Advanced Search
MyIDEAS: Login to save this article or follow this journal

Does the Control-based Approach to Consolidated Statements Better Reflect Market Value than the Ownership-based Approach?

Contents:

Author Info

  • Hsu, Audrey Wen-hsin
  • Duh, Rong-Ruey
  • Cheng, Kang
Registered author(s):

    Abstract

    Motivated by the recent Discussion Paper (DP) issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on how to define reporting entities, this study investigates the value relevance of consolidated statements under the ownership-based approach of U.S. Accounting Research Bulletin No. 51 (ARB 51) and the control-based approach of International Accounting Standard No. 27 (IAS 27). The results show that consolidated financial statements based on a broader definition of control provide more useful accounting information than those based only on majority-ownership control. We also address one concern raised in the DP, namely, whether a reporting entity should use the common control model to include entities that are under common control of an individual investor or family. The results suggest that accounting standard boards should include the common control model in defining the group reporting entity for firms with complex ownership structures.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S0020706312000386
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal The International Journal of Accounting.

    Volume (Year): 47 (2012)
    Issue (Month): 2 ()
    Pages: 198-225

    as in new window
    Handle: RePEc:eee:accoun:v:47:y:2012:i:2:p:198-225

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/620179

    Related research

    Keywords: Consolidated statements; Control-based approach; Reporting entity; Ownership-based approach; Ownership structure; ARB 51; IAS 27;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
    2. Collins, Daniel W. & Maydew, Edward L. & Weiss, Ira S., 1997. "Changes in the value-relevance of earnings and book values over the past forty years," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 24(1), pages 39-67, December.
    3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998. "Corporate Ownership Around the World," Harvard Institute of Economic Research Working Papers 1840, Harvard - Institute of Economic Research.
    4. Amir, Eli & Lev, Baruch, 1996. "Value-relevance of nonfinancial information: The wireless communications industry," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 22(1-3), pages 3-30, October.
    5. In-Mu Haw & Bingbing Hu & Lee-Seok Hwang & Woody Wu, 2004. "Ultimate Ownership, Income Management, and Legal and Extra-Legal Institutions," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 42(2), pages 423-462, 05.
    6. Venkatachalam, Mohan, 1996. "Value-relevance of banks' derivatives disclosures," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 22(1-3), pages 327-355, October.
    7. Duh, Rong-Ruey & Lee, Wen-Chih & Lin, Ching-Chieh, 2009. "Reversing an impairment loss and earnings management: The role of corporate governance," The International Journal of Accounting, Elsevier, Elsevier, vol. 44(2), pages 113-137, June.
    8. Kothari, S. P. & Zimmerman, Jerold L., 1995. "Price and return models," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 20(2), pages 155-192, September.
    9. Goncharov, Igor & Werner, Joerg R. & Zimmermann, Jochen, 2009. "Legislative demands and economic realities: Company and group accounts compared," The International Journal of Accounting, Elsevier, Elsevier, vol. 44(4), pages 334-362, December.
    10. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, Elsevier, vol. 65(3), pages 365-395, September.
    11. Fan, Joseph P. H. & Wong, T. J., 2002. "Corporate ownership structure and the informativeness of accounting earnings in East Asia," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 33(3), pages 401-425, August.
    12. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 46(3), pages 467-498, 06.
    13. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, Elsevier, vol. 58(1-2), pages 81-112.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:accoun:v:47:y:2012:i:2:p:198-225. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.