Christopher Nobes

Towards a General Model of the Reasons for International Differences in Financial Reporting

The article first examines the existing modelling literature, which contains a large number of suggested reasons for international differences in accounting. After examining terminological problems, a preliminary parsimonious model is developed to explain the initial split of accounting systems into two classes. The term ‘accounting system’ is used here to mean the financial reporting practices used by an enterprise. A country might exhibit the use of several such systems in any one year or over time. Consequently, it should be systems and not countries that are classified. The model proposes a two-way classification using two variables: the strengths of equity markets and the degree of cultural dominance. Implications for classifiers and rule-makers are suggested.

The survival of international differences under IFRS: towards a research agenda

Abstract The compulsory use of IFRS for the consolidated statements of listed companies in the EU and elsewhere, and the convergence of IFRS with US GAAP, might imply the end of ‘international accounting’ as an important field of study. However, there are motives and opportunities for international differences of practice to exist within IFRS usage. Some of the original motives for international accounting differences may still be effective in an IFRS context, though in different ways. The opportunities for different IFRS practices are divided into eight types. Hypotheses relating to each of these are proposed, and some ways of testing them are suggested. Some implications of the existence of different national versions of IFRS are noted.

IFRS Policy Changes and the Continuation of National Patterns of IFRS Practice

International Financial Reporting Standards (IFRS) contain several policy options. This paper examines the choices made in 2008/9 IFRS financial statements by large listed companies from five countries on all the options that are observable. We compare these choices with those that had been made by the same companies in 2005/6, which (except for the German companies) was the year of transition to IFRS. For Australian and UK companies, we find – as expected – that there were few policy changes. However, despite the constraints on policy change within IFRS, we find that French and Spanish companies not only made more changes than the other companies but that they also made more changes after transition than at transition. Further investigation reveals that these findings are largely driven by a small number of topics. One possible explanation for the pattern of these changes is a ‘learning’ process, which is supported by finding that nearly all the post-transition changes made by the French and Spanish companies were away from previous national requirements. However, we consider other possible explanations. We also present the profiles of IFRS practices for 2008/9. Despite the changes in policy from 2005/6, we find clear evidence that national patterns of IFRS practice continue through the period, so that international comparability remains in doubt.

The True and Fair View Requirement: Impact on and of the Fourth Directive

Abstract The overriding British legal requirement for financial reporting of giving ‘a true and fair view’ (TFV) has been exported to continental Europe via the European Communitys (EC) Fourth Directive on Company Law. This paper considers accounting rules in continental Europe before this process, and traces the gradual acceptance of the predominance of TFV in the drafting of the Directive after UK accession to the EC. The signifiers used in different European languages in the various drafts of the Directive are examined. It is noted that all (eight) other versions contain only one adjective (generally equivalent to ‘faithful’) rather than true and fair. The origins of the Dutch getrouw, the French fidele, etc. are looked into. As the Directive evolved, and particularly as it was implemented in the twelve EC states, greater linguistic variety emerged, such that five countries changed the wording from the original Directive and two others qualified the wording. Whether this affects what TFV signifies is ...

International Variations in the Connections Between Tax and Financial Reporting

This paper constructs a method for assessing the degree of connection between tax rules and practices and financial reporting rules and practices in a country. Five types of connection and disconnection are suggested, and 15 arenas of accounting are proposed for assessment on this basis. The method is applied to four countries, partly in order to test the claim of a clear distinction between Anglo-Saxon and continental European countries.

The continued survival of international differences under IFRS

The claimed starting point for much recent literature is that International Financial Reporting Standards (IFRS) have been very widely adopted. That is somewhere between an error and a misleading simplification. This paper begins by providing an antidote by analysing the degree to which IFRS have not been adopted in the jurisdictions containing the worlds largest 16 stock markets. This might help researchers with their institutional settings. The paper then examines several issues which can lead to international differences in IFRS practice, starting with language and enforcement, but focusing mainly on policy options. Previously published lists of these are up-dated, the extensive recent literature on IFRS policy choice and policy change is synthesised, and new data are provided. Finally, researchers are offered some lessons from the past and some directions for the future.

The true and fair view requirement in recent national implementations

Abstract This note examines the implementation of the true and fair view requirement into the laws of Austria, Finland, Norway and Sweden. It builds on an earlier analysis of the 12 EU member states that had previously implemented the requirement. It is found that three of the four countries depart from the wording of the appropriate language versions of the Fourth Directive. Also, two of the countries do not implement the ‘override’, and the other two implement it in a way not done before, by reserving to the member state the specification of the allowed departures.

On Researching into the Use of IFRS by Private Entities in Europe

There were three important regulatory developments in 2009 for accounting by private entities in Europe, including a new IASB standard designed mainly for private entities. This research note considers the EU regulatory context and other issues relevant to research into voluntary adoption of international standards by private entities in Europe. These are applied as a critical case study of a previously published paper.

The Influence of Tax on IFRS Consolidated Statements: The Convergence of Germany and the UK

The literature on the links between tax and financial reporting suggests that the strength of those links varies over time and from one jurisdiction to another. The links in Germany were seen to be particularly strong, and those in the UK rather weak. Previous literature was largely set in the context of unconsolidated statements but authors have suggested that their findings were relevant for consolidated reporting. This paper examines the scope for tax influence on IFRS consolidated financial reporting in the two above countries. We find that the overall position for Germany and the UK is now similar, that is, that the potential for tax influence is much weaker in Germany than recorded in previous studies. We also find that, even for unconsolidated reporting under domestic accounting rules, the extreme positions recorded for the two countries in the 1990s have been modified.

Modelling the links between tax and financial reporting: A longitudinal examination of norway over 30 years up to IFRS adoption

Abstract The operational links between tax and financial reporting vary on a continuum from country to country and from period to period. We propose a model for how the links vary over time in developed Western countries. This takes account of competing purposes for accounting, and the mutual reactions of taxation and financial reporting authorities. We illustrate the model using the case of Norway over a 30-year period up to the adoption of IFRS. This has the incidental benefit of analysing the operational links for Norway, which has not been done systematically before, at three dates. We also put Norway into the context of four other countries by adopting and somewhat enhancing existing methodology. We show that Norway has moved from a ‘continental’ position to one that exceeds the disconnection of tax from financial reporting found in the USA or the UK. We raise several research questions related to the generalisability of our model.