Abstract

<abstract> This paper examines how financial reporting modes are determined within a company, from the perspective of perceived costs and benefits. The modes investigated include financial reporting regimes (e.g. International Financial Reporting Standards, UK Generally Accepted Accounting Principles) and the financial reporting techniques which support them (e.g. valuing intangibles and investments, treatment of development costs). A stated preference approach is adopted and applied to a fieldwork analysis of the functioning of a large port authority, which was a member of a group and prepared both consolidated and subsidiary accounts. The analysis is largely qualitative, exploring in-depth such matters as key factors in making choices, the decision-making processes behind choices, and the staging of decisions, but underpinned by a quantitative basis, using a metric for determining net benefits of financial reporting regimes and techniques. Our analysis aims to improve our understanding of a company's choice processes underlying its financial reporting, including its handling of complexity and uncertainty, and its use of innovations in techniques and organisational forms for decision support. </abstract>

Highlights

  • This paper applies a stated preference approach, i.e. one based on asking respondents, rather than on market data, cf. Adamowicz et al (1994), to explore a company’s choice of financial reporting modes and to investigate the rationale underlying those decisions

  • There are three major parts to this paper: first, a scoping section, on the use of a stated preference approach to the process of making choices over financial reporting regimes and techniques; second, a methodology section, explaining the fieldwork approach adopted, and the two instruments which were used to explore the choice-making in a UK context; and third, a case study section, illustrative of our approach, reporting on face-to-face interview evidence from a UK port authority, exploring its rationale for choices made over regimes and techniques

  • Two instruments were used: first, an administered questionnaire (AQ) which provided outline company information, and explored stated preferences of the respondent over financial regimes and techniques, using Likert scales to establish a metric for perceived benefits and costs; and second, a three-part semi-structured interview agenda (SSI), our main focus of this paper, which looked at (a) the choice of financial reporting regimes; (b) the choice of financial reporting techniques; and (c) the relation between these choices and their rational

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Summary

Introduction

This paper applies a stated preference approach, i.e. one based on asking respondents, rather than on market data, cf. Adamowicz et al (1994), to explore a company’s choice of financial reporting modes and to investigate the rationale underlying those decisions. To set it in context, the business is a dynamic UK-based owner (and operator) of ports, which are strategically positioned to serve as logistical gateways across the UK. We have about 10 trading companies, including the Head Office entity They have either different types or geographies, sometimes due to statutory requirements: e.g. They are spatially distributed and tend to be in other ports.”

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