Competition among accounting standard setters: a property rights analysis

This paper develops a property rights analysis of competion among accounting standard setters. The takings decision is costly as it imposes some form of compensation to be paid to a national accounting standard setter whose property rights to issue accounting standards are taken away and conferred instead on a competing standard setting body, the IASC. Applying a scenario developed by Giammarino and Nosal (1994), a political-game play model is presented which assumes four participants: (a) IOSCO; (b) a national-based regulatory authority; and (c) a national-based accounting standard setting body and the IASC who compete for the right to set international-GAAP. The optimal linear compensation rule for the takings decision is found to depend upon with which interest group the regulatory authority s preferences coincide

Determinants of the use of financial reporting standards by Australian pension plans

Previous empirical research demonstrates that the voluntary disclosure of defined benefit pension plan (DBPP) information by employers is value-relevant to investors and carries potential proprietary costs. This paper extends these findings in the context of the voluntary use of financial reporting standards (FRS) in annual reports sent by pension plans to their participants. FRS use is predicted to be related to proprietary costs for defined benefit pension plans (DBPPs) and to political visibility for defined contribution pension plans (DCPPs). Tests on the voluntary reporting practices of samples of 54 Australian DCPPs and 54 DBPPs during 1991-92 support these prediction

Competition among pressure groups for political influence over the determination of accounting standards

This paper integrates prior studies of accounting policy choice and lobbying activities by testing the empirical implications of Becker''s (1983) theory of competition among pressure groups for political influence over the determination of accounting standards. The theory is applied to explain the nature and outcome of conflict among pressure groups representing financial intermediaries (suppliers) and pension fund members (users) over the development of conflicting Australian pension accounting rules in 1991-92. Various pension fund financial characteristics and management incentives (including discretionary accounting policy choice and voluntary financial disclosures in pension plan financial reports) are posited to affect the pressure functions of each group. These functions combine to affect a political influence function that determines the rule development process. Consistent with the predicted relationships, it is found that supplier groups exert the most political pressure and secure political influence over the development of rules affecting defined benefit pension plans, whereas no group influences the development of rules affecting defined contribution pension plans

Determinants of voluntary accounting policy choices by Australian life insurers

This paper empirically examines various incentives facing managers of Australian life insurers to voluntarily use actuarial-based income smoothing techniques (AIS). AIS were subsequently incorporated into jointly-developed Australian and New Zealand life insurance accounting standards (LIAS) issued in 1997. The propensity of managers to voluntarily use AIS is predicted to be related to the firm s tax rate, ownership structure, size, expense ratio and solvency. These predictions were tested on a sample of 28 firms during the period 1992-93. Empirical results suggest that firms using AIS tend to be larger, pay higher levels of income tax and are less likely to contravene minimum solvency requirements

The determinants of the intermediary spread: evidence from Australian, UK and USA-based international equity funds

International equity funds continue to grow in popularity, despite their apparent inability to provide investors with value for money as measured by traditional CAPM-based performance measures. This paper develops and tests a new measure of performance which assumes instead that search costs of investors are non-trivial and cause the demand for these funds to be inelastic, thus creating an intermediary spread. This is based on Brennans (1993) equilibrium model of the pricing and the (marginal cost and benefit) determinants of this intermediary spread, which implies that, for any mutual fund, the marginal costs of the intermediary spread in the form of expenses and sales load must be explicitly traded off against the marginal benefits in terms of the funds return relative to a benchmark. The measure is used to evaluate the performance of twelve USA, eight UK and five Australian-based internationally diversified equity funds over the period 1982-95, and results are compared with those of the traditional Jensen measure. The results imply that a measure based on the theory of financial intermediation can provide new insights into the performance of these funds in ways that are not revealed by the Jensen measure

Pension underfunding in the Australian public sector: a generational accounting perspective

We examine the financial dimensions and accounting implications of pension under-funding in the Australian public sector. A generational-based accounting perspective provides important insights to explain why public sector funds are under-funded. We project the burden of under-funded government employer pension obligations to three generational cohorts of public sector employees, based on a data set describing flow of funding characteristics of 10 federal, state and local Australian government funds in the early 1990s. We find wide variations in interperiod inequity across various levels of Australian government in our sample. Employer contributions required to bring pension funds into generational balance is an important determinant of cross-sectional variations in pension under-funding practices across the sample, after controlling for other variables used in prior studies