A half-century of Accounting and Business Research: the impact on the study of international financial reporting

This paper celebrates the contribution of this journal, over its first 50 years, to research on international financial reporting, defined as comprising writings on comparative or harmonisation topics. The paper examines the journal’s output in that field and how it contributed to the field’s development. Even though the journal was sympathetic to international financial reporting, less than 1% of output in its first decade (the 1970s) related to it. In its first 35 years, a large proportion of the journal’s limited output in the field was produced by two small groups of researchers. However, during its fourth decade, the field gradually became dominant as the accounting world changed. By then, the journal had already published the seminal papers on several central topics in international financial reporting, including measuring harmonisation, using reconciliations to measure international accounting differences, assessing international differences in the influence of tax on financial reporting, and measuring international difference in the application of international standards. These topics were later taken up by many researchers in several other journals.     

Accountability and not‐for‐profit organisations: Implications for developing international financial reporting standards

This paper provides empirical evidence which informs contemporary debates on developing international financial reporting standards for not‐for‐profit organisations (NPOs). Drawing on a global survey with respondents showing experience of NPO reporting in 179 countries, we explore: practice and beliefs about NPO financial reporting internationally; perceptions of accountability between NPOs and stakeholders; and implications for developing international financial reporting standards. Interpreting our research in the context of accountability, we find considerable support for developing international financial reporting standards for NPOs, recognising broad stewardship accountability to all stakeholders as important, but prioritising accountability upwards to external funders and regulators.     

Financial and external reporting research: the broadening corporate governance challenge

This study provides a critical examination of contemporary financial and external reporting research from a corporate governance perspective. Adopting Hines' social constructionist approach to financial reporting, the study investigates research into accounting publishing patterns, published reviews of major subject areas within financial and external reporting research, and interviews a sample of accounting professors in British universities. The findings reveal a strong North American economics and finance-based positivist influence, a largely uncritical acceptance of accounting's subservience to the demands of the market, a reluctance to engage major policy questions and broader reporting constituencies. These appear to be conditioned to a large degree by internal features and pressures within the academic research community. Evidence is presented for greater attention to major environmental shifts impacting accounting and communities globally, a reinvigoration of researchers' direct engagement with reporting constituents in the field, a revisiting of major accounting, business, social and environmental policy questions, and a preparedness to address today's major corporate governance concerns of communities and governments.     

The real effects of a new accounting standard: the case of IFRS 15 Revenue from Contracts with Customers

International Financial Reporting Standard 15 (IFRS 15) Revenue from Contracts with Customers has significantly changed the philosophy of revenue recognition, not only to provide a fairer representation of corporate revenues, but also to inhibit the use of revenues for ‘earnings management’ purposes. We provide a framework to analyse the various effects of new and amended accounting standards. Changes in how companies recognise, measure, present and disclose their revenues (accounting effects) can affect how companies and their transactions are understood, both internally and externally (information effects), can change security prices (capital market effects) and can change how companies operate, and their costs and cash flows (real effects). We provide empirical evidence, based on a review of corporate annual reports, comment letters and interviews, on the effects of IFRS 15. We find evidence of accounting, information and, to a lesser extent, real effects, although, outside a few industries, IFRS 15 has had relatively little impact on the recognition and measurement of revenue.     

IFRS framework-based case study: Barrick Gold Corporation—Goodwill for Gold

The case of Barrick Gold Corporation: Goodwill for Gold utilizes a framework-based approach to examine the objectives, underlying concepts, and relevant IFRS guidance applied to goodwill. The questions presented in the case study progressively lead from the broad concepts underlying the preparation of financial data, in general, to the International Accounting Standards concerning recognition, measurement, and subsequent treatment of goodwill, specifically IFRS 3, IAS 36, and IAS 38. It challenges you to determine if these standards are consistent with the underlying concepts set forth in the IFRS’s conceptual Framework. This case illustrates the importance of professional judgment in the standard setting process by requiring you to examine the IASB’s published supporting documents including the Board’s Basis for Conclusions. In addition, the case includes a practical application problem that requires you to determine the financial statement effects of the subsequent treatment of goodwill.     

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.     

Integrated performance management using information technology: a study of UK charities

This paper explores how UK charities use information technology (IT) to support integrated performance management (IPM). Based on six case studies of small and medium-sized charities (SMCs), it finds that SMCs see IT as important for IPM, but face significant barriers establishing effective IPM. The paper concludes that charities would benefit from a more strategic infrastructure approach to IT, integrating IT for data, information and knowledge.     

Financial scandals: a historical overview

I examine the incidence of fraud from c.1720 to 2009 and relate it to the occurrence of significant financial scandals. Focusing on the UK, and US prior to Enron, and using a detailed dataset of significant events and news content, underpinned by examination of specific watershed scandals, the paper highlights the regulatory response to scandals and the implications for accounting and financial reporting. The evidence reveals the incidence of fraud and financial scandal to be historically contingent and skewed towards certain sectors, particularly banking and finance, facilitated by complex group structures and international capital mobility, and mediated by managerial incentives and ownership concentration. Financial reporting and auditing can mitigate fraud opportunities in all sectors and businesses without complex group structures, and the accounting profession achieved some success in this respect up to the mid-1970s. Since then, the profession has been increasingly challenged by, and to some degree implicated in, the development of interconnected and international business networks, which, combined with wider financial deregulation, has led to a resurgence of fraud and financial scandal not previously experienced since the mid-nineteenth century.     

Reporting accounting changes and fundamental errors: a teaching note

Mastering the requirements for reporting accounting changes and fundamental errors in comparative statements is a challenging topic for many accounting students. Because authoritative literature focuses on identifying events and associating them with reporting methods, many illustrative examples confound the differences between reporting methods with the differences between the factual situations in which the methods apply. This paper presents a single-context teaching aid that focuses on mastering basic reporting methods inherent in the International Accounting Standard governing accounting changes and in the US generally accepted accounting principles. Suggestions are also provided for class discussions of issues surrounding the reporting of accounting changes and fundamental errors.     

The global institutionalization of financial reporting: The case of the United Arab Emirates

Almost 100 countries have agreed to adopt or work towards convergence with the International Accounting Standards Board's international financial reporting standards (IFRS). Applying an institutional theory framework at a nation state level, and using publicly available data about the emerging economy of the United Arab Emirates (UAE) as a case, this paper identifies some of the global coercive, normative and mimetic pressures which have contributed to this widespread adoption. The challenge for emerging economies such as that of the UAE is whether the reality of IFRS implementation can match the image of IFRS adoption.     

21st century scandals: towards a risk approach to financial reporting scandals

Financial reporting scandals in the 21^st century have been followed by many changes in the regulatory framework of financial reporting. While it is natural to ask for research evidence on the effectiveness of these changes in preventing new scandals, we discuss some of the difficulties in conducting this type of research as well as limitations of commonly used approaches. We argue as the central point of this paper that both research and regulation should be based on an explicit acceptance of a permanent risk of financial reporting failure, rather than working on the assumption that this risk can and should be ever further reduced. Acceptance of this point of view can turn what is currently a scattering of unconnected research efforts into a coherent research agenda with potentially high relevance. Facing the existence of permanent financial reporting risk leads to a series of interconnected questions including the measurement of this risk, both actual and as perceived by various stakeholder groups, communication and education concerning these risks, and mechanisms to share or transfer these risks.     

Australia's switch to international financial reporting standards: a perspective from account preparers

This study reports the findings of a structured telephone survey on adoption of international financial reporting standards (IFRS) from 60 firms drawn from among Australia's top 200 corporations. Although we find evidence of strong systematic variation in survey responses with factors such as firm size, industry background and expected impacts on financial performance, the general results indicate that many respondents have not been well prepared for the transition and are generally very sceptical about the claimed benefits of IFRS as enunciated in the government's Corporate Law Economic Reform Program. The results have implications to other international reporting jurisdictions, particularly the European Union, where adoption of IFRS is already underway.     

Accounting for government guarantees: perspectives on fiscal transparency from four modes of accounting

Government guarantees are increasingly important as a policy instrument in public infrastructure investment and to assist the banking and financial sectors following the global financial crisis. This paper analyses how different modes of accounting characterize such guarantees in the contexts of public sector financial reporting, statistical accounting, budgeting and long-term fiscal projections. Guarantees are difficult to specify for accounting treatment and consistent conceptualization of liabilities. These difficulties make it attractive for governments to treat obligations as off-budget and off-balance sheet contingent liabilities, rather than recognize them in financial statements and statistical accounts. Miller and Power’s territorializing, mediating, adjudicating and subjectivizing roles of accounting are utilized to analyse the reporting of UK government guarantees. Provisioning for guarantees is complex in financial reporting statements and often absent in national accounts, a deficiency which Eurostat has attempted to address by devising the concept of standardized guarantees and by securing more disclosure of contingent liabilities. There is potential for future research especially where there is greater mediation between the four modes of government accounting.     

Financial reporting on the Internet by 2010: a consensus view

This paper reports the final results of a Delphi study into corporate financial reporting by 2010. Twenty UK experts in accounting and the Internet representing academics, auditors, regulators, reporting companies and users participated in the study. A three-dimensional conceptual framework was adopted consisting of the role of the Internet (i.e. problem solver or problem creator), the determinant of change (technological determinism, non-technological determinism or contingency perspective), and the pace of change (conservatism, gradualism or radicalism). The consensus view was that the financial reporting package would evolve into a core of general purpose, standardised information (in both the hard copy and Internet version) together with a non-core of general purpose and customised information. Radical changes suggested by prior studies such as real-time reporting and disclosure of raw data will not occur, at least to the core package. Auditors will be reactive and cautious, and regulators will adopt a minimalist approach. The fundamental dilemma of financial reporting in the Internet environment will be between standardisation and customisation.     

The objectives of financial reporting: a historical survey and analysis

This article is a survey and analysis of the succession of writings on the objectives of financial reporting during the past 90 years. Its aim is to contribute towards an understanding of the origins, significance, and limitations of conceptual frameworks. The article begins with a review of the extensive literature, including the series of recommended and approved conceptual frameworks, in the USA and then proceeds to examine the corresponding literatures in Great Britain, Canada, and Australia, followed by a discussion of the framework issued by the International Accounting Standards Committee in 1989 and Chapters 1 and 3 of the framework issued by the International Accounting Standards Board and Financial Accounting Standards Board in 2010. Summary remarks about Continental Europe conclude the survey. Attention is drawn to the criticisms of the objectives approach as well as to its possible perverse consequences for the remainder of the framework. In the course of the survey, there is an attempt to trace the evolution of stewardship and conservatism, or prudence, in the series of frameworks.     

Using Google Trends to track the global interest in International Financial Reporting Standards: Evidence from big data

This study proposes a novel method for identifying international accounting differences under International Financial Reporting Standards (IFRS). Using Google Trends data extracted between January 2014 and August 2022, it creates an index, the Global IFRS/IAS Search Index (GISI), which comprises the search activities of 121 jurisdictions for 45 IFRS accounting standards. To assess its relative validity, I classify Nobes' (1983) 14 jurisdictions in addition to 20 OECD countries. The cluster analysis demonstrates that the GISI is a viable alternative for analyzing international differences under IFRS. The results indicate that incorporating big data could be beneficial for examining global accounting issues. A judgmental international classification of financial reporting practices     

Tick Size and Financial Reporting Quality in Small-Cap Firms: Evidence from a Natural Experiment

Using a natural experiment (the SEC's 2016 Tick Size Pilot Program), we investigate the effects of an increase in tick size on financial reporting quality. The tick size pilot program reduces algorithmic trading (AT) and increases fundamental investors’ information acquisition and trading activities. This in turn increases the scrutiny of managers’ financial reporting choices and reduces their incentives to engage in misreporting. Using a difference-in-differences research design, we find a significant decrease in the magnitude of discretionary accruals, a significant reduction in the likelihood of just meeting or beating analysts’ forecasts, and a marginally significant decrease in restatements for the treated firms in the pilot program. Furthermore, we find that the change in financial reporting quality is concentrated in treated firms experiencing decreases in AT and increases in information acquisition activities. We also find that the mispricing of accruals is significantly lower for treated firms. Taken together, our results suggest that an increase in tick size has a causal effect on firms’ financial reporting quality.     

The Changing International Transmission of Financial Shocks: Evidence from a Classical Time‐Varying FAVAR

We study the changing international transmission of financial shocks over the period 1971–2012. Global financial shocks are measured as unexpected changes of a U.S. financial conditions index (FCI), developed by Hatzius et al. (2010). We model the FCI jointly with a large international data set through a time‐varying parameter factor‐augmented VAR and find that financial shocks have a considerable impact on growth in the nine countries considered. Moreover, financial shocks during the global financial crisis are found to be large by historical standards. They explain approximately 20% of GDP growth variation on average over 2008–9, compared to an average of 5% prior to the crisis.