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Research Note. Compliance with group accounting standards – the vertical adjustment issues: field studies of multi-nationals

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  • Arne Fagerstrom
  • Lars G. Hassel
  • Gary M. Cunningham
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    Abstract

    Compliance with accounting standards is a major issue in Europe and elsewhere. Research on the horizontal dimension shows non-compliance even though financial reports state compliance and auditors concur. The vertical dimension is more relevant to discover the extent and reasons for non-compliance. Previous research shows that financial executives of multi-nationals indicated non-compliance when asked directly, even though financial reports and auditors state compliance. This follow-on study uses field-studies of subsidiaries of multi-nationals in three countries to explore the extent and reasons for non-compliance for vertical adjustments when consolidating. The method of agreement and method of differences were used to analyse data. Results show substantial non-compliance and some reasons for non-compliance, notably income smoothing. The vertical dimension is appropriate for continued research and this study provides a model for similar research.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Accounting, Auditing and Performance Evaluation.

    Volume (Year): 4 (2007)
    Issue (Month): 6 ()
    Pages: 650-665

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    Handle: RePEc:ids:ijaape:v:4:y:2007:i:6:p:650-665

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    Web page: http://www.inderscience.com/browse/index.php?journalID=41

    Related research

    Keywords: accounting standards compliance; consolidated financial reporting; consolidation process; group accounting; subsidiary reporting; vertical adjustments; multinational subsidiaries; income smoothing.;

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