Charles Richard Baker

Should Merger Accounting be Reconsidered?: A Discussion Based on the Chinese Approach to Accounting for Business Combinations

In 2006, the China Accounting Standards Committee (CASC) issued its Statement No. 20, which permits both the purchase and pooling of interests (or merger) method of accounting for business combinations. The decision of the CASC in Statement No. 20 stands in contrast to the decisions taken by the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) which both eliminated the pooling of interests method. As a result of the issuance of CASC 20, along with similar pronouncements by the Japanese standard setters and other standards setting bodies, the goal of harmonizing international accounting standards has been faced with a lack of convergence in the area of accounting for business combinations. In this paper we examine the reasons for this lack of convergence in order to develop a reconciled framework. In particular, the Chinese standards setters have sought to develop an approach to accounting for business combinations which distinguishes between instances where the combining entities are under common control or not under common control. Using a relatively narrow definition of common control, both the FASB and the IASB have excluded business combinations among entities under common control from the scope of their respective pronouncements. The purpose of this paper is to analyze the reasons for the distinctly different approach taken by the Chinese accounting standards setters by comparing the provisions of FASB 141, IFRS 3 and CASC 20. Our analysis will show that the technical differences between the standards are based on different understandings of the underlying economics of business combinations (Anthony, 1987), which leads in turn to different representations of the combination process. We believe that a forthright recognition of these differences may lead to a reconsideration of the pooling of interests and merger methods in a new comprehensive framework.

Disciplinary practices in the French auditing profession

Purpose - – The purpose of this paper is to contribute to understand the role of the statutory auditing profession in France. The study is theoretically based on distinctions between a functionalist view of professions and a neo-weberian view. Prior research, conducted in Anglo-American countries has shown that the auditing profession has focussed primarily on protecting the private interests of the profession. Hence, there is a need to conduct research on this topic in a code law country where the state is expected to play a significant role in protecting the public interest. Design/methodology/approach - – The methodology involves a content analysis of 148 disciplinary decisions issued against statutory auditors in France from 1989 to 2006. This analysis identified 21 types of violations grouped into public interest or private interest offences. Because visible offences are public and are more likely to threaten the reputation of the profession, these types of decisions are also studied with respect to their visibility. Findings - – The results reveal that in a code law country such as France the auditing profession tends to defend both the public interest as well as its private interests. The results also support the “visibility” effect. Research limitations/implications - – The written disciplinary decisions have been anonymized so that the names of the auditors and the clients cannot be identified. Originality/value - – This paper differs from previous studies conducted in the Anglo-American context which show an emphasis on protecting the private interests of the auditing profession. Moreover, this study reveals the existence of “mixed” offences and underlines that a profession primarily focusses on these cases. Thus, the work reconciles in part the functionalist and neo-weberian perspectives. Lastly, this paper confirms the importance of the visibility effect.

Developing human capital through a pragmatic oriented action research project A French case study

The action research methodology used in this article is referred to as ‘intervention research’. In specific terms, it is called the Socio-Economic Approach to Management (SEAM). The SEAM approach is both participatory and collaborative. It is a pragmatic oriented action research methodology and it belongs to the French action research tradition with roots in the UK and the work of Tavistock Institute. The action research project described in this study was carried out in a company in the security sector in France. The findings of the study indicate that a pragmatic oriented action research methodology such as SEAM may enhance the quality of human resource management and capabilities, and thus increase the value of human capital. The article also discusses the measurement of human capital and the factors which contribute to the sustainable development of human capital through time.

What can Thomas Jefferson’s accounting records tell us about plantation management, slavery, and Enlightenment philosophy in colonial America?:

Thomas Jefferson was the third President of the United States of America and the principal author of the Declaration of Independence of the American Colonies from Great Britain. Less well known is that he was a meticulous record keeper. He kept daily records of every receipt and expenditure that he made, no matter how small, for a period of over 60 years. Most of these records have survived and are located in various libraries throughout the United States. Two questions are raised in this article: first, what can Jefferson’s accounting records tell us about plantation management in colonial America? Second, what do these accounting records reveal about Jefferson’s perspectives on eighteenth-century Enlightenment philosophy? This article investigates original archives in an effort to answer these questions.

The impact of accounting standards on hedging decisions

Purpose - The purpose of this paper is to study the effects of financial accounting standards on the economic decisions of managers. The primary research question addressed in the paper is whether the hedging behavior of corporate treasurers in France has been affected by the issuance of International Accounting Standard No. 39 and International Financial Reporting Standard No. 9 dealing with financial instruments and hedging. Design/methodology/approach - In all, 48 semi-structured interviews were conducted with French corporate treasurers. The interview instrument is included as an exhibit to this paper. The interviews were recorded and transcribed. In addition, three interviews were conducted with representatives of Big 4 audit firms who are experts in accounting for financial instruments. The empirical findings are interpreted using a theoretical framework derived from Jean Baudrillard who argues that the “map” (accounting results) tends to define the “territory” (economic decision-making) in a period of “hyperreality” (when the underlying economic reality is confused). In other words, accounting standards, and the reported numbers that result from such standards, can influence the economic decisions of managers and not merely represent the outcome of economic decisions already taken. Findings - Corporate treasurers often make decisions based on earnings impact. This finding is similar to findings in prior literature regarding the effects of accounting standards on economic decisions taken by managers. A fear of increased earnings volatility is central to the treasurers’ concerns. Also key is the complexity of the process for qualifying financial instruments for hedge accounting treatment. The authors also find that the behavior of corporate treasurers is neither stable nor homogeneous. The behavior appears to be the outcome of a collective learning process in which the corporate treasurer is only one actor. Research limitations/implications - The type of qualitative research undertaken in this study has its limitations. It cannot be demonstrated that the findings are generalizable. There is a contextual specificity to the treasurer’s function, which reinforces a particular focus on accounting results. The CFO is simultaneously the superior of the treasurer and responsible for financial reporting, and consequently subject to a conflict of interest that does not necessarily apply to other types of managers. Therefore the findings cannot apply to all managerial functions. Practical implications - The authors found that corporate treasurers focus on accrual-based earnings despite engaging in a function that is supposed to focus on cash flows. Even if the IASB believes that accounting standards should be used primarily by investors and creditors, they should acknowledge that there is a fear of earnings volatility by managers, and that there is an temptation toward increased use of other comprehensive income as an alternative to reporting volatile earnings numbers. Social implications - The research provides support for those who argue that international accounting standards that require fair value accounting for financial instruments have had a negative pro-cyclical impact on the real economy. Originality/value - This paper is a qualitative research study conducted in an area of research where there have previously been only quantitative studies. The access to a large number of French corporate treasurers is unique. The study supports prior findings regarding the influence of accounting standards on managerial behavior, but with an added theoretical interpretation related to Baudrillard’s arguments regarding the nature of the “map” and the “territory” in complex economic systems.

Accounting and Economic Systems: A Tribute to the Work of Jacques Richard

This chapter presents a tribute to the work of Jacques Richard, who has been both a well-known professor at the University Paris Dauphine, and an important scholar regarding the history and development of accounting systems and international financial accounting standards. Professor Richard has also been an inspiring mentor to a generation of accounting students both in France and other countries.

From care of the poor to the great confinement: an exploration of hospital accounting in France

ABSTRACT This study examines hospital accounting practices in France during the fifteenth through seventeenth centuries in order to illustrate differences between the role and mission of the Hôtel-Dieu and the Hôpital Général. The Hôtel-Dieu originated during the medieval period as a place of refuge for the sick and the poor, whereas the Hôpital Général was created during the seventeenth century as a way of resolving problems associated with a growing population of beggars and vagrants in French cities. The accounting records of the Hôtel-Dieu appear to follow the charge-and-discharge system of accounting similar to that employed by ecclesiastical and governmental institutions of the same time period. Although the accounts of the Hôpital Général also followed the charge-and-discharge system, those accounts appear to have been prepared with the direct authority of a Treasurer operating under a Board of Commissioners appointed by the King, thus indicating a greater emphasis on internal control. The similarity in accounting practices for two very different types of institutional structures suggests that accounting practices do not necessarily change as a result of institutional changes. In other words, there may be a break in institutional form without a corresponding break in accounting practices.

Towards the Use of Action Research to Promote Sustainability

The purpose of this article is to discuss how action research might be utilized to enhance sustainability in organizational settings. While it has been argued that active engagement by researchers in implementing organizational change risks organizational capture, action research is a methodology that may be able to withstand organizational pressures, thus allowing researchers to implement sustainability practices from within organizations. The article summarizes the history and principles of action research. In addition, The Centre for Social and Environmental Accounting Research (CSEAR) is discussed as a case study of action research which seeks to further the goals of sustainability through its efforts on a worldwide basis.