Volume 34 Number 1
Volume 34 Number 2
Volume 34 Number 3

Volume 34 Number 1 1999

 ARTICLES:

Foreign Company Listings in the United States
by Sara Hanks

Acceptance and Observance of International Accounting Standards: An Empirical Study of Companies Claiming to Comply with IASs
by Donna L. Street, Sidney J. Gray, and Stephanie M. Bryant
James Madison University and University of New South Wales

Key Words: International Accounting Standards; IASC: Comparability Project; Compliance with IASs

Abstract: This article reports on an empirical study of the accounting policies and disclosures of a sample of major companies from around the world claiming to comply with IASs in l996. Specifically, the research addresses the extent of compliance with the IASs revised during the Computability Project. The findings reveal significant noncompliance with IASs including; use of LCM for inventories; violation of the all-inclusive requirement for reporting profit/loss and of the strict definition of extraordinary items; failure to capitalize certain development costs; failure to provide all required disclosures for property, plant, and equipment, particularly those associated with revaluations; failure to comply with pension disclosure requirements; for companies operating in hyperinflationary economies, failure to restate foreign entities in accordance with IAS 29; and charging goodwill to reserves or amortizing goodwill over a period in excess of the 20 year limit. Noncompliance, as evidenced by the current research, is very problematic for the IASC as it strives to achieve an IOSCO endorsement and as IAS l Revised becomes effective for 1999 financial statements.

A Comparative Analysis of Management Accounting Practices in Australia and Japan: An Empirical Investigation
by Hema Wijewardena and Anura De Zoysa
University of Wollongong and Nagoya University

Key Words: Japanese management accounting, Cost management, Australian costing practices.

Abstract: This paper is based on the findings of a questionnaire survey conducted on large manufacturing firms in Australia and Japan during 1997. The results of the survey have revealed a number of important differences between the two countries. For example, while management accounting practices of the Australian companies place an emphasis an cost control tools at the manufacturing stage, those of the Japanese companies devote a much greater attention to cost planning and cost reduction tools at the product design stage. Further, the Japanese companies seem to have introduced more frequent changes to management accounting practices than their Australian counterparts.

An Empirical Investigation of Factors Affecting the Selection of Markets for Foreign Bond Issues
by Mary A. Flanigan, Rasoul H. Tondkar, and Robert L. Andrews
Longwood College and Virginia Commonwealth University

Key Words: Foreign bonds; Accounting similarity/diversity; Selection of markets for foreign bonds; International capital markets, Classification of accounting systems; Disclosure requirements.

Abstract: This study investigates factors affecting the selection of markets for issuing foreign bonds and assesses the increase in the likelihood of issuing in a given market when certain variables are present. Logistic regression models evaluate similarity/diversity of accounting systems; disclosure levels; and the existence of a parent/subsidiary and/or an equity listing in the market country as independent variables. The results support the hypothesis that accounting diversity is an influencing factor in selection of a market for issuing foreign bonds.

The Impact of Tax Rules on Financial Reporting in Germany, France, and the UK
by Eva L. E. Eberhartinger
Vienna University of Economics and Business Administration

Key Words: Conformity. Tax link, France. Germany, UK. Financial reporting

Abstract: The paper examines the influence of tax rules on the financial statements of a company. An analysis of differences between tax reporting and commercial reporting in Germany, France and the UK shows that these differences lead to distorting effects with respect to the comparability of statements of companies from different countries, and with respect to non-compliance with the true and fair view requirement in cases where such influence of tax rules on the financial statements actually occurs. The comparison is conveyed with a view to the fourth EC company law directive, which itself does not take a position for or against the influence of tax rules. The strong influence of tax rules on the commercial accounts in Germany, in contrast to the UK, where such influence is minimal, and the moderate approach of France, which stands in between the two other countries is discussed. The different approaches of the three countries can be considered an obstacle to comparability in the opinion of the author, the required information in the notes on the influence of tax provisions does not compensate for the shortcomings of the influence of tax rules on the annual accounts of companies.

Firm Characteristics of Swiss Companies that Utilize International Accounting Standards
by Ann B. Murphy
Metropolitan State College of Denver

Key Words: International Accounting Standards; Switzerland; Firm characteristics

Abstract: This study examines firm specific characteristics of Swiss companies that have voluntarily elected to prepare financial reports using International Accounting Standards (IASs). An identification of differences between companies that select to adopt IASs and those that do not should aid in determining what the perceived benefits might be. The variables tested were foreign sales activity, foreign stock exchange listings, debt/equity ratio, market value, size and audit firm.

The study used MANOVA and stepwise discriminant analysis to determine if differences existed between the group of 22 Swiss companies that adopted IASs and a group of 22 Swiss companies that use local standards, based on six independent variables. The foreign activity variables, percent of foreign exchange listings and percent of foreign sales were found to be statistically significant. Thus, the perceived benefits might be that international standards facilitate reporting to multinational stakeholders, and are not necessary for companies that are only required to report to domestic users. This study is an initial examination of Swiss companies that use IASs. Numerous questions, such as how does the market value companies' that utilize IASs, remain to be asked and investigated.

Collection and Transmission of Accounting Information Across Cultural Borders: The Case of US MNEs in Jordan
by Victoria Beard and Ziad AI-Rai
University of North Dakota and University of Jordan

Key Words: International accounting; Cross-cultural; Jordan; Branch office

Abstract: This paper examines some of the problems facing host country nationals as they work to comply with the US parent company’s costing, accounting, and reporting mandates. The study contributes to our understanding of international accounting in three ways. First, it focuses on intra-firm rather than international coordination and control issues. Second, it provides numerous applied examples from inside business how cross-cultural misunderstandings can adversely affect firm performance. Third, it approaches issues from the perspective of the foreign (in this case Middle Eastern) accountant, controller or manager rather than from the more frequently studied perspective of the US parent. Presumably, a better understanding of the day to day problems facing offshore foreign managers will help home-office employees work more effectively with their overseas counterparts.

BOOK REVIEWS:

Kaikeikankyo Nippon no Kaikei to Kokusaitekichowaka no Shiten kara
by Elli Okada
Reviewed by YOSHINAO KOZUMA

Internationale Rechnungslegung
by Bernhard Pellens
Reviewed by KONRAD W. KUBIN

Cost Management in World Practice
by Alicja Jarugowa, Wojciech Andrzej Nowak and Anna Szzychta
Reviewed by TERESA KIZIUKIEWICZ

Transnational Accounting, TRANSAC
edited by Dieter Ordelheide and KPMG
Reviewed by PASCALE DELVAILLE

FEE Comparative Study on Conceptual Accounting Frameworks in Europe
by the Fédération des Experts Comptables Européens
Reviewed by ANGELO RICCABONI

Macro-Accounting and Modern Money Supplies
by B. A. Swanson
Reviewed by PROF. A. MAGGINA

Volume 34 Number 2 1999

Auditing of State-Owned Enterprises in China: Historic Development, Current Practice and Emerging Issues
by Qingliang Tang, Chee W. Chow, and Amy Lau
University of Western Sydney, Nepean, N. S. W, Australia; San Diego State University, San Diego, CA, USA and Oklahoma State University, Stillwater, OK, USA

Key Words: Auditing; State-owned enterprises; Reform; China

Abstract: State-owned enterprises (SOEs) play a pivotal role in the Chinese economy. Together they manage over 5O% of China's national capital. With China steadily moving towards a market economy SOEs increasingly are given the latitude to seek external funding, develop joint ventures and more generally, to operate without direct government involvement. This separation of ownership and management, in turn, has increased the need to monitor and control China's SOEs, and audits can play a key role in this oversight function. Despite the potentially important role that SOE audits can play in safeguarding the interests of the state and external investors, there is a relative dearth of research on the current state of and challenges facing such audits. This paper provides an overview of the historical development of the SOE audit by the Ministry/Department of Finance, and current SOE audit practices performed by the State Audit Administration/Qffice. The main conclusion of the study is that, with ownership of the SOE being further diversified and the operation of the SOE being completely commercialized (ie, without any political consideration), the nature of the state audit office us a government agent is incompatible with the role of independent auditor for SOEs. SOEs need a non-government third party to verify its financial statements and audit its business activities to meet the information needs of diversified interest groups in the SOE including the state. individual or institutional investors, creditors and employees etc.

A Cross-National Test of Determinants of Inflation Accounting Practices
by Jeffrey J. Archambault and Marie E. Archambault
Clarkson University School of Business, Potsdam, NY USA

Key Words: Cross-national; Culture; Inflation accounting; Social change model

Abstract: This paper develops a model to identify characteristics that may affect inflation accounting practice among countries. Parametric and nonparametric tests are conducted to determine the effect of inflation rate, national culture, legal system, economic system, accounting system, and other accounting policies on inflation accounting practice. Countries that use price level adjustments have higher inflation than countries that use historical cost or historical cost with some revaluation. The results indicate that national culture, accounting system, economic system, and financial statement disclosures are also important factors in explaining the cost basis used by businesses operating in various countries.

Voluntary Environmental and Social Accounting Disclosure Practices in the Asia-Pacific Region: An International Empirical Test of Political Economy Theory S.
by Mitchell Williams
University of Calgary, Calgary, Alberta, Canada

Key Words: Environmental, social; Asia-Pacific; disclosures; political economy

Abstract: The principal objective of this paper is to provide empirical evidence on the significance of cross-country (societal) variables that may assist in explaining variations in the quantity of voluntary environmental and social accounting disclosure (VESAD) information provided by organizations in annual reports across national boundaries. Using content analysis (number of sentences), 356 listed companies operating in seven Asia-Pacific nations (Australia, Singapore, Hong Kong. the Philippines, Thailand, Indonesia and Malaysia) were surveyed. Empirical tests (multiple regression analysis) conducted found that two cultural dimensions (uncertainty avoidance and masculinity) and political and civil systems are significant determinants of the quantity of VESAD information supplied by listed companies in these countries. In contrast, the legal system and equity market do not appear to be important factors in explaining variations in VESAD levels across these countries. In conclusion. it is argued that the socio-political and economic system of a nation interact to shape the perceptions of organizations in the need to release VESAD that meet social expectations as well as to avoid government regulation to preserve their own self-interests. This is consistent with Bourgeois political economy theory.

An Empirical Investigation of Multinational Firms' Compliance with International Accounting Standards
by Samir M. El-Gazzar, Philip M. Finn and Rudy Jacob
Pace University, New York, NY, USA

Key Words: International Accounting Standards; Cross-border trade; Harmonization; Voluntary disclosure

Abstract: Over the years, the number of firms acknowledging adherence to International Accounting Standards (MS) in the presentation of their financial statements has increased steadily. Since adherence to IAS is not mandatory the questions are who are these firms, what are their characteristics, and why are they voluntarily complying with IAS. This study examines the underlying motivations and characteristics of firms complying with IAS. This examination is of special interest to the International Accounting Standards Committee (IASC) for assessing the merits of mandating LAS by multinational firms. It also helps accounting researchers in understanding the disclosure behavior of multinationals. Our results indicate that the magnitude of a firm’s foreign operations, its financing policy, membership of certain geographical and trade blocks in the European Union (EU), and multiple listing on foreign stock exchanges are significantly associated with multinationals' compliance with MS.

Do Firms Use Industry-Wide Targets When Managing Earnings? Finnish Evidence
by Juha-Pekka Kallunki and Minna Martikainen
University of Oulu, Oulu, Finland; and LTT-Research, Helsinki, Finland

Key Words: Earnings management; Financial ratios; Ratio adjustment process; Industry analysis; Nonlinear models; Finland

Abstract: This study investigates the adjustment process of the earnings management of a firm to industry-wide targets in Finland. where accounting and tax legislation provide extensive possibilities for firms to manage their earnings. In addition, the amount of earnings management is directly measurable from published financial statements of the Finnish firms. The results of the study indicate that the management of a firm takes into account the extent of earnings management of other firms operating in the same industry when managing reported earnings. Furthermore, firms seem to consider mainly' the permanent part of the change in the industry average when determining the target level of earnings management.

An Analysis of the Authorship of International Accounting Research in U.S. Journals and AOS: 198Q through 1996
by Jenice Prather-Kinsey and Norlin Rueschhoff
The University of Missouri, Columbia, MO, USA; and The University of Notre Dame, Notre Dame, IN, USA

Key Words: International accounting research, Journals; Academic institutions; Authors; Academic rank; Methodology

Abstract: We analyze the international accounting research published in 30 U.S. academic journals and Accounting Organizations and Society (AOS) from 1980 to 1996 to provide strategies for those interested in pursuing academic careers in international accounting. We focus on the relationship between the most prolific authors and their academic environment. Our findings show that the set of authors and schools of the most prolific authors in international accounting in the U.S. are not the same as the set of the most prolific authors and schools of AOS. Neither the international accounting authors nor their academic affiliations were dominated by U.S. or U.K. academic institutions. The authors in international accounting were promoted within and between schools and many were full professors with professorships. The dominant research methods used and topics researched in AOS were different from those of U.S. journals. Young faculty should develop their career objective and align their employment and publications goals accordingly because they have a broad selection of mentors, universities and journals for which to target their research. Aligning research interests with academic environment choices should maximize an international accounting faculty’s publication productivity and academic rank.

Research Note: The Impact of Personal Connection on Auditor Concentration
by Nabil Baydoun

Volume 34 Number 3 1999

The Comprehensiveness of Cash Flow Reporting in the United Kingdom: Some Characteristics and Firm-specific Determinants
by R. S. Olusegun Wallace, Mohammed S. I. Choudhury, and Ajay Adhikari
King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia; City University, London, UK, and American University, Washington, DC, USA

Key Words: UK Cash flow reporting; Comprehensiveness; Firm-specific determinants; Free cash flows; Direct versus indirect method of presentation of operating cash flows

Abstract: We report the results of a study of the characteristics and comprehensiveness of disclosure in cash flow statements (CFSs) published in the 1995 annual reports of UK firms and their relationships with selected firm-specific characteristics. Based on the data from a sample of 200 firms, our results suggest that the comprehensiveness of cash flow reporting is (1) an increasing function of firm size (however defined) and (2) a decreasing function of return on sales. There are significant differences in cash flow reporting comprehensiveness among industrial groups and between positive and negative net cash flows firms. However, our results also suggest that cash flow reporting comprehensiveness is not associated with net cash flow per £ worth of equity, liquidity, leverage, and the number of foreign enterprises. Data Availability: The data used in this study were obtained from the annual reports of sample firms and Times 1000.

Corporate Disclosures Made by Chinese Listed Companies
by Zezhong Xiao
The Cardiff University of Wales, Cardiff, UK

Key Words: Accounting regulation; Corporate disclosure; China; Developing economies;Financial reporting; International accounting

Abstract: This paper investigates the current corporate disclosure requirements placed upon Chinese listed companies and the level of compliance with them. Although influenced by the old accounting regime adopted in the planned economy, these recently promulgated requirements represent a significant development towards a market-oriented economy.  However, problems still exist, perhaps the most serious one being that these requirements are not based on users' information needs. Nonetheless, the level of compliance appeared to be high largely because these requirements are mandatory. In addition, companies voluntarily disclosed, among others, forecast earnings (1argely influenced by traditional practice) and a report of the Supervisory Board (following foreign practice) although the most updated regulations have discouraged the former and made the latter compulsory. Compared with those in the planned economy, some current disclosure practices represent advances while others may be seen as deficiencies.

Determinants of Audit Fees: The Importance of Litigation, Disclosure, and Regulatory Burdens in Audit Engagements in 20 Countries
by Mark H. Taylor and Daniel T. Simon
University of South Carolina, Columbia, SC, USA; and University of Notre Dame, Notre Dame, IN. USA

Key Words: Audit fees; International auditing; Litigation; Regulation

Abstract: The majority of previous audit fee research has focused on fees' and their determinants' in individual countries. This paper combines fee observations from 20 countries into a single sample. The benefit of aggregating fee observations from differing countries is the opportunity to examine the effects of variables such as litigation and regulation. which vary across, but not within a given country on audit fees. Hence. the focus of this paper is on "macro" determinants' of audit fees. The results indicate that increased litigation pressures, institutional traditions of increased disclosure, and increased regulation put upward pressures on audit fees. This paper establishes the role of those variables in the determination of fees. integrating an International perspective in the examination of audit fees.

Corporate Social Disclosures by Listed Companies on Their Web Sites: An International Comparison
by S. Mitchell Williams and Carol-Anne Ko Wern Pei
Hong Kong Polytechnic University, Hung Hom, Hong Kong, SAR, People's Republic of China

Key Words: Corporate social disclosures; World Wide Web; Asia-Pacific; Quantity; Quality

Abstract: This paper extends previous research of corporate social disclosures by concentrating on information released on a firm’s Web Site rather than through annual reports. It compares and contrasts corporate social disclosure practices between the two mediums of communication with respect to the number of firms reporting, amount of information released, and nation. In addition, this study considers the practices of 172 organizations from four nations within the Asia-Pacific region (namely Australia, Singapore, Malaysia and Hong Kong). The principal findings of this study are: (1) Australian and Singaporean firms provide significantly more corporate social disclosures on their Web Sites than in annual reports with their counterparts in Malaysia and Hong Kong showing no significant differences; (2) organizations in all countries appear to provide more narrative information on Web Sites than annual reports; and (3) companies provide a greater emphasis on disclosing product and customer-related information on their Web Sites than in annual reports.

Implementing the EU Accounting Directives in Sweden – Practitioners' Views
by John Blake, Hilary Fortes, Catherine Gowthorpe, and Marl Paananen
University of Central Lancashire, Preston UK, Middlesex University Business School, UK; and Gothenburg School of Economics, Gothenburg, Sweden

Key Words: Tax-accounting link; True and fair override; Sweden; International accounting

Abstract: Sweden legislated in 1995 to implement the European Union (EU) directives relating to harmonization of accounting. This article reports the results of an empirical study, based upon interviews and, questionnaire survey on the attitudes of Swedish practitioners to the harmonizing legislation and to the current state of Swedish accounting The research finds that the Germanic influence on Swedish accounting is lessening in importance, with a likely weakening of the close line between taxation and accounting and a perception amongst practitioners of the increasing importance of the International Accounting Standards Committee (IASC) and US influences.

Governmental Accounting and Auditing in Thailand: An Overview and Some Suggestions for Improvement
by Laurie J. Henry and Panu Attavitkamtorn
Old Dominon University Norfolk, VA, USA

Key Words: Thailand government accounting; Thailand government auditing; Thailand performance auditing

Abstract: The purpose of national government is to deliver services to its constituents that often do not give rise to revenue. Frequently governments make such resource allocation decisions with poor quality financial information that is not reliable, not timely and limited in its data on assets and liabilities. One such government is Thailand, which in May 1997 experienced an economic crisis that required the intervention of the International Monetary Fund, toppled the existing government. and contracted the Thai economy Thus, the Thai government faces an increasing need for improved government financial information for planning for an economic recovery. This paper will present the current state of governmental accounting and auditing in Thailand. Further the author will make some suggestions for improving the reporting and auditing of financial information to facilitate government decision making with the existing economic crisis.