Research on financial accounting and uncertainty: developments and departures

This paper is concerned with uncertainty and accounting. Research carried out in the area to date and the proposed future direction of the research are explored. Potential hypotheses concerning user reaction to disclosures of uncertainty in financial statements are discussed. These hypotheses suggest that increased information regarding uncertainty may be relevant to userss and may change their confidence concerning their decisions. It may also contribute to a firmer social, `intersubjective' reality. An experimental framework within which such hypotheses might be explored is developed. The paper then discusses the problems foreseen with the future implementation of these experiments and how these problems might be minimised. The paper concludes by briefly commenting on the role of accounting disclosure in an uncertain world

Perceptions of performance: the reactions of analysts and institutional investors to FRS 3

This paper explores the reactions of analysts and institutional investors to FRS 3 Reporting Financial Performance. Such reactions were elicited through an analysis of submissions to the Accounting Standards Board concerning FRED 1 (on which FRS 3 is based), a review of published reactions to FRS 3 and by way of a series of inverviews with analysts and institutional investors. Those interviewed were generally supportive of FRS 3. The research finds little support amont those interviewed for the arguments made by user groups and others during the development of FRS 3. The paper argues, based on the discussion with analysts and institutional investors and other research in the area, that although EPS is an important component of the language of such users, it is not the only word in their vocabulary

The grasshoppers and the great cattle: an exploration of participation in the ASB's standard-setting process

This paper presents the results of a research study of participation in the Accounting Standards Board’s (‘the ASB’) standard setting processes. It replicates studies of a similar nature carried out in the US and Australia or in specific contexts (e.g. Operating and Financial Review) in the UK. The study considers the 1,519 responses to the ASB’s proposals for accounting standards. Consistent with the findings of other studies, the study finds that there is a high level of preparer participation in the ASB’s consultation process. Drawing on Positive Accounting Theory to develop its hypotheses, the paper then examines the characteristics of the preparer corporations which formally lobbied the ASB. The research evidence supports the hypotheses that those firms who become involved in the lobbying process tend to be larger and more highly geared than non-lobbying firms. The paper concludes by considering the implications of these findings in the light of the ASB’s objectives

The Impact of Default Risk on the Basu Measure of Accounting Conservatism

We show, analytically and empirically, that there is a positive correlation between default risk and the Basu measure of conservatism: the higher the default risk, the higher the bias in the Basu measure. We use the insight provided by our analysis to construct an improved version of the Basu measure, the Default-Adjusted-Basu (DAB) measure. The DAB measure adjusts for the effects of default risk on the Basu measure. Using Distance-to-Default as a measure of default risk, we contend that the DAB measure can substantially reduce the bias caused by default risk, and hence is a more robust measure of accounting conservatism than the standard Basu measure. We demonstrate that once one adjusts for the distance-to-default, the Basu conservatism coefficient is no longer positively correlated with leverage

The influence of institutional factors on corporate narratives: a thematic content analysis of Guinness

This paper provides a thematic content analysis of the Chairman’s Statement of Arthur Guinness & Son Ltd over time. The analysis traces the evolution of the content over four distinct periods using a coding scheme developed from extant research. The objective is to study whether the corporate narratives change in line with the institutional factors over time. To interpret the results, we draw on an institutional theory-based lens to offer potential explanations of some of the change and stability noted. Institutions can constrain behaviour, but they can also support and empower agents to bring about change. The results of the longitudinal content analysis reveals some variations over time, but in general the content is relatively stable. This may be explained by the organisation itself being an institution that is sufficiently institutionalised so that corporate reporting remained relatively stable. This suggests Guinness may be an example of a strong institution over time. "The final, definitive version of this paper has been published in Accounting History, 2020, 25(3), 425-447, published by SAGE Publishing. Available online: https://doi.org/10.1177/1032373219881811. DOI: 10.1177/1032373219881811. Please cite the published version.

The grasshoppers and the great cattle: an exploration of participation in the ASB\u27s standard-setting process

This paper presents the results of a research study of participation in the Accounting Standards Board’s (‘the ASB’) standard setting processes. It replicates studies of a similar nature carried out in the US and Australia or in specific contexts (e.g. Operating and Financial Review) in the UK. The study considers the 1,519 responses to the ASB’s proposals for accounting standards. Consistent with the findings of other studies, the study finds that there is a high level of preparer participation in the ASB’s consultation process. Drawing on Positive Accounting Theory to develop its hypotheses, the paper then examines the characteristics of the preparer corporations which formally lobbied the ASB. The research evidence supports the hypotheses that those firms who become involved in the lobbying process tend to be larger and more highly geared than non-lobbying firms. The paper concludes by considering the implications of these findings in the light of the ASB’s objectives

Discourses surrounding the evolution of the IASB/FASB conceptual framework: What they reveal about the “living law” of accounting

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) recently published the final version of Chapter 1 of their joint Conceptual Framework for Financial Reporting (IASB/FASB, 2010).In this article, we focus on two of the key issues addressed in Chapter 1: stewardship and the definition of the primary user groups of financial statements.To address the discourses surrounding the evolution of Chapter 1, we introduce the concept of “living law” from sociological jurisprudence into accounting scholarship.We first trace the role of stewardship/accountability in the evolution—from antiquity to the present day—of the living law of accounting.We then explore the origin, nature, and implications—from a living law perspective—of the moral traditions associated with stewardship/accountability.Our analysis suggests that stewardship has been, and continues to be, embedded in the living law of accounting—notwithstanding the formal pronouncements of standard setters.We also examine the social accounting project from a living law perspective and we suggest that such an analysis provides new possibilities for addressing core social accounting concerns.We conclude by arguing that, particularly in light of the far reaching impact of the neoliberal agenda, there is an urgent need for scholars in both contemporary “social” and “mainstream” accounting to recognize and build upon their shared living law heritage rooted in the age-old traditions of stewardship/accountability

The Impact of Default Risk on the Basu Measure of Accounting Conservatism

We show, analytically and empirically, that there is a positive correlation between default risk and the Basu measure of conservatism: the higher the default risk, the higher the bias in the Basu measure. We use the insight provided by our analysis to construct an improved version of the Basu measure, the Default-Adjusted-Basu (DAB) measure. The DAB measure adjusts for the effects of default risk on the Basu measure. Using Distance-to-Default as a measure of default risk, we contend that the DAB measure can substantially reduce the bias caused by default risk, and hence is a more robust measure of accounting conservatism than the standard Basu measure. We demonstrate that once one adjusts for the distance-to-default, the Basu conservatism coefficient is no longer positively correlated with leverage