The economic determinants of depreciation accounting in late nineteenth-century Britain |
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Authors: | Shirley A. Carlon Richard D. Morris |
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Affiliation: | a ATAX, University of New South Wales, Sydney, NSW, Australiab University of New South Wales, Sydney, NSW, Australia |
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Abstract: | This paper examines the economic incentives for unregulated companies, in late nineteenth-century Britain, to disclose in their published accounts the fact that they had charged depreciation. We argue that the disclosure will be positively associated with whether a company has outside shareholders and long-term debtholders, profitability, extent of depreciable assets, appointment of a professional auditor, and size. These hypotheses are tested using 150 British companies from the years 1880/81, 1889/90 and 1899/01. Our results indicate that whether depreciation was charged is related to profitability and, to a lesser extent, to the presence of outside shareholders, long-term debt holders and the appointment of a professional auditor. However, the amount of depreciation charged is related only to profitability and appears to be opportunistically determined. |
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Keywords: | accounting history depreciation dividends profits positive accounting theory |
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