Research Note. Compliance with group accounting standards – the vertical adjustment issues: field studies of multi-nationals Online publication date: Mon, 10-Mar-2008
by Arne Fagerstrom, Lars G. Hassel, Gary M. Cunningham
International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE), Vol. 4, No. 6, 2007
Abstract: Compliance with accounting standards is a major issue in Europe and elsewhere. Research on the horizontal dimension shows non-compliance even though financial reports state compliance and auditors concur. The vertical dimension is more relevant to discover the extent and reasons for non-compliance. Previous research shows that financial executives of multi-nationals indicated non-compliance when asked directly, even though financial reports and auditors state compliance. This follow-on study uses field-studies of subsidiaries of multi-nationals in three countries to explore the extent and reasons for non-compliance for vertical adjustments when consolidating. The method of agreement and method of differences were used to analyse data. Results show substantial non-compliance and some reasons for non-compliance, notably income smoothing. The vertical dimension is appropriate for continued research and this study provides a model for similar research.
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