Graeme Dean

Corporate Collapse: Regulatory, Accounting and Ethical Failure

Outlined below are some underlying ideas pursued in our Corporate Collapse: Accounting, regulatory and ethical failure, which first appeared in 1997, revised in 2003, followed by a Chinese translation in 2006. Primarily case-based, it examined material over many decades in several countries, but mainly concentrated on Australian causes celebres. Also detailed is our later book Indecent Disclosure: Gilding the corporate lily, published in 2007—it is theme based, reviewing similar material, but post-2000. Very little had changed during the 10 years interregnum, despite regulators’ and governments’ promises of rigorous corporate reforms. Both books were set against a background of repeated official inquiries into discrepancies between what corporations had disclosed about their trading affairs and their actual financial outcomes. The matters in focus have been concerns over many decades. They continue to be, as regulatory reforms have been piecemeal and ill-directed. The recent global financial crisis (GFC) revealed behavior suggesting that it is more likely the ‘truth’ that under the present regulatory regimes many corporations habitually ‘gild the lily’.

Reporting on the state of infrastructure by local government

The Australian accounting profession has advocated that infrastructure should be accounted for by reporting it at current written down replacement values, on the basis that these financial disclosures would provide relevant information to stakeholders. While local councils are required to apply the profession’s asset valuation and accrual standards in preparing general purpose financial reports, the State of New South Wales has gone further by requiring local councils to also present information about the physical condition of infrastructure, together with estimates of the cost of bringing that infrastructure to a satisfactory condition, and the annual costs of maintaining infrastructure at that standard thereafter. This paper examines how this information was reported for 1995‐96. Analysis of reporting practices suggest that while there are some anomalies and uncertainties surrounding the rating of physical condition and the concept of “satisfactory condition”, the disclosures provided by NSW local government are more informative and arguably more relevant to external stakeholders and those responsible for asset management in local government than the information currently prescribed by accounting standards.

Consequences and costs of financial reporting compliance for local government

Local governments are continuously being subjected to changing legislation in regard to reporting requirements. Results of this research indicate that the amount of time allocated to complying with external reporting requirements was often considered excessive and not always relevant – detracting from the ‘doing’. It was also revealed that the bottom line is perceived to be the most important indicator of a councils performance by stakeholders. From this, several implications emerge – including the potential for manipulation of accounting figures to achieve a target operating result. Another includes councils losing their original identity as service providers to the community. Hence, financial, political and social costs appear to be associated with continually changing financial reporting requirements imposed on local government. Future research proposes to take the derived questionnaire used here to other countries in order to determine whether data prepared using financial accounting standards (like the International Financial Reporting Standards) distort the information used by the various council decision makers.

Use of CCA in the Public Sector: Lessons From Australia’s Experience With Public Utilities

The background to the widespread adoption by Australian public trading enterprises of a deprival value variant of current cost accounting reflects successive efforts to establish demanding rate of return targets, or to legitimise price increases, or to monitor the financial performance of PTEs on a national basis. The experience of three public utilities in implementing CCA is reviewed. This experience suggests that CCA valuation of infrastructure (using deprival or optimized deprival values) is unable to deliver financial data to permit valid cross-sectional and longitudinal comparisons of performance. Issues raised during the 1970s and 1980s debates about CCA were either ignored or overlooked.

Implementing IFRS in local government: value adding or additional pain?

Purpose - The aim of this paper is determine the impact financial reporting obligations and, in particular, the International Financial Reporting Standards (IFRS) have on local government management decision making. In turn, this will lead to observations and conclusions regarding the research question: “Does reporting under the IFRS regime add value to the management of local government?” Design/methodology/approach - Following analysis of a survey instrument distributed to all local governments in all states of Australia, this research reports on interviews within Australias largest state – New South Wales (NSW). Findings - In general, findings suggest that for smaller councils and those situated away from the major cities, the time spent on complying with IFRS and various other legislative demands results in management accounting issues often being downplayed. Research limitations/implications - A further paper needs to be conducted in order to determine in the second year of implementation the impact of IFRS – both in Australia and, in the future, in other countries – where local government is implementing IFRS. Practical implications will be evident when all Australian states are compared as NSW is the only state where an IFRS template has been produced for all local authorities. Originality/value - This is the first known analysis of IFRS in local government in Australia, and possibly the world. It utilises both survey and interview instruments within an institutional theory framework to capture the full richness of data available.

The R.J. Chambers Collection: An "Archivist's" Revelations of 20th Century Accounting Thought and Practice

A major, unique accounting archival source, the R.J. Chambers Collection comprises both hard copy and, utilizing cutting-edge search technology, internet accessible materials. From his academic beginnings, Chambers was an orderly person, an archivist of the extensive and varied evidence that underpinned his proposals for accounting reform. Opening research areas for accounting biography, the development of accounting thought, the history of accounting institutions, prosopography, public sector accounting history, and comparative international accounting history are foremost amongst the myriad justifications for seeking to unravel the accounting history “lodes” in archives such as the Goldberg, Chambers, and Briloff Collections [Potter, 2003]. The archiving of the meticulously kept Chambers papers from 1947–1999 provides an opportunity for unfolding the background to events previously withheld from accounting history scholars. Professional episodes in relation to inflation accounting, standard setting, pro...

Chambers as Educator and Mentor

Adopting a personal tone, this article explores Ray Chambers’ impact on accounting and management education and through that his impact on accounting thought and practice. As mentor and colleague for over a quarter of a century, Chambers left many wonderful impressions, some of which are described here. The article describes some of the influences on the innovations and approaches of a great teacher. Familial and early working life experiences are shown to have greatly influenced his views on accounting, finance and management, and hence his innovations in accounting and management education at both the Sydney Technical College and the University of Sydney. His research, writings and teachings continually stressed the need to apply common sense to common experience. The article concludes by noting Chambers’ perennial pursuit of seeking evidence to test his ideal solution to eradicate the follies and infelicities that plagued then (and still plague today) accounting thought and practice. Chambers regarded having such an ideal as the essence of being a researcher.

Pacioli's double entry -- part of an intellectual and social movement

ABSTRACT Our research contains unashamedly speculations about Pacioli, and his Renaissance heroes. It seeks to codify prior research which has speculated on many aspects of Fra Luca Paciolis (1445–c.1517) life. Regarding teaching, not surprisingly, most students are less than enthused by the experience of being taught double-entry bookkeeping (DEB) as a mechanical exercise. The focus on control in many research papers has misplaced emphasis on the origins of DEB, generally ignoring the socio-economic and intellectual contexts in which it was forged. This study speculates on DEBs intellectual foundations, namely perspective, proportionality, harmony, order and balance captured in the Venetian form of DEB. By emphasising DEBs recourse to these aspects, it is placed in Renaissance Italys fifteenth- and sixteenth-century intellectual and social movement. Academics including Bryer have suggested that a broader notion of financial accountability is appropriate. We concur. Accountability is generally a missing dimension in DEB teaching and related research. A major complaint in the aftermath of the Global Financial Crisis (GFC) levelled at the banks, and their shadow banking arms in particular, is that their group accounting failed ‘to tell it how it actually was’ – that is, it failed to truly account. Companies were unaccountable. The ‘morality’ of audited accounting with a lack of corporate accountability, namely its recourse to truth, balance, proportionality of the kind the Renaissance players sought, was certainly absent during the GFC.

Corporate Governance: A Case of ‘Misplaced Concreteness’?

Whiteheads notion that if you say something for long enough, it will be believed, aptly describes the development of the latest corporate governance regimes. Curbing managerial opportunism is the current focus, but the regimes contain only more of what has failed in the past. Inexplicably, at a time when reformers are declaring their allegiance to principles over rules, long-standing principles are being by-passed and more rules imposed. Whereas much of what the rules address is contestable, the frequency with which it is proclaimed has been seductive – it is being accepted as if it were true, not by virtue of either convincing evidence or argument, but through the power of repetition. Stock options in executives remuneration packages are to be expensed, not because they satisfy expensing criteria, but because of the penetration of the mantra that they are expenses; independence is being accepted as the consequence of not being in particular relationships, not because that will change ones state of mind, so much as it will appear likely to have done so; and impairment calculations are being declared superior to conventional amortization techniques, not because of any demonstration that they better indicate the decrease in the market price of a physical asset, but because of the repetition of the impairment litany. Corporate governance is being perceived as a set of processes, rules to be complied with, rather than the desired outcome of them – that is, the authority exercised with probity and unquestionable integrity over corporations’ affairs, for the public good. There is a less than clear explanation of whether or how the separate governance processes mesh with one another. The governance miasma confuses rather than clarifies corporate activity. Underpinnings of the mechanisms in the governance regimes have achieved a false status of concreteness. Contrary to the universal indoctrination, the case is stronger for fewer, rather than more, governance rules.

Incentives for Non-Disclosure by Corporate Groups

A regulatory approved deed of cross guarantee (the deed) was introduced into Australia in December 1991, relieving participating companies within a group from having to prepare, have audited, and file financial statements. We examine the characteristics of firms that obtain relief from filing (and therefore disclosing) separate financial statements of closed-group companies by adopting the deed. This is the first attempt to analyse adoption using large-scale archival data. The results support the survey evidence in Dean and Clarke (2005), thus providing triangulation on their work. In particular they support the view that the decision to adopt the deed is a function of strategic factors as well as accounting and auditing cost savings. Those strategic factors were not in focus when regulators first introduced a deed of indemnity in 1985, nor when the original indemnity was modified to become a deed of cross guarantee in 1991 or when it was further modified in 1998. Further, evidence is provided to test the conflicting ideas arising from the analytical literature and the mixed results in the empirical, voluntary disclosure literatures. That evidence suggests that non-disclosure arises when firms are in a more competitive industry and, in particular, when there is ability to retain non-disclosure at the consolidated level (i.e., where the number of segments is high). Other factors supporting non-disclosure are leverage and the proportion of foreign operations (proxying for deed complexity). The proportion of outside directors (a proxy for legal liability) and the number of shares outstanding (a proxy for agency costs of equity) are not associated with the decision to adopt the deed.