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Article
Publication date: 13 September 2011

Michael G. Keenan

The purpose of this paper is to explain the adoption of consolidated accounting for New Zealand holding companies during the period 1946‐1957.

Abstract

Purpose

The purpose of this paper is to explain the adoption of consolidated accounting for New Zealand holding companies during the period 1946‐1957.

Design/methodology/approach

An explanatory, multiple‐case, holistic case study is used to explain the relative increase in consolidated accounting adoption in New Zealand following passage of the Companies Act 1955, in spite of that accounting choice remaining voluntary under the legislation.

Findings

The explanation is subjected to replication tests for explanatory case studies, and is supported by the data from all 25 cases satisfying the criterion for inclusion in the study.

Originality/value

The explanation differs from the micro‐economic explanations of accounting choice in terms of firm characteristics which are generated within the positive accounting research paradigm. It utilizes findings from research in the economics of standardization which show that mechanisms for co‐ordinating the behaviour of market participants enable them to capture benefits of market externalities which would otherwise be unavailable because of market failure. The explanation is that: the low rate of pre‐legislation consolidated accounting adoption was due to a market failure around the accounting information which rendered unilateral adoption generally uneconomic; and the post‐legislation surge in adoption was due to passage of the Act resolving the market failure by overcoming a co‐ordination problem for potential adopters, enabling them to realise positive network effects and, therewith, net benefits of adoption.

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Pacific Accounting Review, vol. 23 no. 2
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 31 May 2006

Frias Aceituno, José Valeriano, Rodriguez Bolivar and Manuel Pedro

The majority stockholders are not the same as parent company stockholders in a consolidated entity when one or more subsidiaries own parent company’s shares. In this…

Abstract

The majority stockholders are not the same as parent company stockholders in a consolidated entity when one or more subsidiaries own parent company’s shares. In this milieu, the allocation of income could be performed: a) among majority and minority stockholders; b) among parent company stockholders and minority stockholders. Considering minority interest as a component of the consolidated equity, this paper demonstrates how the criterion used to allocate income can influence on the consolidated financial statements and, thereby, analysis based these financial statements.

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International Journal of Commerce and Management, vol. 16 no. 2
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 4 May 2012

Padmini Srinivasan and M.S. Narasimhan

India is one of the few countries where companies are required to give both consolidated financial statements (CFS) as well as parent‐only financial statements. While…

Abstract

Purpose

India is one of the few countries where companies are required to give both consolidated financial statements (CFS) as well as parent‐only financial statements. While parent‐only statements have been in existence for a long time, CFS was introduced recently. The purpose of this paper is to examine the value relevance of CFS in India.

Design/methodology/approach

The value relevance of CFS is examined through an empirical study. The study examines the relationship between market values and consolidated earnings and parent‐only earnings is analysed. The study uses four years data of 59 companies whose subsidiary earnings are more than 20 per cent of consolidated revenue.

Findings

Initial results show that annual CFS are not value relevant, whereas annual parent‐only financial statements are value relevant. However, wherever quarterly financial statements are available, CFC are found to be value relevant and parent‐only financial statements are not value relevant.

Practical implications

While CFS and parent‐only financial statement on an annual basis are mandatory, companies have the option to publish parent‐only financial statement on a quarterly basis while not reporting quarterly consolidated financial statements. This inconsistency in the regulation causes confusion to investors who receive parent‐only quarterly financial statements for three quarters and suddenly consolidated financial statements at the end of the year. The paper shows how market reacts to such reporting practices.

Originality/value

In addition to examining the value relevance of CFS, the paper also examines the impact of incomplete regulations of financial reporting on asset pricing.

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Article
Publication date: 1 March 2000

W.R. Singleton

An issue related to the strategic choice of organizational form for affiliated businesses is how the financial information of the affiliate will be reported. A question…

Abstract

An issue related to the strategic choice of organizational form for affiliated businesses is how the financial information of the affiliate will be reported. A question arises as to whether alternative methods of reporting influence user decisions. The purpose of this study was to investigate whether alternative consolidation accounting methods affected the financial decisions of users in selected countries. An experiment was conducted with student subjects in Australia, Canada and the U.S. Alternative consolidation techniques and country were the independent variables. Results indicated user responses were affected by the consolidation method. Country effects were also noted.

Details

International Journal of Commerce and Management, vol. 10 no. 3/4
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 1 March 2014

Silvia Gardini and Giuseppe Grossi

The paper focuses on the potential benefits of fair value accounting (FVA) in the public sector and the shift towards the entity theory of consolidation supported by…

Abstract

The paper focuses on the potential benefits of fair value accounting (FVA) in the public sector and the shift towards the entity theory of consolidation supported by international accounting standards. The analysis of the Italian cases shows neither adjustments of the assets to their fair value, nor any recognition of intangibles other than goodwill in consolidated financial statement (CFS), maintaining the configuration of a municipal corporate group based on historical costs. These findings suggest a lack of focus on FVA by local governments (LGs), which is in contrast with international accounting standards. Using a combination of sources (such as annual reports and interviews), part of this paper is based on multiple-case studies of Italian LGs on the voluntary adoption of CFS.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 26 no. 2
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 31 July 2014

Christopher Nobes

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…

Abstract

Purpose

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).

Design/methodology/approach

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.

Findings

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.

Practical implications

Policy implications concern the improvement in the use of such terms as “control” and “power”. Suggestions are made for clarifying the scope of consolidation.

Originality/value

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.

Details

Accounting, Auditing & Accountability Journal, vol. 27 no. 6
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 4 June 2018

Serena Santis, Giuseppe Grossi and Marco Bisogno

The purpose of this paper is to review and analyze the literature on consolidated financial statements (CFS) in the public sector published from 1980 to 2015 in public…

Abstract

Purpose

The purpose of this paper is to review and analyze the literature on consolidated financial statements (CFS) in the public sector published from 1980 to 2015 in public sector accounting and management journals, and propose a future research agenda.

Design/methodology/approach

Adopting a structured literature review methodology, the authors investigate how the CFS literature is developing and what its focus is.

Findings

The authors identify five major topics: the definition of the consolidation area; the identification of the reporting entity; the private vs public sector accounting standard dichotomy; the relationship with the statistical rules; and the usefulness of CFS.

Originality/value

The authors analyze these topics, highlighting the growing implementation of CFS in different contexts (mainly focusing on governments outside the USA) and provide suggestions for future research.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 30 no. 2
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 7 January 2019

Ana Isabel Lopes and Mariana Lopes

The purpose of this paper is to investigate how the adoption of IFRS 10 and IFRS 11 affected consolidated financial statements. Specifically, the paper explores whether…

Abstract

Purpose

The purpose of this paper is to investigate how the adoption of IFRS 10 and IFRS 11 affected consolidated financial statements. Specifically, the paper explores whether entities adopted mandatorily or voluntarily both IFRS, whether expressly declared effects, whether considered those effects as material and whether those effects had impacts on selected items of financial statements and on selected financial ratios.

Design/methodology/approach

The research is an exploratory study using public entities from Germany, France and the UK. The majority of the data is manually collected from financial statements.

Findings

The results suggest that the adoption of the new IFRS 10 affected the composition of a large number of entity groups but that their financial information and economic-financial indicators do not present material changes. There is also evidence of a large and material impact on the changes in the classification and accounting for interests in arrangements under joint control through the new IFRS 11. The evidence thus suggests unequal effects of the adoption of IFRS 10 and IFRS 11 on the proportion of entities declaring materiality of effects, on the quantitative effects on selected items of financial statements, and on financial ratios. A comparison between the pre-adoption and post-adoption periods reveals that the majority of the effects are driven by the adoption of IFRS 11.

Originality/value

As far as is known this exploratory paper is the first presenting the effectiveness of adopting the most important standards under the “consolidation package” and opens an avenue for future research by academics, for future post-implementation reviews by IASB, and for analysis of peer reviews between accounting practitioners.

Details

Meditari Accountancy Research, vol. 27 no. 1
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 1 June 2004

Isabel Martínez Conesa and Esther Ortiz Martínez

Financial analysis at international level has to overcome a lot of obstacles that increase the uncertainty which the financial analyst is used to handling. It is commonly…

Abstract

Financial analysis at international level has to overcome a lot of obstacles that increase the uncertainty which the financial analyst is used to handling. It is commonly argued by accounting regulators, academics, and so on, that different accounting standards are one of these handicaps. For this reason European listed companies will be required in year 2005 to elaborate consolidated financial statements according to International Accounting Standards. Will it be a solution for the handicaps that face financial analysts? The objective of this study is to see how accounting diversity can be resolved and what are the conclusions of financial analysts in capital markets. The prior hypotheses will be: first, that accounting diversity is not what introduces the most important uncertainty in the international financial analysis, and second, that accounting diversity is avoided instead of being corrected. It is evidenced that the most important factors of diversity are strategies of the company and that analysts try to reduce the impact of accounting diversity, for example, using less biased ratios such as Enterprise Value/EBITDA.

Details

European Business Review, vol. 16 no. 3
Type: Research Article
ISSN: 0955-534X

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Book part
Publication date: 1 March 2012

Eva Heidhues and Chris Patel

Over the last decade, the accounting convergence process with the development and adoption of IFRS as national standards has become the focus of governments…

Abstract

Over the last decade, the accounting convergence process with the development and adoption of IFRS as national standards has become the focus of governments, professionals, and researchers. In 2005, the EU (including Germany) and Australia adopted IFRS. A survey by Deloitte Touche Tohmatsu (2010) reported that 89 countries have adopted or intend to adopt IFRS for all their domestic listed companies. Currently, more than 100 jurisdictions require or permit the use of IFRS, with countries such as Canada, Brazil, and Argentina being the most recent adopters (IFRS Foundation, 2011b). This growing number of countries implementing IFRS and their experiences and emerging challenges have further raised researchers' interest in this controversial topic (Ashbaugh & Pincus, 2001; Atwood et al., 2011; Byard et al., 2011; Christensen et al., 2007; Daske et al., 2008; Ding et al., 2007; Hail et al., 2010a, 2010b; Kvaal & Nobes, 2010; McAnally et al., 2010; Mechelli, 2009; Niskanen, Kinnunen, & Kasanen, 2000; Stolowy, Haller, & Klockhaus, 2001; Tyrrall et al., 2007). However, these studies have concentrated on the development and application of specific accounting standards and practices and/or cross-national and cross-cultural issues concerning adaptation, implementation, and evaluation of IFRS. Moreover, an increasing number of studies have been devoted to classifications of accounting models and categorization of accounting standards, principles, and values (Chanchani & Willett, 2004; D'Arcy, 2000, 2001; Doupnik & Richter, 2004; Doupnik & Salter, 1993; Gray, 1988; Kamla, Gallhofer, & Haslam, 2006; Nair & Frank, 1980; Patel, 2003, 2007; Perera & Mathews, 1990; Salter & Doupnik, 1992). However, very few studies have critically examined the historical development of accounting practices and issues related to convergence in its socioeconomic context and, importantly, we are not aware of any study that has rigorously examined the institutionalization of Anglo-American accounting practices as international practice with an emphasis on power and legitimacy in the move toward convergence of accounting standards.

Details

Globalization and Contextual Factors in Accounting: The Case of Germany
Type: Book
ISBN: 978-1-78052-245-6

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