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The use and usefulness of equity accounting

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  • Michael E. Bradbury
  • Laura Mehnaz
  • Tom Scott

Abstract

In this study we examine the use and usefulness (value relevance) of equity accounting. Descriptive evidence shows there is a higher frequency of disclosure about the investment in associates than the share of profits. There is also more diversity in presentation and disclosure than reported by the International Accounting Standards Board. The characteristics of firms differ for those that report ancillary disclosures such as assets and liabilities of the associate. Firm characteristics also differ on whether associate income is reported before earnings before interest and taxes (EBIT). Last, we document that equity accounting is value relevant, but not when alternative accounting options (e.g., fair value or proportionate accounting) are available.

Suggested Citation

  • Michael E. Bradbury & Laura Mehnaz & Tom Scott, 2022. "The use and usefulness of equity accounting," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1957-1981, April.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:s1:p:1957-1981
    DOI: 10.1111/acfi.12845
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    References listed on IDEAS

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    1. Zeting Zang & Humayun Kabir & Tom Scott, 2022. "Does OCI Presentation for Equity Financial Assets Matter?," Australian Accounting Review, CPA Australia, vol. 32(4), pages 427-439, December.

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