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Explaining Accounting Policy Choices of SME’s: An Empirical Research on the Evaluation Methods

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  • Szilveszter FEKETE
  • Yau M. DAMAGUM
  • Razvan MUSTATA
  • Dumitru MATIS
  • Ioan POPA

Abstract

Analyzing accounting issues relative to small and medium sized entities (SMEs) we found the influence of taxation as the main leitmotif in the Romanian literature. However, weak empirical evidence is provided to sustain this argument. In this paper we investigate the accounting policy choices of SMEs, particularly those related to the evaluation methods. Our purpose is to find some “pattern” in these decisions and to identify the main factors that trigger them. Data for the study was collected through a survey in which respondents were requested to indicate the degree to which each of the factors listed in the questionnaire influenced their choice of accounting methods. After controlling for size, we applied the principal component analysis technique in ascertaining the impact of factors. Our results though consistent with the reviewed literature, are still surprising. This is in the sense that while taxation seems to remain the strongest influence factor, the weakest happens to be the true and fair view (TFV) consideration. In finding some possible explanations to this, we leave this question open: is it possible that the overwhelming academic concept of TFV is an empty vessel for practitioners?

Suggested Citation

  • Szilveszter FEKETE & Yau M. DAMAGUM & Razvan MUSTATA & Dumitru MATIS & Ioan POPA, 2010. "Explaining Accounting Policy Choices of SME’s: An Empirical Research on the Evaluation Methods," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 33-48.
    • Handle: RePEc:ers:journl:v:xiii:y:2010:i:1:p:33-48
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    2. Aziz Jaafar & Stuart McLeay, 2007. "Country Effects and Sector Effects on the Harmonization of Accounting Policy Choice," Abacus, Accounting Foundation, University of Sydney, vol. 43(2), pages 156-189, June.
    3. Bernard Raffournier, 1995. "The determinants of voluntary financial disclosure by Swiss listed companies," European Accounting Review, Taylor & Francis Journals, vol. 4(2), pages 261-280.
    4. Cloyd, CB & Pratt, J & Stock, T, 1996. "The use of financial accounting choice to support aggressive tax positions: Public and private firms," Journal of Accounting Research, Wiley Blackwell, vol. 34(1), pages 23-43.
    5. Buzby, Sl, 1975. "Company Size, Listed Versus Unlisted Stocks, And Extent Of Financial Disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 13(1), pages 16-37.
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    Cited by:

    1. Irena Jindrichovska, 2013. "Financial Management in SMEs," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 79-96.
    2. repec:ers:journl:v:xvi:y:2013:i:sisme:p:79-96 is not listed on IDEAS

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    More about this item

    Keywords

    Accounting standards; financial accounting; SME’s;
    All these keywords.

    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other

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