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1 – 10 of over 10000Francesco Capalbo, Luca Galati, Claudio Lupi and Margherita Smarra
This paper aims to examine how proportional appropriation systems affect the quality of financial reporting in entities controlled by local governments.
Abstract
Purpose
This paper aims to examine how proportional appropriation systems affect the quality of financial reporting in entities controlled by local governments.
Design/methodology/approach
The authors examine this issue using the setting of Italian municipally owned entities (MOEs) following the implementation of a new accounting regulation that limits the spending power of the participating municipality when the owned entity reports losses. The authors apply Benford's law on net income figures using the Chi-square and Z-tests on the adjusted version of the Mean Absolute Deviation (MAD) criterion to spot any sign of low data quality. The sample, which consists of 2,120 MOEs, covers the years 2010–2019 and is evenly divided into the periods pre- and post-policy introduction.
Findings
Widespread data anomalies were detected following the introduction of the new regulation for MOEs controlled by local governments. Evidence is stronger for entities owned entirely by municipalities. The results suggest that the extent of data manipulation grows as the municipality's ownership stake increases, consistent with the hypothesis that a decrease in spending power through the appropriation of financial resources affects earnings management practices in municipally controlled entities.
Practical implications
This paper sheds light on government-based accounting policies by documenting evidence of somewhat inefficient responses by those responsible for the preparation of financial statements on behalf of municipally owned entities, and, accordingly, insights are provided to help review these policies so as to forestall even indirectly detrimental repercussions on public services.
Originality/value
This paper extends prior research in public-sector earnings management by being the first to test whether MOEs manipulate their earnings as a consequence of participating municipalities' reduced spending capability. Understanding factors influencing earnings management practices driven by governments, other than political incentives, is still an open issue.
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Hafez Abdo, Freeman Brobbey Owusu and Musa Mangena
The purpose of this study is to provide a harmonisation framework for the diverse accounting practices by extractive industries.
Abstract
Purpose
The purpose of this study is to provide a harmonisation framework for the diverse accounting practices by extractive industries.
Design/methodology/approach
The study takes a three-stage approach. The first involves a comprehensive literature review of the historical evolution of accounting regulations by extractive industries. The second involves constructing an accounting practice index for extractive industries. The third involves constructing a harmonisation framework.
Findings
The accounting practice index provides empirical evidence of the wide diversity of accounting practices by extractive industries. Analysis of the literature review addresses the several attempts by accounting and regulatory bodies to standardise the diverse practices of accounting by extractive industries and reasons for the lack of successful standardisations. The authors extract lessons from these previous attempts and propose a harmonisation framework.
Research limitations/implications
The proposed harmonisation framework can be used to align together the diverse accounting practices by extractive industries and enhance comparability and consistency of accounting figures and statements produced by these industries. Harmonising the diverse accounting practices is crucial for investment decision-making.
Originality/value
The harmonisation framework is the first of its kind that could enhance the comparability of accounts of extractive industries’ firms and be used to harmonise diverse accounting practices by other industries.
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Clinton Free, Stewart Jones and Marie-Soleil Tremblay
The purpose of this paper is to synthesize insights from the emerging work in accounting on greenwashing and sustainability assurance and propose an agenda for future research in…
Abstract
Purpose
The purpose of this paper is to synthesize insights from the emerging work in accounting on greenwashing and sustainability assurance and propose an agenda for future research in this area.
Design/methodology/approach
This article offers an original analysis of papers published on greenwashing and sustainability assurance research in the field of accounting. It adopts a systematic literature review and a narrative approach to analyse the dominant themes and key findings in this new and rapidly evolving field. From this overview, specific avenues for future research are identified.
Findings
In the past few years there has been a substantial spike in concern relating to greenwashing among academics, practitioners, regulators and society. This growing concern has only partly been reflected in the research literature. To date, research has primarily focused on: (1) the characteristics of firms adopting sustainability assurance, (2) the challenges facing sustainability auditors, (3) the development of appropriate assurance standards and regulations, and (4) capital market responses to greenwashing and sustainability auditing/assurance. Three key future research issues with respect to greenwashing are identified: (1) the future of standard-setter attempts to regulate greenwashing, (2) professional jockeying in sustainability reporting assurance, and (3) capital market opportunities and challenges relating to greenwashing and assurance.
Originality/value
Despite the profound economic and reputational impact of greenwashing and the rapid development of sustainability assurance services, research in accounting remains fragmented and emergent. This review identifies avenues offering considerable scope for inter-disciplinarity and bridging the divide between academia and practice.
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Jude Edeigba, Ernest Gyapong and Vincent Konadu Tawiah
An intractable effect of revenue and expense recognition based on tax regulation and accounting rules is unresolved and may be manageable only by reducing the value of deferred…
Abstract
Purpose
An intractable effect of revenue and expense recognition based on tax regulation and accounting rules is unresolved and may be manageable only by reducing the value of deferred taxes. Therefore, in this study, the authors examined the relationship between the International Accounting Standard 12 (IAS 12) and deferred income taxes associated with tax and accounting rules.
Design/methodology/approach
The authors used a large sample of balanced data from 144 firms across 1992–2019. To mitigate the problem of superfluous results, the authors used the same number of firms and years for pre- and post-IAS 12 periods. The authors employed robust econometric estimations to establish the impact of IAS 12 on deferred tax.
Findings
The regression results show that deferred tax assets decreased significantly, whereas deferred tax liabilities increased significantly, in the post-IAS 12 period. These contrasting results imply that IAS 12 implementation has increased conservatism and prudence in financial reporting. However, the authors find that the increase in deferred tax assets post-IAS 12 is value destructive, suggesting that its implementation has unintended consequences. The results are robust to alternative measurements and econometric identification strategies.
Originality/value
While prior studies have explored topics such as deferred tax measurement and the impact of income and expense recognition, the authors specifically analyzed how IAS 12 affects deferred taxes and their effect on the market valuation. The authors find that certain accounting standards may not be relevant to the capital market.
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Zubair Ahmad and Zeeshan Mahmood
This study seeks to deepen the understanding of the political process underlying the establishment and evolution of corporate governance (CG) regulations in a developing country.
Abstract
Purpose
This study seeks to deepen the understanding of the political process underlying the establishment and evolution of corporate governance (CG) regulations in a developing country.
Design/methodology/approach
Drawing on regulatory space concept (Hancher and Moran, 1989) and Oliver's (1991) typology of strategic responses, the authors identify which actor participated in and benefitted from the establishment of a new transnational CG regulation in Pakistan. Data were collected through interviews and from the published secondary sources.
Findings
The findings highlighted regulations are being influenced and shaped up by the political process of negotiation, bargaining, manipulation and domination between powerful and resourceful actors in a given regulatory space. National regulators and regulatees can be indeed fervent opponents to the transnational regulations when it comes to protecting their well-rooted national interests.
Originality/value
This study contributes to the accounting literature by illustrating political processes through which internationally recognised CG practices are resisted, negotiated and implemented in the developing countries. The regulator must pay attention that the outcome of the regulatory change process is the result of carefully crafted and conscious strategies of actors in the regulatory space.
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Alba Gómez-Ortega, Ana Licerán-Gutiérrez and Maria de la Paz Horno-Bueno
The “public interest” of financial institutions was used as an argument to intervene in accounting practices. The Bank of Spain's standard was not compatible with International…
Abstract
Purpose
The “public interest” of financial institutions was used as an argument to intervene in accounting practices. The Bank of Spain's standard was not compatible with International Accounting Standard (henceforth IAS) 39 and the Spanish banking sector had become one of the most provisioned in Europe. This makes it an interesting case study of the relationship between provisioning and income smoothing. The 2008 financial crisis revealed that provisions were insufficient and a reinforcement regulation process began in 2012. This paper aims to examine whether, since 2012, the Bank of Spain's regulatory effort on impairment accounting standards has induced less income smoothing, correcting its countercyclical effect.
Design/methodology/approach
A regression model is applied during the period 2005–2020, to test whether there is a trend change in the correlation between the level of provisions and annual earnings in 2012.
Findings
The results show that from 2012 onwards (when the Bank of Spain reinforced the regulation on provisioning), there was a correction in income smoothing behaviour.
Originality/value
This study provides empirical evidence that reinforces the claim that accounting policy can affect decision-making accounting practices, in this particular case, at the Bank of Spain.
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Know your customer (KYC), accounting standards, issuance, clearing, and trade settlement became the major barrier to implement accounting, accountability and assurance process in…
Abstract
Purpose
Know your customer (KYC), accounting standards, issuance, clearing, and trade settlement became the major barrier to implement accounting, accountability and assurance process in supply chain finance (SCF). Blockchain technology features have the potential to solve accounting problems. This research focuses on exploring how blockchain technology provides solutions to overcome the barriers of accounting process in SCF. The benefits, opportunities, costs and risks related to blockchain adoption are also explored.
Design/methodology/approach
Multi-case study and qualitative methods are used with a framework based on blockchain role to overcome the accounting process barriers. Ten blockchain projects in SCF and 29 interviews of participants as a unit of analysis are considered.
Findings
The findings indicate that blockchain technology offers solutions to solve accounting, accountability and assurance problems in SCF. Validity, verification, smart contracts, automation and enduring data on trade transactions potentially solve those barriers. However, it is also necessary to consider costs such as implementation, technology, education and integration costs. Then there are possible risks such as regulatory compliance, operational, code development and scalability risk. This finding reflects the current status of blockchain technology roles in SCF.
Research limitations/implications
This study unveils blockchain's SCF accounting potential, emphasizing multi-case method limitations and future research prospects. Diverse contexts challenge findings' applicability, warranting cross-industry studies for deeper insights. Addressing selection bias and integrating quantitative measures can enhance understanding of blockchain's accounting impact.
Practical implications
Accounting professionals can get an idea of the future direction and impact of blockchain technology on accounting, accountability and assurance processes.
Originality/value
This study provides initial findings on the potential, costs and risks of blockchain that is beneficial for parties involved in SCF, especially for banks and insurance underwriters. In addition, the findings also provide direction for the contribution of blockchain technology to accounting theory in the future.
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Shuwen Li, Zarina Zakaria and Khairul Saidah Abas Azmi
This study aims to explore the conflicting issues of carbon accounting and trading practices in China through the lens of agonistic democracy.
Abstract
Purpose
This study aims to explore the conflicting issues of carbon accounting and trading practices in China through the lens of agonistic democracy.
Design/methodology/approach
Based on a framework of three interrelated levels, this study explores emitting entity carbon accounting debates and discussions in mitigating climate change. Interview data were collected from 20 emitting entity participants and external auditors.
Findings
This study identifies irreconcilable conflicts between emitting entities and the government in carbon accounting and trading activities. Under the strong influence of government power, emitting entities portray themselves as “responsible” and “legitimate” state-owned enterprises. This study further identifies possible democratic spaces and reveals the potential for agonistic discourse and a fallacy of “consensus” and monologues in institutional space. If the emitting entity and government can overcome their participation challenges, this would significantly facilitate vibrant and agonistic discourse in carbon activities and pave the way for democratic spaces.
Originality/value
This study demonstrates the potential and limitations of applying agonistic democracy and the significance of participation in institutional spaces in government-led carbon accounting and trading issues. It enriches prior research on promoting democratic participation in carbon accounting from the agonistic democracy perspective.
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Ethiopia has enacted laws on transparency and disclosure of information in state-owned enterprises (SOEs). However, these laws are not strict enough, with the transparency and…
Abstract
Purpose
Ethiopia has enacted laws on transparency and disclosure of information in state-owned enterprises (SOEs). However, these laws are not strict enough, with the transparency and disclosure practices disappointing in the country. Thus, this study aims to investigate the legal framework governing transparency and disclosure in SOEs.
Design/methodology/approach
This study uses doctrinal, qualitative and comparative approaches. Domestic legal texts are appraised based on the organization for economic co-operation and development Guideline on Corporate Governance of State-owned Enterprises, the World Bank Toolkit on Corporate Governance of State-owned Enterprises and best national practices. This approach has been further corroborated by qualitative analysis of the basic principles of transparency and disclosure.
Findings
The finding reveals that the laws on transparency and disclosure do not comply with global practices and are inadequate to ensure transparency and discourse in SOEs. They fail to establish appropriate disclosure frameworks and practices at the SOE and state-ownership entity levels. They also indiscriminately subject enterprises to multiple auditing functions and conflicting responsibilities.
Originality/value
To the author’s knowledge, this study is the first legal literature on transparency and disclosure in Ethiopian SOEs. This study assists the state as owner in reforming the laws and uplifting SOEs from their current unpleasant condition. It can also become a reference for future research.
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Sarath Lal Ukwatte Jalathge, Hang Tran, Lalitha Ukwatte, Tesfaye Lemma and Grant Samkin
This study aims to investigate disclosure of asbestos-related liabilities in corporate accounts and counter-accounts to examine whether and how accounting contributes to corporate…
Abstract
Purpose
This study aims to investigate disclosure of asbestos-related liabilities in corporate accounts and counter-accounts to examine whether and how accounting contributes to corporate accountability for asbestos-contaminated products.
Design/methodology/approach
This study uses the Goffmanesque perspective on impression management to examine instances of concealed asbestos-related liabilities in corporate accounts vis-à-vis the revealing of such liabilities in counter-accounts.
Findings
The findings show counter-accounts provide significant information on liabilities originating from the exposure of employees and consumers to asbestos. By contrast, the malleability of accounting tools enables companies to eschew accounting disclosures. While the frontstage positive performance of companies served an impression management role, their backstage concealing actions enabled companies to cover up asbestos-related liabilities. These companies used three categories of mechanisms to avoid disclosure of asbestos-related liabilities: concealing via a “cloak of competence”, impression management via epistemic work and a silent strategy of concealment frontstage with strategic reorganisation backstage.
Practical implications
This study has policy relevance as regulators need to consider the limits of corporate disclosures as an accountability tool. The findings may also initiate academic and practitioner conversations about accounting standards for long-term liabilities.
Originality/value
This study highlights the strategies companies use both frontstage and backstage to avoid disclosing asbestos-related liabilities. Through analysis of accounts and counter-accounts, this study identifies the limits of accounting as an accountability tool regarding asbestos-induced diseases and deaths.
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