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Evaluating the statistical significance of de facto accounting harmonization: a study of European global players

  • Leandro Canibano
  • Araceli Mora
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    Two different forces are involved in the international harmonization of accounting: institutional endeavours to harmonize accounting internationally by developing common accounting rules and reporting standards, and spontaneous efforts by 'global players' to adopt accounting methods that will improve communication with users in other countries. These two developments are proceeding side by side, generally reinforcing one another but occasionally moving independently. This paper is primarily concerned with the process of harmonization of financial accounting within the European Union. The hypothesis we want to test is that, in spite of the obstacles to the harmonization of regulations in the European Union, there has been greater conformity in recent years in the accounting practices of companies which operate on the international stage. If so, the implications for the harmonization strategies of the international bodies are important. In this study, we first carry out a critical analysis of previous research on accounting harmonization, summarizing the methods used in empirical studies of de facto harmonization and the results obtained. We note that the major deficiency in the index-based methods of measuring harmonization is that no test of significance has been included in prior research. In this paper, we propose a bootstrapping test of the C index as a way of measuring the significance of the change in its value. We consider a sample of eighty-five 'global players' from thirteen countries and we analyse their financial statements with regard to four accounting issues (deferred taxation, goodwill, leasing and foreign currency translation), providing estimates of the significance of de facto accounting harmonization for the periods from 1991-2 to 1996-7.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09638180020017113
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    Article provided by Taylor & Francis Journals in its journal European Accounting Review.

    Volume (Year): 9 (2000)
    Issue (Month): 3 ()
    Pages: 349-369

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    Handle: RePEc:taf:euract:v:9:y:2000:i:3:p:349-369
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    1. Horowitz, J.L., 1995. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Working Papers 95-10, University of Iowa, Department of Economics.
    2. Joel L. Horowitz, 1996. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Econometrics 9602009, EconWPA, revised 05 Mar 1996.
    3. J. L. Horowitz, 1995. "Bootstrap Methods In Econometrics: Theory And Numerical Performance," SFB 373 Discussion Papers 1995,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    4. Leo van der Tas, 1992. "Evidence of EC financial reporting practice harmonization," European Accounting Review, Taylor & Francis Journals, vol. 1(1), pages 69-104.
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