中计量属性的整合

本文在回顾相关文献的基础上 ,指出购买法和权益法的选择不仅具有明显的会计后果 ,而且在企业特定因素和我国特殊融资和监管环境的作用下可能转化为严重的经济后果。本文最后勾勒出我国企业合并会计的逻辑框架并对我国会计准则体系中计量属性的整合提出初步见解     

Political Influences in Changes to Setting Australian Accounting Standards

The process of establishing regulatory arrangements for setting accounting standards in most Western countries has frequently exposed conflict between private-sector bodies, professional accounting organisations, and government bodies, each attempting to dominate the process in order to gain favoured outcomes. Recent changes by the Australian Federal Government in the structure of setting accounting standards show a substantial shift in power from the two professional accounting bodies (ICAA and ASCPA) to the government. The groups who believe they will gain more influence in the new structure have supported the changes and there has been little opposition from groups losing power for fear of ending up with even less. The initial proposal to adopt IASC accounting standards was effectively discarded in the reforming legislation, showing the government’s sensitivity to corporate reactions and reluctance to relinquish power to an international body. Although some activities in the period preceding the change can be categorised within the corporatism and inter-organisational domain conflict models of regulatory processes, the actions of the government in initiating change do not fit with the role of dispassionate arbiter in neo-corporatism and the muted reaction of the professional accounting bodies is inconsistent with predictions of domain defence.     

Measurement: A Way Forward

Australia has a long tradition of using methods of valuation which depart from the traditional 'historical cost' model—and this has steadily been reflected in regulatory requirements and practices for different industries. However, while many forms of market value accounting have been introduced into a variety of accounting standards, the Australian Accounting Standards Board's conceptual framework (CF) has not led these changes, nor provided any substantive guidance on measurement issues. This article suggests criteria that can be used to select among accounting measurement alternatives.     

Auditing Standards in China—A Comparative Analysis with Relevant International Standards and Guidelines

The continuing and deepening economic reforms in China have brought many changes both socially and economically to the society. The primary function of auditing in China has begun to shift away from the traditional tax compliance assessment towards the credibility lending to financial statements. The economic reforms and the development of the Accounting Standards for Business Enterprises have necessitated the parallel development of auditing standards in China. While some significant differences exist, the new Chinese auditing standards are, in a number of important aspects, similar to the professional standards promulgated by the International Federation of Accountants. The development of a comprehensive body of standards, auditor independence, the role of certain auditing techniques, and certified public accountant (CPA) population are the major areas that China needs to improve. Opening up the Chinese accounting industry will trigger significant advances in the implementation of Chinese standards and the development of the Chinese accounting profession.     

Financial statement comparability and segment disclosure

Statement of Financial Accounting Standards (FAS) No. 131, Disclosures about Segments of an Enterprise and Related Information (FASB [1997]), reestablishes standards for how public business enterprises report segment information in financial statements. A prevailing criticism of FAS 131 is that it likely reduces financial statement comparability for firms with similar lines of business. This study estimates comparability of accounting disclosures surrounding the implementation of FAS 131 to examine potential variation in comparability associated with the segment reporting regime shift. Financial statement comparability is operationalized following the De Franco et al. (2011) accounting system comparability measure as the degree that firms have similar mappings for economic performance into financial statements. Results indicate decreased comparability for firms following FAS 131 adoption. Specifically, segment information reformulated according to how companies manage their businesses marginally limits this reduction in comparability, but greater segment information disaggregation through an increase in the number of reported segments attributed to FAS 131 application diminishes comparability overall. This study contributes to the standard setting process, as the FASB has assigned comparability to an important position in its conceptual framework and has made the goal of increasing comparability a vital component of its agenda that drives the need for accounting standards.     

Harmonisation or discord? The critical role of the IASB conceptual framework review

The IASB has achieved great success in extending the adoption of international financial reporting standards, but it has also encountered opposition at national and regional levels. Some of this opposition arises from differences in national accounting cultures, which are embedded in the market structures and institutional and legal frameworks within which business entities operate. These issues are particularly apparent in the debate on the IASB’s revision of its conceptual framework, which expresses its own vision of an international accounting culture. An important example is the issue of whether stewardship should be a distinct fundamental objective of financial reporting.     

Accounting Reforms in China: Cultural Constraints on Implementation and Development

There is considerable theory and evidence to suggest that culture is an important environmental variable influencing the development of accounting systems internationally. According to the Hofstede (1980) and Gray (1988) cultural models, China's accounting development and practice should be in the cluster that supports statutory control, uniform practices, a conservative measurement approach and secrecy in disclosure. A uniform and rigid system of financial reporting has been practised for decades in the People's Republic of China under the centrally controlled economy. The accounting reforms launched since the 1980s aim to establish a new framework for regulating financial reporting which is adaptable to China's recently emerged socialist market economy. The adoption of accounting standards in the later phases of the reforms marks a dramatic turning point in China's accounting history towards a more international Anglo-Saxon orientation in financial reporting. Based on an analysis of the authority for accounting systems, the accounting profession and accounting measurement and disclosure in China, it is argued that this development will be constrained by the influence of China's culture and its accounting subculture. While financial reporting will be governed by accounting standards, their development and enforcement will remain a governmental and legalistic function. Accountants will continue to rely heavily on detailed technical rules. This mixed orientation will constitute China's unique national identity in terms of its accounting and financial reporting system.     

Financial Reporting Practices of China's Listed Firms

The long‐term success of financial markets depends on the widespread availability of reasonably detailed and reliable financial information. Individual investors depend critically upon companies' regulatory filings and voluntary disclosures to assess their long‐run risks, payoffs, and, ultimately, their intrinsic values. However, a recent string of accounting frauds involving Chinese firms listed on overseas markets has drawn attention to the accounting and governance risks associated with investing in Chinese firms. This article provides a brief overview of the information environment of Chinese capital markets and the primary forces that affect the incentives of Chinese listed companies to provide timely and accurate financial reports. The evidence reviewed here indicates that the adoption of world‐class standards and regulation, although necessary, is not sufficient to generate incentives for transparency. The long‐term health of China's capital markets will also depend upon other reforms that are designed to accomplish the following: (1) improve the protection of investor rights through an effective, independent judiciary court system that promotes civil lawsuits, and through credible regulatory enforcement; (2) strengthen market development activity, especially with respect to foreign investors; and (3) limit political rent‐seeking behavior and deter politicized business decisions, especially in China's state‐owned enterprises. Together, such reforms have the potential to improve corporate governance in China and better align the incentives of the state and majority shareholders with those of minority shareholders, while increasing the ability of accounting to serve a contracting function and the demand for timely information for valuation purposes.     

All for Nothing? Accounting for Land under Roads by Australian Local Governments

Accounting for land under roads by local governments has been one of the most controversial and protracted episodes in the setting of Australian accounting standards. However, after more than two decades of exposure drafts, regulation, transitional provisions and re‐regulation, most land under roads has not been recognised in local government balance sheets. Australian Accounting Standard AAS 27 Financial Reporting by Local Governments was first issued in 1991 and, among other significant reforms, proposed that local governments report land under roads as an asset in their financial reports. However, persistent opposition to this requirement and practical difficulties associated with its implementation gave rise to a succession of transitional provisions deferring its mandatory application. Finally, in 2007 – 16 years after AAS 27 was first promulgated – the Australian Accounting Standards Board (AASB) sought to bring closure to this issue with the release of AASB 1051 Land Under Roads. However, in the interim some state governments had pursued their own resolutions, forbidding the recognition of land under roads. This research reports the results of a survey of the impact of land under roads on local government financial reports. After two decades of debate and regulation, diversity is found to persist in the extent and manner of recognition of this ‘asset’. However, recognition remains the exception rather than the norm and is typically confined to recent acquisitions that comprise only a very small portion of total assets. These circumstances are suggestive of an episode of regulatory failure.     

Accounting standards,regulatory enforcement,and innovation

We examine the effects of accounting standards and regulatory enforcement on entrepreneurial innovation and social welfare. When the entrepreneur issues a financial report that violates the accounting standards, a regulatory agency may detect the violation and bring charges. We find that when regulatory penalties are relatively insensitive to the magnitude of the violation, optimal standards are sufficiently low that they induce full compliance, and increase as the intensity of enforcement increases. In contrast, when regulatory penalties are sensitive to the magnitude of the violation, optimal standards induce non-compliance and decline as the intensity of enforcement increases.     

Disharmony in international accounting standards setting: The Chinese approach to accounting for business combinations

The paper addresses two distinct aspects of disharmony in international accounting standards setting. The first aspect relates to the political economic context of financial accounting standards. This is illustrated by the Chinese standards setters’ decision to allow the pooling of interests method of accounting for business combinations despite the prohibition of this method by both the FASB and the IASB. This decision by the Chinese standards setters appears to have been based on political economic factors related to the need for industrial reorganization in China rather than a desire to serve the needs of global capital markets. The second aspect of disharmony relates to the role played by differential understandings of the fundamental objectives of financial reporting in an international context. The IASB's goal of producing one set of global accounting standards to serve the needs of global capital markets has led to a reduction in the number of permissible accounting methods and a move towards the fair value accounting model. In particular, the IASB concluded that the acquisition method of accounting for business combinations should be the only method allowed for business combinations. In contrast, the Chinese standards setters have recognized the existence of both mergers and acquisitions, and in response they created two different methods of accounting for business combinations. Effectively, the Chinese standards setters developed an alternative approach to accounting for business combinations which challenges the IASB's goal of achieving international accounting convergence through the fair value model.     

[In]visible [in]tangibles: Visual portraits of the business élite

Visual portraits of the business élite are widely disseminated, and form significant sites for communicating messages regarding leadership and associated intellectual, symbolic and social intangibles, yet have been neglected in accounting research. At the same time, accounting for intangibles is recognised to be inadequate. This inter-disciplinary article constructs a framework from art theory to interpret portraits of the business élite and their associated [in]visible [in]tangibles. Four sets of rhetorical codes in portraiture are identified: physical, dress, spatial and interpersonal. Illustrative portraits from annual reports and the media are analysed to indicate how [in]visible [in]tangibles are portrayed through visual rhetoric.     

NEW PUBLIC MANAGEMENT'S CURRENT ISSUES AND FUTURE PROSPECTS

In this paper we describe the main characteristics of NPM and illustrate the current state of affairs in three main areas: (a) the effectiveness of NPM reforms, (b) NPM's impact on planning and control in government entities, and (c) the implementation and use of accrual accounting methods in government. We use the responses of 105 (mostly Dutch) practitioners in government and non‐profit organizations. Most respondents recognize performance improvements, but only a minority attribute these improvements directly to NPM reforms. Improved planning and control systems are seen to have only a limited impact on the work of professionals, while accrual accounting is considered to have only limited potential to support political decision making.     

Accruals and ‘accounting numbers management’ in UK executive agencies

Public sector reforms have implemented business techniques, including management by results, cost management and accrual accounting, to make public entities more efficient and accountable. As a consequence, ‘accounting numbers management’ has become a way for managers in the public sector to adapt accounting figures to their interests. This study focuses on ‘earnings management’ (manipulation of earnings) in government agencies. The authors provide evidence of earnings management in which agencies try to keep net operating costs to around zero. The authors' findings question the effectiveness of financial targets associated with accrual-based measures.     

The Nature and Rationale of a Conceptual Framework for Financial Reporting by Islamic Banks

Islamic banks have to abide by the revealed doctrines in Islam in conducting their business and financial transactions. They employ in-house religious advisers—often referred to as Shari'a Supervisory Board (SSB)—who issue a special report to inform users of financial statements whether or not the bank has adhered to the Islamic principles. Recently, a private standard-setting body—the Financial Accounting Organization for Islamic Banks and Financial Institutions (FAOIBFI)—has been set up to externally regulate the financial reporting by Islamic banks. The FAOIBFI has published two statements on the objectives and concepts of financial reporting to act as a framework in setting accounting standards for Islamic banks. This paper examines the FAOIBFI's approach for developing objectives and concepts of financial accounting and investigates its need for such a theoretical framework. It is argued that the FAOIBFI's objectives and concepts would not be useful in mandating accounting standards on issues that are affected by religious ruling. This does not necessarily mean that such a framework may not be useful in legitimating the FAOIBFI's role and in setting accounting standards for issues that are not governed by revealed moral doctrines although it will be subject to similar limitations to those found by other standard-setting bodies in utilising and applying their framework. However, it implies that the more the FAOIBFI sets accounting standards that incorporate religious ruling, the less it would tend to find its own objectives and concepts useful. The ambiguities that may arise from different interpretations of the religious rules will require resolutions primarily by reference to religious rather than accounting authority.