Mohamed E. Hussein

Political Aspects of Financial Accounting Standard Setting in the USA

Discussion about the actual nature of political action is unusual in the literature about the Financial Accounting Standards Board (FASB). Examines the treatment of politics in the US standard setting context and this analysis results in the conclusion that despite widespread recognition that standard setting is political, what this means is greatly underappreciated. Moving knowledge about financial accounting policy towards a more adequate realization of its political nature is furthered by a discussion of the roles of power, ideology and rhetoric.

A comparative study of cultural influences on financial reporting in the U.S. and The Netherlands

Abstract This paper argues that financial reporting and its regulation have multiple purposes reflecting each countrys social, cultural, and political environments. Thus, the original idea of harmonization as moving towards uniformity in accounting standards across countries may not be achieved as long as social, cultural, and political differences exist across countries. An alternative approach is a reconcillation strategy where an agreement is reached on basic recognition and measurement criteria and on a framework that enables users to reconcile financial statements from different countries while it also satisfies those countries regulatory requirements. To support this argument, the paper presents evidence from a comparison of financial reporting in the U.S. and the Netherlands within their respective cultures and an analysis of annual reports of a matched sample of American and Dutch publicly listed companies.

Accounting standards and national tax laws: The IASC and the ban on LIFO

Abstract We investigated the link between tax laws and financial accounting standards by considering the attempt by the International Accounting Standards Committee (IASC) to ban the use of the LIFO inventory method. Our goal was to identify evidence of non-tax-motivated use of or preference for LIFO primarily through an examination of publicly available responses to the IASC exposure drafts. We found that the only support for LIFO as a preferred inventory accounting method came from those countries in which the method is allowed for tax purposes. In supplementary analysis of the use of LIFO in Canada and South Africa—where the method is allowed for financial reporting purposes but not for tax purposes—those few Canadian firms which chose LIFO appeared to do so because of U.S. tax laws, and when LIFO was disallowed for tax purposes in South Africa, those firms previously using LIFO for financial reporting purposes then changed to FIFO or average cost. The r results suggest that the theoretical support for the LIFO inventory method, as well as its use, are confined to those countries in which LIFO provides a tax advantage.

The innovative process in financial accounting standards setting

Abstract Most of the literature in the area of accounting change points to the fact that economic advantage and technical considerations are not the only factors influencing the adoption or non-adoption of accounting changes. This paper describes and illustrates the proposition that change in financial accounting standards is a social process that approximates a diffusion and adoption of innovation process.

Shareholder and stakeholder value in corporate downsizing – The case of United Technologies Corporation

In recent years, many corporations have initiated downsizing programs to eliminate jobs, close facilities and withdraw from major lines of business. These initiatives have been justified in the name of creating “lean and efficient” organizations. In many cases, top management is rewarded with large bonus compensation packages. Such rewards are considered to be consistent with the goal of maximizing shareholder value. We compare stakeholder and shareholder value models of management accountability to gain insights into the broader economic and societal consequences of the current financial reporting model. Specifically, we examine downsizing at United Technologies Corporation to demonstrate how current financial reporting practices privilege shareholder/management interests over other stakeholders and favor actions that may result in detrimental effects to corporate stakeholders and society at large. This paper extends extant research by providing a concrete example of how “generally‐accepted” financial reports may be used to analyze economic events (like corporate downsizing) through multiple perspectives.

Harmonization of the auditor's report

Abstract International efforts to harmonize the audit report, spearheaded by the International Auditing Practices Committee of the International Federation of Accountants (IFAC), culminated in the issuance of International Standard on Auditing (ISA) 13 in 1983. The stated purpose of ISA 13 was to: “provide guidance to auditors on the form and content of the auditors report issued in connection with the independent audit of the financial statements of any entity.” The purpose of this paper is to assess whether ISA 13 has resulted in greater international harmonization of audit reports. We assess the level of harmonization both by examining the extent to which countries have adopted ISA 13 and by the extent to which the content of the auditors report has changed. A survey of IFACs member organizations in 86 countries netted 50 responses. Eighty-six percent of respondents (and 93% of respondents from developing and emerging economies) said they have achieved harmonization with ISA 13. We compared the auditors reports (in financial reports) of 450 companies in 33 IFAC member countries on two different dates (a pre-ISA 13 date and a post-ISA 13 date). The results suggest a higher degree of conformity with the standard for the post-ISA 13 reports. Finally, cluster analysis was conducted to explore the dynamics of clustering from pre-ISA 13 to post-ISA 13 regimes. A slight drop in the divisiveness coefficient (DC) was observed for the total audit report elements as well as for the form elements, suggesting a less cohesive cluster structure for the post-ISA 13 regime. The empirical evidence, taken as a whole, shows reduced diversity of practices and standards involving the audit report since the issuance of ISA 13. This conclusion should provide encouragement for international standard-setters.

The managerial accounting component of elementary ccounting

Abstract The purpose of this article is to stimulate discussion of the content and presentation of the managerial component of undergraduate elementary accounting. The first part of this article reports the results of a survey conducted to gather data about the current managerial accounting content of elementary accounting, how it is taught, and modifications in content which are deemed desirable by those teaching the course. The second part describes the changing environment in which organizations function. The authors hope this article will stimulate an evaluation of the managerial/accounting component of the elementary accounting course and result in a more meaningful course for future decision makers.

From partnering to road maps

Rigsbee, E. 2001. PartnerShift: How to Profit from the Partnering Trend, 2nd ed. (New York: John Wiley & Sons, Inc.). Hanson, P. (Forthcoming) The M&A Guide: A 10-Step Roadmap for Workforce Integration (New York: John Wiley & Sons, Inc.).