Graeme Wines

Implications of the IFRS goodwill accounting treatment

Purpose - This paper aims to critically examine the change in accounting treatment for goodwill pursuant to international financial reporting standards (IFRSs) by reference to the Australian reporting regime. Design/methodology/approach - The paper discusses and compares the former Australian and the new IFRS treatments for goodwill. This comparison focuses on the advantages and potential complexities of the new method, with the aim of identifying the issues and challenges that preparers, independent auditors and those involved in corporate governance face in complying with the new requirements. Findings - The paper highlights that the identification and valuation of cash-generating units and goodwill require numerous assumptions to be made in estimating fair value, value in use and recoverable amount. Considerable ambiguity and subjectivity are inherent in the IFRS requirements. Research limitations/implications - Findings suggest that future research should examine how financial report preparers and corporate governance mechanisms are dealing with the complex change required by the new goodwill accounting treatment and how the many critical issues involved in auditing the resulting figures are being addressed. Practical implications - The research has practical implications for financial report preparers in identifying the issues that must be addressed in complying with the international goodwill accounting treatment. In turn, the paper highlights conceptual issues of relevance to auditors in their role of providing assurance on the resulting accounting numbers. It also has implications for others involved in corporate governance, such as audit committee members, in emphasising the areas in which they should be providing oversight of the accounting judgments. These issues are of relevance in any reporting regime based on IFRSs. Originality/value - While much has been written about the mechanics of the new goodwill accounting requirements, there has been a lack of critical research highlighting the many problems and ambiguities that will arise in the application of those rules.

The first 10 years of Accounting History as an international refereed journal: 1996–2005

This article undertakes a content analysis of publications in the first 10 years of the new series of the journal Accounting History. In so doing, it adds to the prior literature examining publishing patterns in the accounting history discipline. The article commences by providing an historical background to the introduction of the new series and the journals editorial team. This is followed by a content analysis of the journals research publications. This analysis examines patterns of authorship, the journals most published authors, institutional and geographical affiliations of authors, author gender and article classifications.

Students as surrogates for practicing accountants: Further evidence

Abstract This study extends our understanding of the circumstances in which the use of student surrogates is appropriate in accounting research. Prior research suggests caution using students for unstructured and complex experimental tasks, however their suitability for structured tasks is not so clear. Employing an experimental design, this study examined the effect of knowledge differences on a structured task requiring accounting classification judgements across three research participant groups: professional accountants, advanced level accounting students and engineering students with no accounting knowledge. The findings support the use of advanced level accounting students as surrogates for accounting practitioners in relatively structured decision contexts.

Auditor independence: Shared meaning between the demand and supply sides of the audit services market?

Purpose – The purpose of the paper is to examine the extent to which there is shared meaning of the concept of auditor independence between the three major groups of parties on the demand and supply sides of the audit services market – auditors, financial report preparers and financial report users. Design/methodology/approach – The paper utilises the measurement of meaning framework (semantic differential analysis) originally proposed by Osgood et al. in 1957. The framework is used to investigate the extent to which there is shared meaning (agreement in interpretations) of the independence concept, in response to alternative audit engagement case contexts, between key parties to the financial reporting communication process. The studys research data was collected in the period March 2004‐May 2005. Findings – Findings indicate a robust and stable single‐factor cognitive structure within which the research participants interpret the connotative meaning of the auditor independence concept. An analysis of the experimental cases finds similarities in connotations (interpretations) of an audit firms independence for the participant groups for most cases, with the exception of cases involving the joint provision of audit and non‐audit (taxation) services. Research limitations/implications – The usual external validity threat that applies to experimental research generally applies to the study. That is, the results may not be generalisable to settings beyond those examined in the study. An important implication of the study is that it emphasises the continuing problematic nature of the joint provision of audit and non‐audit services, even in situations where the non‐audit services comprise only traditional taxation services. Originality/value – The study is the first to examine the concept of auditor independence by means of the Osgood et al. measurement of meaning research framework using, as research participants, the three major groups on the demand and supply sides of the audit services market.

The connotative meaning of independence in alternative audit contexts: an exploratory study

This experimental study investigates the connotative (measured) meaning of the concept “auditor independence” within three audit engagement case contexts, including two acknowledged in the literature to represent significant potential threats to independence. The study’s research design utilises the measurement of meaning (semantic differential) framework originally proposed by Osgood et al. (1957). Findings indicate that research participants considered the concept of independence within a two factor cognitive structure comprising “emphasis” and “variability” dimensions. Participants’ connotations of independence varied along both these dimensions in response to the alternative experimental case scenarios. In addition, participants’ perceptions of the auditor’s independence in the three cases were systematically associated with the identified connotative meaning dimensions.

A comparison of different study load classifications and their association to student performance: an exploratory study

Purpose – The purpose of this paper is to investigate the alternative study load measures (dichotomous full-time/part-time classification and the number of units enrolled) and their association to student performance by using student data from a final year accounting unit in a large Australian university. Design/methodology/approach – Using regression analysis, the authors compare the two measures to ascertain the explanatory power of the two approaches in explaining student performance. Findings – A positive association is found between study loads and student performance when using the “number of units enrolled” measure. This relationship was not found when the dichotomous measure (full-time vs part-time) was used. The results suggest that a scaled measure of study loads is a better measure compared to a binary (dichotomous) measure. Research limitations/implications – The study will assist future researchers to better control for study loads, and also to gain a better understanding of the association b...

Rate of return reporting by Victorian Government public trading authorities: 1985 to 1992

During the period 1985 to 1992, the major Victorian State Government (Australia) public trading authorities were required to prepare Rate of Return Reporting (RoRR) accounts as supplementary statements to their annual historical cost financial statements. RoRR represents a version of current (replacement) cost accounting. This paper provides a background to the Victorian RoRR requirements and an examination of the financial statements, over a five year period, of three of the six authorities required to comply with the RoRR requirements. The paper investigates the differences between the historical cost and RoRR profit and loss statements and balance sheets, analysing the major reasons for the differences and the impacts of RoRR on the reported performance and financial position of the trading authorities.

The collapse of unlisted mortgage companies: a regulatory dilemma

Purpose - Policy issues associated with the regulation of the unlisted debenture market have been highlighted in recent times with the collapse of a number of regionally based mortgage companies. The purpose of this paper is to analyse the decline and demise of the unlisted debenture market between 2007-2013 with particular reference to the effectiveness of the regulatory regime in stabilising the industry and protecting investors’ interests. Design/methodology/approach - A database was constructed which reflected the total population of unlisted mortgage companies in the financial sector. A snapshot approach was used to assess the extent to which these companies complied with regulatory provisions. Findings - Findings suggest the regulatory process allowed these companies to continue operating despite not complying with the relevant Australian Securities and Investments Commission benchmarks. In the light of the current inquiry into the financial system, the research suggests that a re-evaluation of the regulatory approach is timely. Research limitations/implications - This research is restricted to a study of one category of debenture issuers (issuers of mortgage finance). It is based on reports required by regulatory authorities. It does not provide an analysis of the motivations of investors in these companies. Practical/implications - This research has implications for the implementation of regulatory change in respect to oversight of shadow banking activities. It suggested that a passive approach to regulation is not sufficient to ensure that the interests of investors are fully protected. Originality/value - No prior research has systematically examined the unlisted mortgage and analysed the borrowing and lending activities of companies that have failed and those that have survived.

Remuneration Committee Existence and Effectiveness: A Study on Their Impact on Voluntary Narrative Executive Remuneration Disclosure

Voluntary disclosure in narrative format is generally seen as an important governance mechanism through which an organisation communicates with its stakeholders to provide information, gain legitimacy and demonstrate accountability. This paper investigates the relationship between the existence of a remuneration committee (RCX) and it’s effectiveness (RCE) on the voluntary disclosure of information relating to executive remuneration action in narrative format. Our study utilises data from Top 200 Australian Securities listed (ASX) firms and focuses on such disclosure during a critical period i.e. the global financial crisis years (2007 to 2011) when executive remuneration came into significant scrutiny. We find both the existence and effectiveness of a remuneration committee plays a significant role in the voluntary disclosure of executive remuneration in narrative format (VDER).

Australian government budget balance numbers: The hybrid nature of public sector accrual accounting

Purpose - – The purpose of this paper is to analyse the nature and comparability of budget balance (surplus/deficit) numbers headlined by the Australian Commonwealth Government and the governments of the six Australian States and the two Australian Territories. It does this in the context of the transition to Australian accounting standard AASB 1049 Whole of Government and General Government Sector Financial Reporting. Design/methodology/approach - – A case study research method is adopted, based on a content/documentary analysis of the headline budget balance numbers in the general government sector budget statements of each of the nine governments for the eight financial years from 2004-2005 to 2011-2012. Findings - – Findings indicate some variation in the measurement bases adopted and a number of departures from the measurement bases prescribed in the reporting frameworks, including AASB 1049. Findings also reveal that none of the nine governments have headlined a full accrual based budget balance number since the implementation of AASB 1049 in 2008. Research limitations/implications - – While the study focuses on the Australian general government sector environment, it has significant implications in highlighting the ambiguity in the government budget balance numbers presented and the monitoring and information asymmetry problems that can arise. Research findings have wider relevance internationally in highlighting issues arising with the public sector adoption of accrual accounting. Practical implications - – The paper highlights the manner in which governments have been selective in the manner in which they present important budget aggregates. This has important practical and social implications, as the budget balance number is one of the most important measures used to evaluate a government’s fiscal management and responsibility. Originality/value - – The paper represents the first detailed examination of aspects of the effect of the transition to AASB 1049.