The purpose of this paper is to chart, analyse and attempt to explain, the changes in the scope of consolidation over the last century in national and transnational regulations. It first concentrates on the four countries which have been the main drivers of change (the USA, the UK, Germany and France) and then on the transnational regulations of the EU and International Accounting Standards Board (IASB). This issue is of great topical importance (e.g. the IASB's standard on consolidation of 2011).
The author synthesises the literature and then analyses the extensive set of accounting requirements over a century from the four countries, the EU and the international standard setters. Three theoretical perspectives (transnational operations, financing and diffusion of ideas) are assessed as explanations for the developments.
Definitions of subsidiary have ranged from the simple to the byzantine, including poor use of such words as “control” and “power”. Over time, there have been many types of exclusion from consolidation (e.g. based on lack of ownership, lack of control, dissimilarity or foreignness), but the scope has gradually widened. In terms of the conventional understanding of international accounting differences, the US concentration on ownership and the German concentration on control are unexpected. However, the theoretical perspectives allow an explanation, largely in terms of financing and diffusion of ideas rather than transnational operations.
Policy implications concern the improvement in the use of such terms as “control” and “power”. Suggestions are made for clarifying the scope of consolidation.
This is the first paper to analyse the scope of consolidation over a century up to the present on a transnational basis, and the first to seek to explain the developments in a theoretical context.
The author is grateful, for comments on an earlier draft, to Kristina Artsberg (University of Lund), Jane Davison (Royal Holloway), Matthew Egan (University of Sydney), Brendan McSweeney (Royal Holloway), Christopher Napier (Royal Holloway), R.H. Parker (University of Exeter), Christian Stadler (Lancaster University), Renata Stenka (Keele University) and the Editor (Paul Gillis) and reviewers of this journal.
Nobes, C. (2014), "The development of national and transnational regulation on the scope of consolidation", Accounting, Auditing & Accountability Journal, Vol. 27 No. 6, pp. 995-1025. https://doi.org/10.1108/AAAJ-03-2013-1287Download as .RIS
Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited