Financial Accounting Practices Research Articles

Privatization and Company Restructuring in Eastern Europe

Summary The successful transition of Eastern European economies from central planning to market orientation has to include significant company restructuring in addition to privatization. At the micro level it can bring enhanced productive efficiency through changes in organizational structure, operations and financial control and the introduction of marketing as a crucial element and function of the restructured companies. At the macro level, company restructuring creates the necessary conditions for improved allocative efficiency, achieved through the transition from the monopolistic market structure of chronic deficit to a mostly competitive one able, in the longer run, to meet market demand. Restructuring is used here in the broader sense of changes in the organization's management orientation, operational processes and systems as well as in its formal structure. Restructuring is held to be both extremely complex and critical to the realization of the benefits of privatization at both macro and micro levels. Some broad hypotheses relating to common elements of the restructuring process arc introduced: a shift to a flatter, less hierarchical organization structure; the adoption of ‘western’ financial management and accounting practices and the introduction of budgetary accountability; the evolution of the marketing function and the rationalization of product ranges in the light of market needs.

'Publishing your private affairs to the world': corporate financial disclosures in the UK 1900-24

The main intention of this paper is to consider the disclosure practices of quoted UK companies during an important period of change in financial accounting practice, the first quarter of the twentieth century. The paper focuses in particular on levels of disclosure, as indicated by the volume of information provided, and on more qualitative aspects of disclosure practice. Our knowledge of the patterns of disclosure practices over time is deficient, despite the work of a number of accounting historians, and is based upon a limited amount of primary evidence. The paper reviews current perspectives on the corporate financial disclosures of the period, provides new evidence on disclosure practices in the form of an analysis and comparison of the published and internal records of thirty quoted companies operating in four major industrial sectors in the UK during the period 1900-24 and draws some conclusions.

How uniform is financial reporting in Germany? The example of foreign currency translation

In many standard textbooks on comparative international accounting, a separate chapter is devoted to classification models of national financial reporting systems. Typically, the authors of ‘international accounting classification models’ not only organize national financial reporting systems into certain groups and assign descriptive labels to these categories. Rather, they also tend to draw analogies with the disciplines of the natural sciences so as to justify the methodology which underlies their theoretical constructs. The validity of these methodological claims is indirectly being examined in this paper, which argues predominantly from an empirical angle. The focus of the essay is on the notion - usually advanced by the authors of the models under discussion - that German financial accounting practice can be described as ‘uniform’, thus forming a contrast to the ‘fair-judgemental’ approach to financial reporting which is commonly held to prevail in the United Kingdom. In order to test these propositions, the accounting policies in the area of foreign currency translation in the consolidated accounts of a sample of British and German chemical companies are subjected to scrutiny.

Auditing, Accounting and Supervision in the European Charitable Sector

In this paper we first describe recent developments which have seen the emergence of a stronger regulatory structure for United Kingdom charities. Secondly, we outline the radical proposal to change the financial accounting practices of charities. These proposals are designed to provide the financial criteria for monitoring and ensuring greater accountability of charities. Finally we question what effect will these changes have had on the rest of the European charitable sector? How different is the ‘British Model’ from other European countries? Will other European States follow the ‘British Model’? Or has the ‘British Model’ lessons it could learn from its partner states? To effect an answer we illustrate from our recent survey the current audit, accounting and supervision practices in the other European Union States with the exception of Greece.

Managing environmental change: insights from researchers and practitioners

Analyses the articles published in theFIU Hospitality Reviewduring a seven‐year period from 1989‐1995. Identifies seven main themes: people and organizations; marketing; environmental change; total quality management and strategy; education; financial analysis and accounting practice; tourism and technology. Summarizes by highlighting the linkages between the themes and the related sub‐themes.

Institutional thinking: The case of financial instruments

Although financial accounting practices and disclosures are frequently altered, such changes appear to be constrained by “institutional thinking”. In this paper, I explore an instance of institutional thinking — the emergence and development of an FASB project on financial instruments. This study illustrates the programmed ways in which accounting problems are constructed and resolved, a process that shadows certain questions while emphasizing the traditional accounting concerns with disclosure, recognition and measurement.

Should Historians Trust Late Nineteenth-Century Company Financial Statements?

Business historians generally have been advised to adopt a cautious apporach when using financial accounting statements. This paper reviews the Business History literature on financial accounting practices and argues, by reference to evidence obtained from the exiting accounting and economic history literatures and from new archival sources, that this caution may well be excessive if applied to the corporate data of the late nineteenth century.

The IASC comparability project: A cross-national comparison of financial reporting practices and IASC proposed rules

The International Accounting Standards Board (IASC) issued Exposure Draft 32 in 1989, which led to the revision of 10 international accounting standards (IASs), all of which substantially reduce the amount of choice available to companies when choosing which financial accounting practices to follow. This article assesses the extent to which the current financial reporting practices of 27 IASC member countries agree with the new international accounting standards. The results indicate that while the overall level of agreement with the revised standards is high, there are considerable differences both among issues and among countries. Companies in many countries will have to significantly change their accounting practices in certain areas if they are to comply with the new IASs. This is particularly true of companies in countries with code law-based legal systems and more conservative accounting practices. There is also generally less agreement over issues such as treatment of mergers, accounting for development costs, recognition of revenues on long-term contracts, treatment of differences due to the translation of the income statement at rates other than the closing rate, and changes in the costs of retirement benefits.

The Impact of Financial Accounting Practices on the Measurement of Profit and Equity: Australia Versus the United States

The purpose of this paper is to make a quantitative comparative analysis of differences between Australian financial reporting practices and U.S. GAAP. The empirical data consist of Form 20‐F filings for thirteen Australian incorporated companies for the period 1985–93. Based on prior research, there is a test of the hypothesis that U.S. GAAP is more conservative than Australian financial reporting practice. The results of the empirical analysis offer little support for this hypothesis in the context of the reporting of profit. However, the hypothesis is supported for the reporting of shareholders’ equity. The most frequent and material differences in profits relate to asset measurement, equity consolidation and accounting for intangible assets. Generalizations relating to differences in shareholders’ equity are more difficult to make.

Relationships between financial accounting research, standards setting and practice in Germany

(1992). Relationships between financial accounting research, standards setting and practice in Germany. European Accounting Review: Vol. 1, No. 1, pp. 27-38.

The effect of book income adjustment in the 1986 alternative minimum tax on corporate financial reporting

This study examines the effect of the book income adjustment provision in the 1986 alternative minimum tax ( AMT) on financial accounting practices. A model is developed to identify firms that are more susceptible to the book income adjustment. The changes in financial accounting practices for firms affected by the AMT are then examined. Our results indicate that firms that are likely to be affected by the book income adjustment shift timing and permanent differences across years to reduce the impact of the AMT.

The FASB's conceptual framework, financial accounting and the maintenance of the social world

This paper addresses the functional failure of the FASB's Conceptual Framework. It suggests that the reason for the problems encountered by the FASB in its CF project (and those encountered in other CF projects), is that the FASB CF is elaborated around a highly problematic conception of the relationship between financial accounting and economic reality. The CF involves a process of mundane reasoning around a central incorrigible proposition of our society, that social reality exists objectively and intersubjectively. This paper draws on anthropology to show that this assumption of a concrete, objective social reality is a product of everyday reasoning such as that of the FASB members. A comparison of the FASB's reasoning about economic reality, with the reasoning of the African Azande about their poison oracle reality, shows how those two realities are both socially maintained by the same process of commonsense reasoning. A number of important implications follow which extend beyond CFs and financial accounting practices. These implications relate to the essential culture and value-dependency of logic, reasoning and rationality, and have attendant inferences for the potential role of accounting researchers in influencing society rather than merely participating in the legitimizing and reproduction of the status quo.

The Sociopolitical Paradigm in Financial Accounting Research

The efficacy of the processes by which social reality is created and reproduced is largely attributable to the fact that these processes are screened from scrutiny by taken‐for‐granted assumptions which are embedded in language, thought and social practices such as accounting and accounting research. A number of taken‐for‐granted assumptions which are embedded in predominant modes of accounting research, commonsense reasoning, and accounting practice, which function to protect the processes of reality construction from scrutiny, are discussed. These assumptions result in a conceptualisation of the role of accounting information as communicating a reality which exists independently of financial accounting practices. As such, these assumptions obscure, or gloss over, accounting′s sociopolitical role in constructing social reality. As these assumptions are critiqued and set aside, it becomes clear that the social practices of accounting and accounting research both play an important part in the social construction of reality.

Making by-products a main product of discussion: A challenge to accounting educators

Current textbook coverage of accounting for by- products is critically examined in the present article. Most texts suggest that, because amounts involved are relatively “immaterial,” any of several techniques is acceptable. For the most part, little reference to any underlying concepts, other than the concept of “materiality,” is included in textbook discussion of this topic. Educational theorists assert that learning is enhanced when students are able to anchor new information to material previously learned. The authors argue that it is both possible and desirable to tie the presentation of by-product accounting to (a) the FASB Concept Statements (specifically, to asset and revenue recognition concepts) and (b) other financial accounting practices to which students are traditionally exposed. The by-products illustration used in this article is but one example of how cost accounting topics can be tied to the mainstream of accounting thought. The authors encourage such applications in other cost accounting areas by accounting educators.

THE EVOLUTION AND CURRENT STATE OF FINANCIAL ACCOUNTING CONCEPTS AND STANDARDS IN THE NONBUSINESS SECTOR

This article presents a condensed history of significant post 1900 developments in nonbusiness financial accounting practices and standards, and highlights some of the major issues in the recent increase in interest and activity in nonbusiness accounting. It includes consideration of federal, state, and local government units along with various types of nongovernmental nonbusiness entities. The initial section of the article traces both the development of fund accounting techniques and the discovery of their inadequacies. Next, the article discusses developments in standard-setting and the search for a sound theoretical foundation. Finally, it presents a current profile of nonbusiness accounting. The article implies that nonbusiness accounting can no longer be treated as a secondary consideration. The nonbusiness sector is a major component of the environment that requires sound financial accounting and reporting standards and practices.

Introduction to Financial accounting theory and practice

Introduction to Financial accounting theory and practice

An Empirical Analysis of International Accounting Principles: A Comment

In a recent article in this Journal, Frank uses data from the 1973 Price Waterhouse survey of financial accounting practices to classify countries' accounting systems into groups.' While the methodology seems more satisfactory and the results greatly more reasonable than those reported elsewhere using the same data,2 neither Frank nor other researchers have investigated the reliability of these data and how appropriate they are for their statistical analyses. I believe that the data may be questionable on three counts. First, they may contain some straightforward mistakes. These are illustrated in table 1. The easiest answers for me to check are those for the United Kingdom in the 1976 survey. Note that if such answers can be wrong for this country, would it be reasonable to rely on similar answers for Bolivia? Second, some of the answers, although either strictly or conditionally true are misleading, particularly to a computer. Table 2 gives examples of this. The survey's impression that U.K. or U.S. accounting is as conservative as German accounting and more conservative than French accounting is surely misleading. The table hides the fact that German or French conservatism is of a wholly different order than Anglo-Saxon prudence.3 Regarding the clear profit figure, anyone acquainted with

Financial Accounting Practices of Property and Liability Insurance Companies

A sample of annual financial reports to stockholders issued by stock property and liability insurance companies indicates that many insurers are deviating from statutory accounting methods in order to develop financial statements more in accord with generally accepted accounting principles. In addition the professional accounting community is currently considering a change in interpretation of these principles as they apply to the handling of equity securities. This paper analyzes current accounting practices and the possible impact of this contemplated change. The study was made using a computer model to explore the financial effects of these practices given various company growth rates, policy mixes, investment mixes and investment yields. The results indicate that, depending on these factors, very significant differences in such reported financial measures as net income and return on net worth may be generated by changes in accounting methods. The paper concludes by pointing out the possible significance of these findings for the insurance industry. In recent years many stock property and liability insurance companies have become increasingly concerned with the manner in which they account for their operations in annual reports intended for the investing public. Many companies have altered the practices used to prepare financial statements appearing in these reports so as to bring them into line with generally accepted accounting principles as interpreted by the professional accounting community-i.e., the American Institute of Certified Public Accountants (AICPA) and individual public accounting firms. Despite this trend, insurance companies still employ a variety John J. Anderson, Ph.D., is Assistant Professor of Business in the Graduate School of Business at The University of Wisconsin. This paper was submitted in April, 1971. The research on which this paper is based was sponsored, in part, by the University-Industry Research Program at The University of Wisconsin. of accounting practices and financial statement formats in preparing their annual reports to shareholders. The AICPA is currently considering a new interpretation of accounting principles as they apply to reporting unrealized gains or losses on marketable securities which, if adopted, could have a very significant impact on insurance financial statements. The intent of this paper is to describe the accounting practices currently in use and the change being studied by the AICPA and to point out the possible significance and implications of these practices. Statutory Accounting Practices Historically insurance companies have been required to develop elaborate and detailed annual reports for state regulatory commissions, using standard forms and procedures developed by the National Association of Insurance Commis-