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Craig Deegan & Jeffrey Unerman
Financial Accounting Theory european edition
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Financial Accounting Theory european edition
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Financial Accounting Theory european edition
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Craig Deegan Jeffrey Unerman
London Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis Bangkok Bogotá Caracas Kuala Lumpur Lisbon Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
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Financial Accounting Theory Craig Deegan & Jeffrey Unerman ISBN-133 978 ISBN-1 9780077 00771089 108960 60 ISBN-1 ISB N-100 0-0 0-07-7 7-7108 1089696-55
Published by McGraw-Hill Education Shoppenhangers Road Maidenhead Berkshire SL6 2QL Telephone: 44 (0) 1628 502 500 Fax: 44 (0) 1628 770 224 Website: www.mcgraw-hill.co.uk British Library Cataloguing in Publication Data http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear ning-resources.php?promoCode=&partnerID=&content=story&storyID=19988 =&content=story&storyID=19988 A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data The Library of Congress data for this book has been applied for from the Library of Congress Acquisitions Editor: Mark Kavanagh Senior Development Editor: Natalie Jacobs Marketing Manager: Marca Wosoba Production Editor: James Bishop Text Design by Jonathan Coleclough Cover design by ego creative limited Typeset by MCS Publishing Services Ltd, Salisbury, Wiltshire. Printed and bound in Great Britain by Bell & Bain Ltd, Glasgow Published by McGraw-Hill Education (UK) Limited an imprint of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright © 2006 by McGraw-Hill Education (UK) Limited. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means,Companies, or stored in Inc., a database or retrieval thenetwork prior written consent of The McGraw-Hill including, but notsystem, limitedwithout to, in any or other electronic storage or transmission, or broadcast for distance learning. ISBN-13 978 ISBN-13 9780077 00771089 108960 60 ISBN-1 ISB N-100 0-0 0-07-7 7-7108 1089696-55 © 2006. Exclusive rights by The McGraw-Hill Companies, Inc. for manufacture and export. This book cannot be re-exported from the country to which it is sold by McGraw-Hill.
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Dedication
From Craig: My efforts are dedicated to my beautiful young daughter, Cassandra Joy Deegan. From Jeffrey: This book is dedicated to Terry and Alan Unerman – a most loving, devoted and very special couple.
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v
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Brief table of contents
Preface
Guided tour
xi
xiv
Technology to enhance learning and teaching xvi Acknowledgements
xviii
1 Introduction to financial accounting theory 2 The financial reporting environment
3 The regulation of financial accounting
1 31
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4 International accounting
55
85
5 Normative theories of accounting 1: The case of accounting for changing prices
121
6 Normative theories of accounting 2: The case of conceptual framework projects
167
7 Positive Accounting Theory
205
8 Unregulated corporate reporting decisions: Considerations of systems oriented theories 9 Extended systems of accounting: The incorporation of social and environmental factors within external reporting
267
309
10 Reactions of capital markets to financial reporting 11 Reactions of individuals to financial reporting: An examination of behavioural research
375
12 Critical perspectives of accounting
427
Index
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409
456
Detailed table of contents
Preface
xi
Guided tour
xiv
Technology to enhance learning and teaching Acknowledgements
xvi
xviii
1 Introduction to financial accounting theory
Opening issues ◆ What is a theory? http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear ning-resources.php?promoCode=&partnerID=&content=story&storyID=19988 =&content=story&storyID=19988 ◆ Why it is important for accounting students to study accounting theory ◆ A brief overview of theories of accounting ◆ Evaluating theories of accounting ◆ Can we prove a theory? ◆ Evaluating theories – considerations of logic and evidence ◆ Outline of this book ◆ Questions ◆
2 The financial reporting environment ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆
3 The regulation of financial accounting ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆
Opening issues Introduction An overview of the development and regulation of accounting practice The rationale for regulating financial accounting practice The role of professional judgement in financial accounting How powerful is the accountant? Chapter summary Questions
1 1 2 4 5 11 14 16 22 24 31 31 32 34 38 41 44 49 50
Opening issues Introduction The ‘free market’ perspective The ‘pro-regulation’ perspective Public interest theory Capture theory Economic and social impacts of accounting regulation Lobbying and the economic interest group theory of regulation Accounting regulation as an output of a political process
vii
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55 55 56 57 62 65 67 69 71 75
viii
DETA DE TAILE ILED D TA TABL BLE E OF CO CONT NTEN ENTS TS
◆ ◆
Chapter summary Questions
4 International accounting ◆ ◆ ◆ ◆
◆ ◆ ◆ ◆ ◆
77 79
Opening issues Introduction Evidence of international differences in accounting
85 85 86 86
Explanations of differences in accounting practices employed in different countries Reasons for harmonization and standardization Obstacles to harmonization and standardization of accounting Processes and institutions of international accounting standardization Chapter summary Questions
5 Normative theories of accounting 1: The case of accounting for changing prices ◆
Opening issues
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◆ ◆
◆ ◆
Limitations of historical cost accounting in times of rising prices Current purchasing power accounting Calculating indices Current cost accounting Exit price accounting: the case of Chambers’ continuously contemporary accounting The demand for price adjusted accounting information Professional support for various approaches to accounting for changing prices Chapter summary Questions
6 Normative theories of accounting 2: The case of conceptual framework projects
88 106 108 109 114 115
121 121 122 123 128 129 140 146 152 155 158 159
167 167
◆
Opening issues
◆
Introduction 168 What is a conceptual framework of accounting? 168 A brief overview of the history of the development of conceptual frameworks 171 Building blocks of a conceptual framework 175 Benefits associated with having a conceptual framework 194 Conceptual frameworks as a means of legitimizing standard-setting bodies 197 Chapter summary 198 Questions 199
◆ ◆
◆ ◆ ◆ ◆ ◆
7 Positive Accounting Theory ◆ ◆ ◆ ◆
Opening issues Positive Accounting Theory defined The origins and development of Positive Accounting Theory Opportunistic and efficiency perspectives
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205 205 206 208 220
DETAILED TABLE OF CONTENTS
◆ ◆ ◆ ◆ ◆ ◆
Ownermanager contracting Debt contracting Political costs Some criticisms of Positive Accounting Theory Chapter summary Questions
224 237 241 247 252 253
8 Unregulated corporate reporting decisions: Considerations of systems oriented theories ◆ ◆ ◆ ◆ ◆ ◆ ◆ ◆
Opening issues Introduction Political economy theory Legitimacy theory Stakeholder theory Institutional theory Chapter summary Questions
267 267 268 269 271 284 295 299 300
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9 Extended systems of accounting: The incorporation of social and environmental factors within external reporting ◆ ◆ ◆ ◆ ◆
◆ ◆
◆
◆ ◆
Opening issues Introduction Stages of sustainability reporting Historical development of social and environmental reporting practices Objectives of the social and environmental reporting process – the why why stage stage Identifying stakeholders – the who who stage stage Identifying stakeholder information needs and expectations – the for what stage what stage Theoretical perspectives on some social and environmental reporting procedures – the how how stage stage Chapter summary Questions
10 Reactions of capital markets to financial reporting ◆ ◆ ◆ ◆ ◆ ◆
◆ ◆
Opening issues Introduction An overview of capital market research The information content of earnings Results of capital market research into financial reporting Do current share prices anticipate future accounting earnings announcements? Chapter summary Questions
11 Reactions of individuals to financial reporting: An examination of behavi behavioural oural resear research ch ◆ ◆
Opening issues Introduction
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309 309 310 311 314 315 335 340 352 365 367 375 375 376 377 380 383 396 401 403
409 409 410
ix
x
DETA DE TAILE ILED D TA TABL BLE E OF CO CONT NTEN ENTS TS
◆ ◆ ◆
◆ ◆ ◆ ◆ ◆ ◆
An overview of behavioural research The Brunswik Lens Model The use of particular information items and the implications of different forms of presentation Decision-making processes and the use of heuristics Issues of decision accuracy Protocol analysis
410 411
Limitations of behavioural research Chapter summary Questions
421 422 422
415 417 419 420
12 Critical perspectives of accounting
Opening issues ◆ Introduction ◆ The critical perspective defined ◆ Critical accounting research versus social and environmental accounting research ◆ ning-resources.php?promoCode=&partnerID=&content=story&storyID=19988 Possible impact of critical accounting research on social practice http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear =&content=story&storyID=19988 ◆ The role of the State in supporting existing social structures ◆ The role of accounting research in supporting existing social structures ◆
◆ ◆ ◆
The role of accounting practice in supporting existing social structures Chapter summary Questions
Index
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427 427 427 428 433 436 439 440 444 449 450 456
Preface
This book has been written to provide readers with a balanced discussion of different theories of financial accounting. Various theories for and against regulation of financial accounting are critically discussed and various theoretical perspectives, including those provided by positive accounting theory, political economy theory, stakeholder theory, institutional theory and legitimacy theory, are introduced to explain different types of voluntary reporting decisions. The book also analyses and evaluates the development of various normative theories of accounting, including various approaches developed to account for changing http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear ning-resources.php?promoCode=&partnerID=&content=story&storyID=19988 =&content=story&storyID=19988 prices, and different normative perspectives about the accountability of business entities, as well as various conceptual framework projects. It also emphasizes the role of a number of factors in explaining both international differences in accounting and recent institutional efforts towards international harmonizing of accounting. In addition to providing explanations for why or how organizations should disclose particular items of financial information, the book investigates research that explores how or whether people at an aggregate and individual level demand or react to particular disclosures. Reflecting the growing relevance of social and environmental reporting issues to students, government, industry and the accounting profession, social and environmental reporting issues are discussed in depth. The book also provides an insight into the role of financial accounting from the perspective of a group of researchers who are often described as working from a critical perspective. Being divided into 12 chapters sequenced in a logical order, this book can provide the entire core material required for a course on financial accounting theory. Alternatively, the book can be used as a key text for more general courses which include coverage of aspects of financial accounting theory. All of the material within the book could realistically be covered in the average 10 to 12 week university term, with chapters being studied in the sequence in which they are presented. Because it provides a balanced perspective of alternative and sometimes conflicting theories of financial accounting, it also provides a sound basis for readers contemplating further research in different areas of financial accounting. In writing this book, a style has been adopted that enables students at both the undergraduate and postgraduate level to gain a sound understanding of financial accounting theory. Each chapter incorporates research from throughout the world,
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xi
xii
P REF ACE
hence the book is of relevance to financial accounting theory students internationally. Much of the explanatory material has been drawn from European practical examples – thus making the text even more accessible and relevant to students in Europe. To assist in the learning process, each chapter provides learning objectives, chapter summaries and end-of-chapter discussion questions. Throughout the book readers are encouraged to critically evaluate and challenge the various views presented. To give the various perspectives a ‘real world’ feel, many chapters use recent articles from different newspapers, directly relating to the issues under consideration. In the five years since Craig Deegan wrote the Australian edition of this book, it has proved very popular among both students and lecturers throughout Europe. In addition to the academic coverage of the book, readers have praised the accessible and engaging style in which it was written. This new European edition retains the features of the Australian edition that students and lecturers found so appealing and distinctive, such as use of straightforward explanations, frequent practical http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear ning-resources.php?promoCode=&partnerID=&content=story&storyID=19988 examples, and illustrations using =&content=story&storyID=19988 newspaper articles. With many illustrations drawn from European business and accounting situations, we believe this European edition be even more edition. appealing, relevant to readersofinupdating Europe than thewill earlier Australian Weaccessible have also and taken the opportunity the text to reflect the sometimes significant developments in accounting theory in the past five years. Craig Deegan and Jeffrey Unerman
About the Authors Craig Deegan Craig Deegan BCom (University of NSW), MCom (Hons) (University of NSW), PhD (University of Queensland) is Professor of Accounting and Director of Research and Development within the School of Accounting and Law at RMIT University, Melbourne, Australia. Craig has taught at both undergraduate and postgraduate levels at universities in Australia for more than two decades and has presented lectures internationally, including within the United Kingdom, United States, South Africa, France, China, Singapore, Hong Kong, Malaysia, South Korea and New Zealand. Prior to working within the university sector Craig worked as a chartered accountant in practice. He is a Fellow of the Institute of Chartered Accountants in Australia. Craig’s research has tended to focus on various social and environmental accountability and financial accounting issues and has been published in a number of leading international accounting journals, including: Accounting, Organizations and Society ; Accounting and Business Research ; Accounting, Auditing and Accountability Journal ; British Accounting Review and Review and The International Journal of Accounting .
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PREFACE
xiii
Jeffrey Jeffre y Unerman Unerman Jeffrey Unerman BA (CNAA), MSc (London), PhD (Sheffield), ACA, ILTM is Professor of Accounting and Corporate Accountability in the School of Management at Royal Holloway, which is one of the larger colleges of the University of London. He has taught at both undergraduate and postgraduate levels at universities in the UK since 1992. During this time he has also addressed audiences internationally in Ireland, France, Spain, Sweden, the Czech Republic, Lithuania, Belarus, the USA and Australia. Before joining the academic sector, he qualified as a chartered accountant (he is a member of the Institute of Chartered Accountants in England and Wales) and worked both in practice and commerce. His research, which has been published in a range of international academic journals – including Accounting, Organizations and Society ; Accounting , Auditing and Accountability Journal ; Critical Perspectives on Accounting ; The European Accounting Review and Review and Accounting Forum – focuses on issues of accountability both for social and environmental performance and for the management of intellectual http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear ning-resources.php?promoCode=&partnerID=&content=story&storyID=19988 =&content=story&storyID=19988 capital. He has worked on several research projects with other academics in the UK, Ireland, the Netherlands and Australia, and is a member of the Research Committee of the ACCA.
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Guided tour
Learning Objectives CHA P TER TER 1
Each chapter opens with a set of learning objectives, summarising what students should learn from each chapter.
Introduction to financial accounting theory
Learning Objectives Uponcompletingthis chapterreadersshould: ◆ understandthat thereare manytheories offinancial accounting; ◆
beaware ofthe importancethat knowledgeofdifferent accountingtheories hasin understandingandevaluating variousfinancialaccounting practices;
◆
understandthat thedifferent theoriesof i esof financialaccounting areoften developedto o pedto perform differentfuncti e rentfunctions,suchas o ns,suchas todescribeaccounting practice,orto prescribeparticularaccountingpractices; understandthat theories,includingtheories ofaccounting,are developedas a result ofapplyingvariousvaluejudgementsand s and thatacceptanceof one t h eo r y, i n p r ef e re nce t o o t h er s , w i l i np a r t b e t i ed t o o ne ’s o w nv a lu e judgements; beawarethat weshouldcritically evaluatetheories(interms ofsuchthings as theunderlying logic, assumptions made,and evidenceproduced) before acceptingthem.
◆
◆
Opening issues Atthebeginningofeachchapteranumberofissuesorprob e ranumberofissuesorproblemsareraisedthat relatetothe materialcovered.On completionofthe chapteryoushould beable tosupplyanswersto s to theproblems.In thisintroductorychapter,someofthe issuesthatwe caninitially considerare asfollows:
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Whydo studentsoffinancialaccountingneedtobotherwiththestudyof ‘theories’? Whynot juststudy somemore of thenumerousaccounting ng standards(andthere arecertainly plentyofthem!) orotherpronouncements ofthe accountingprofession? 1
Opening issue CHA P TER TER 3
This section introduces the chapter by providing a topical debate issue for students to consider while they progress through the chapter.
The regulation of financial accounting
Learning Objectives Uponcompletingthis chapterreadersshould: ◆ understandsomeofthevarioustheoreticalargumentsthathavebeen proposed infavour ofreducing theextentof regulationoffinancial accounting; ◆ under standsomeof thevarioustheoreticalargumentsfor regulatingthe a tingthe practiceoffinancial accounting; ◆ understandvarioustheoreticalperspectivesthat describewhois likelytogain thegreatestadvantage fromthe implementationofaccounting regulation; ◆ understandthataccounting standard-settingisa verypoliticalprocess which seeksthe viewsofa broadcross-sectionofaccount users; ◆ under standthe relevanceto theaccounting standard-setting n g process of potentialeconomicand socialimpactsarising fromaccountingregulations.
Opening issues (a) Throughoutthe worldinrecentyearsa numberof industrieshavebeen deregulated,for example,the bankingindustry, the telecommunications industryandtheairlineindustry.Therewerenumero r y.Therewerenumeroussimilarcallsfora s fora reduction in accounting regulations prior to the widely publicize c ized accounting‘scandals’at ’ at Enronandotherlargecompaniesinrecentyears (thesecallsusedsuchterminol e callsusedsuchterminologyas o gyas accountingstandardoverload accountingstandardoverload )) – b u t whatcouldsomeoftheimplicat d someoftheimplicationshavebee i onshavebeeniffinancialaccountingwas deregulated? 55
OPPORTUNISTIC AND EFFICIENCY PERSPECTIVES
Exhibit 7.1 Caption
Dutch supermarket admits £317m error AccountancyAge.com Ahold, the Dutch-based supermarket giant, has admitted that it overstated its profits by at least $500m (£317m). As a consequence, the company said its chief executive and chief financial officer would be leaving, while an investigation into its US food distribution division has begun. It has also postponed its annual results, which were meant to have been announced on 5 March. The news sent shock waves through the market as Ahold’s share price tumbled 40%. The trouble is believed to be centred around US Foodservice, Ahold’s distribution service, over the way it accounted for income. The company is already saddled with massive debt problems fuelled by an aggressive acquisition strategy, which has made merging different accounting practices together difficult. Accountancy Age, Age, 24 February 2003
223
Exhibits To give the various perspectives covered a ‘realworld’ feel many chapters include recent articles from a variety of newspapers, directly relating to the issues under consideration.
videdby PositiveAccountingTheory). Theextent ofthe opportunisticaccounting activitiesoftenonly becomesevidentfollowingcorporate failure,at whichtime the extentofasset overstatementwillbe highlighted. Thefollowingdiscussi n gdiscussionaddresse o naddressesthe variouscontractualarrangem u alarrangementsthat mayexist betweenownersand managers,and betweendebtholdersand managers, particularlythosecontractual arrangementsbasedon theoutput ofthe accounting system.Again,thesecontractualarrangementsare s are initiallyassumedtobe putin placetoreduce theagency costsofthe firm(the efficiencyperspective).However,it isassumedby PositiveAccounti i veAccountingtheorist n gtheorists thatoncethe arrangements arein place,partieswill, ifthey can,adopt manipulativestrategiesto generatethegreatest economicbenefitsto themselves(theopportu e lves(theopportunistic perspective).The v e).The following o wing materialalsoconsiders thepoliticalprocess andhow firmsmightuse accountingto minimizethe costsof potentialpoliticalscrutiny. Whilst someresearcherstend to utilizeeither z eeither the efficiency or opportunistic perspectives v es of Positive i ve AccountingTheory to explain particularaccountin c ularaccounting choices,it shouldbe notedthatin realityit t yit isoftendifficultto t to firmly conclude u de thatanaccountingchoicewas c ewas drivensolelyby anefficiencyor anopportunistic motivation.AsFields etal .(2001) .(2001) state: Unconstrainedaccountingchoiceis likelyto imposecostson financialstatementusers becausepreparersare likelyto haveincentivesto v esto conveyself-servinginformation.
xiv
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GUIDED TOUR
xv
CHAPTER SUMMARY
Chapter summary Thischapterprovid e rprovidesa numberof perspectivesaboutwhymanage v esaboutwhymanagementelects tomake particulardisclosures.Specifically,it reviewslegitimacytheory, stakeholdertheoryand, briefly,thenewly emergent(ina financialreportingcontext) institutio t utionaltheory– threetheoriesthatcanbe classifiedassystemsoriented theories.Systemsoriented e d theoriessee i essee theorganizationas beingpartof a broadersocialsystem. Legitimacytheory, stakeholdertheoryand institutionaltheoryare alllinked to politicaleconomytheorywhereinthe i caleconomytheorywhereinthe politicaleconomyconstit i caleconomyconstitutesthe u testhe social,politicalandeconomicfra c alandeconomicframeworkwithinwhichhumanlifetakesplace andsocial,political andeconomicissues areconsideredas inseparable.Political economytheorycan beclassifiedas e das either classicalor bourgeois. Bourgeois politicaleconomytheoryignores varioustensionswithinsociety andacceptsthe world asessentially l y pluralistic i c withno particularclassdominat c ularclassdominatinganother. i nganother. Legitimacytheoryand i macytheoryand stakeholder theory adoptthe bourgeoisperspective. Institutionaltheorycan adopteitherthe bourgeoisorclassical perspective. Legitimacytheor t imacytheory reliesupon e supon thenotionofa socialcontract,whic a lcontract,which isan impliedcontractrepresentingthe normsand expectationsofthe communityin whichanorganizatio z ationoperates.An organizationisdeemedtobelegitimat i onisdeemedtobelegitimateto e to theextentthatitcomplieswiththetermsofthesocialcont h thetermsofthesocialcontract.Leg r act.Legitimacyand therighttooperateareconsideredtogohandin hand.Accountingdisclosures areconsideredtorepresentonewayinwhichanorganizationcanlegitimizeits t imizeits ongoing n g operations. Wherelegitimacy is threatened, disclosure o sures are one strategyto e gyto restore legitimacy.In i macy.In practice,policiesto i ce,policiesto maintain a in or restore
299
Chapter summary This briefly reviews and reinforces the main topics students will have covered in each chapter to ensure they have acquired a solid understanding of the key topics.
corpo ratelegitimacy aresometimesarticulatedin a tedin termsof reputationrisk a tionrisk management. Twodifferentcategoriesof e sof stakeholdertheoryhave beenreviewed,these beingtheethical (ornormative)branch,and themanagerialbranch. Theethical branchof stakeholdertheorydiscussesissuesassociatedwithrightsto e dwithrightsto information,rightsthatshouldbemetregardlessofthe powerof thestakeholders involved.With v ed.Withinthe ethicalbranch,disclosur o suresare consideredto beresponsibilitydriven.The managerialbranchof stakeholdertheory,onthe otherhand, predictsthatorganizationswill tendtosatisfy theinformationdemands ofthose stakeholders who are important t ant to the organization’s o n’s ongoing survival. Whethera particularstakeholderreceives informationwillbe dependentupon howpowerfulthey areperceivedto be,withpower oftenconsideredin termsof thescarcityof theresources controlled by therespectivestakehol i vestakeholders.The d ers.The disclosur o sureof informatio m ation isconsideredtorepresentanimportantstrategyin managingstakeholders.
Questions This end-of-chapter feature is the perfect way to practice the techniques students have been taught and http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear =&content=story&storyID=19988 apply thening-resources.php?promoCode=&partnerID=&content=story&storyID=19988 methodology to real-world rea l-world situations.
QUESTIONS
Whilemany researchersquestionthe relevanceof‘Western style’accounting standardsacrossallcountries,effortsbya number ofinternationalorgan i onalorganizations are nevertheless e ss continuingto n uingto encouragequite culturally-disparate countriestoadoptIASs r iestoadoptIASsIFRSs.Thisimpliesthatthemembersofsome . Thisimpliesthatthemembersofsome internationalorganizationsare i onsare either unaware ofthe literature, oralternatively, v ely, choosetorejectit asirrelevant.As effortsbya numberofcountries,in particular membersof theEU,continueinrelationtothe domesticimplemen t icimplementation of internationalstandards,it isto beexpectedthat thisdebatewill continue.
Questions 4.1
In thecontextof financialaccounting, whatis harmonization o n andor standardization?
4.2
Identifysome i fysome factors thatmight be expectedto explain a in whydifferent countriesusedifferent systemsofaccounting. After considering n g theHofstede– Graymodel,brieflyexplainthe G raymodel,brieflyexplainthe hypothesizedlink z edlink betweensocietyvalues,accountingvaluesand accounting practice.
4.3
4.4
4.5
Anyeffortstowards standardizingaccountingpracticeson aninternational basisimpliesa beliefthata ‘one-size-fits-all’approachis all’approachis appropriate.Isthis naive? Whileit e it isoftenarguedthatwithinparticularcountriesthereshouldbe e sthereshouldbe someassociationbetween variousvaluesystems andaccounting systems,it isalsoargued(forexample,byBaydounandWillett,1995)thatovertime manyeventswouldtypicallyhave l yhave occurredthatconfound thisexpected ed relationship.Whattypeofevents mightconfoundtheexpectedrelationship?
4.6
4.7
BaydounandWillett(1995,p.72)identi t (1995,p.72)identifyanumberofproble f yanumberofproblemsintesting theHofstede– Graytheory. Graytheory. Theyemphasize thatmany accountingsystems areimported fromother countrieswithpossibly differentcultures.As they state: ‘Dueto theinterferencein whatwouldotherwise havebeen the natural evolutionof u tionof financialinformation o n requiremen r ements,there areno uncontaminatedexamples ofmodern accountingpractices in developing countries.Conseq r ies.Consequently greatcarehas tobe takenin usingdatafrom developingcountriestodraw inferencesaboutrelevance onthe basisof the Hofstede– Grayframew G rayframework.’Explainthepointof a inthepointof viewbeingprovidedby BaydounandWillett.Doyoubelievethatthe . Doyoubelievethattheyarecorrect? Asnoted in thischapter, Hamid,Craigand Clarke (1993) providean argumentthatreligioncanhavea o ncanhavea majorimpactonthe accountingsystem em chosen by particularcountri c ularcountries e s and thatbefore ‘Western’methodsof
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Acknowledgements
Authors’ Acknowledgments Many people must be thanked for helping us write this book. Professor Rob Gray from the University of St. Andrews is to be thanked for very useful and insightful advice provided in the initial development of this book and, through his Centre for Social and Environmental Accounting Research, for generously providing a great deal of useful research material. We also thank Professor David Owen from the University of Nottingham for his incisive advice and encouragement throughout the writing of both editions of this=&content=story&storyID=19988 book. Dr Julie Cotter from the University of http://www.download-it.org/learning-resources.php?promoCode=&partnerID http://www.download-it.org/lear ning-resources.php?promoCode=&partnerID=&content=story&storyID=19988 Southern Queensland is also to be thanked for her views about how the book should be structured and for her assistance in the writing of Chapter 10. In relation to development the original Australian edition, (Macquarie we also thank ProfessorColin Reg Mathews (CharlesofSturt University), Brian Millanta University), Dolley (Edith Cowan University), Dean Ardern (La Trobe University), Natalie Gallery (University of Sydney), for providing critical comments in relation to a number of the chapters, and Tanya Ziebell (University of Queensland) for unearthing some difficult-to-find research papers. In developing this European edition, we are very grateful for the helpful, perceptive and constructive comments – and for their strong encouragement – provided by Professor Brendan O’Dwyer (University of Amsterdam), Professor Richard Laughlin (King’s College, University of London), Alan Murray (University of Sheffield) and, as noted above, Professor David Owen (University of Nottingham). We are also especially grateful to Franco Zappettini for his encouragement, patience and support, and to our colleagues at Royal Holloway and RMIT for their ongoing support, particularly John Ahwere-Bafo at Royal Holloway for his work on the companion website. Lastly, we thank the staff at McGraw-Hill for supporting this project. Particular thanks go to Mark Kavanagh, Natalie Jacobs and Deborah Hey in the UK and to Luisa Cecotti and Valerie Reed in Australia. We hope readers continue to find this European edition interesting, informative and enjoyable to read, and we welcome constructive feedback.
Publisher’s Acknowledgme Acknowledgments nts Our thanks go to the following f ollowing reviewers for their comments at various stages in the text’s development: xviii
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PUBLISHERS ACKNOWLEDGEMENT
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Patrick Devlin – Caledonian Business School Reggy Hooghiemstra – Erasmus University, Rotterdam Rotterdam George Ia Iatridis – Un University of of Ma Manchester Carolyn Is Isaaks – No Nottingham Tr Trent Un University Chris Knoops – Erasmus University, Rotterdam Alan Murray – Sheffield University Management School D avrgar idaret OetwWo en odss Marg Ma Wood
– veersi rssity itty yo tiin gh am –U Un Un niiv iver off N No No ottt tti ngha ng ham m
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