Raquel Wille Sarquis
Doctorate – Differences in accounting practices in the IFRS Era: implications for the comparability of accounting information in different environments
Advisor: Prof. Dr. Ariovaldo dos Santos
Comission: Profs. Drs. Eliseu Martins, Natan Szuster and Fernando Chiqueto da Silva
Class: 217, FEA-5
The purpose of this research was to evaluate the influence of cultural and institutional environment of each country in the accounting practices used by firms and, subsequently, to analyze the impacts of the existence of accounting choices in the IFRS Standards on the comparability of accounting information between firms from countries with different cultural and institutional environments. The literature suggests that accounting is strongly influenced by the environment and that comparability is based on the reflection of the economic substance of events, not on the form. Therefore, three accounting choices that exist or existed in IFRS Standards were analyzed: (i) measurement of joint venture investments (proportionate consolidation or equity method); (ii) recognition and presentation of actuarial gains and losses arising from defined benefit plans (corridor method, income statements or other comprehensive income) and (iii) measurement of investment properties (cost or fair value). The accounting practices’ data were manually collected from the financial statements of 6,298 firms from 27 different countries, from 2005 to 2016. Thus, we collected and analyzed 53,908 financial statements. Using cluster analysis and a set of cultural and institutional variables, the 27 countries were classified into 7 different clusters. Further, we analyzed the accounting practices that prevailed in each country and in each cluster; and how these accounting practices are influenced by the cultural and institutional variables, through the estimation of logistic models (hierarchical in the null version and non-hierarchical). The results indicate that the variance in accounting practices explained by the country level grouping is statistically significant and that all the 12 cultural and institutional variables are relevant to explain the accounting practices used by firms in at least one of the three accounting choices that were analyzed. Finally, using the Accounting System Comparability metric proposed by Barth et al. (2012), we measured the degree of comparability of accounting information among various combinations of clusters, in order to evaluate whether firms were more comparable when they used exactly the same accounting practice or when they used different accounting practices. The results corroborate the proposed thesis that the existence of accounting choices in the IFRS Standards may be necessary to allow firms to use those accounting practices that better reflect the economic substance of events, given the influence of the cultural and institutional environment in which they operate. We found evidence that the elimination of accounting choices, such as the choices about joint venture investments and employee benefits, may reduce the comparability of accounting information, given that firms were more comparable when they used different accounting practices. Thus, there is evidence that the adoption of more flexible accounting standards contributes to improve comparability in countries with different environments, reiterating that the economic substance is more important than the form. The main contribution of this research is to provide evidence that the mandatory requirement of the same accounting practices by firms from different cultural and institutional environments may result in uniformity, but not in comparability of accounting information.
*Abstract provided by the author