No abstract

PurposeThis paper seeks to assess the feasibility and desirability of a major emerging economy adopting and implementing fair value accounting (FVA), as codified in the International Financial Reporting Standards (IFRS), by studying China's recent experience.Design/methodology/approachThe paper examines the extent of FVA adoption in China's new accounting standards (“2007GAAP”), reasons for differences from the International Accounting Standard Board's IFRS, and how 2007GAAP has been implemented in practice. Data are obtained from content analyses of IFRS and 2007GAAP FVA requirements, critical assessments of standard setters' official statements, and analyses of empirical evidence from official reports, media, and academic research.FindingsThe authors find a high degree of adoption of IFRS FVA standards in China's 2007GAAP for financial instruments, but many differences for non‐financial long‐term asset investments. Standard setters justify this divergence by fundamental characteristics of the Chinese environment. The resulting differences from IFRS in the 2007GAAP FVA standards, and in their implementation, challenge official claims of “substantial convergence” between 2007GAAP and IFRS. Hence, the benefits desired by Chinese regulators from adopting FVA and international accounting convergence to IFRS may not be realized.Research limitations/implicationsThe findings are derived from aggregated data in government reports. These findings can be extended in future research by examining specific implementation outcomes in company financial statements.Originality/valueThe paper contributes a timely critical examination of a major emerging economy's convergence with the controversial FVA requirements, which supports the IFRS's standing as a high quality set of accounting standards. The findings provide new insights into factors that can impede international accounting convergence in emerging economies.

This study investigates the economic consequences of four financial reporting regulations relating to environmental liability reporting in samples of 170 US and 156 Canadian public companies during the period 1984 to 1997. The study's purpose is to investigate the factors that make financial reporting regulation effective in enhancing the relevance and reliability of accounting information. Prior research provides the theory that financial reporting regulations impose costs on managers and create incentives for them to report accounting information that is relevant and unbiased. This study assesses these regulations' enforceability, which is viewed as arising from the regulator's power to enforce its regulations by sanctions or penalties. It tests whether the relation between market valuation and reported environmental liability accruals changes when the new regulations are enacted, and whether regulation with high enforceability has a more significant impact than regulation with low enforceability. This study uses a residual-income valuation model to measure the valuation coefficient, or multiplier, on reported environmental liability accruals. Changes in this coefficient are used as indicators of changes in the market's assessment of the value relevance and bias of the reported accounting information. This study provides preliminary evidence indicating that financial reporting regulations issued by the securities market regulator and the accounting profession are associated with changes in the relation between market value and reported environmental liabilities in some cases, and suggests avenues for further international accounting research on the factors involved in financial reporting regulation's impact.This study extends work done in my University of Waterloo Ph.D. and I am very grateful to my thesis committee: Gordon Richardson (chair), Len Eckle, Duane Kennedy, Tony Wirjanto and Walter Blacconiere (external examiner), and my classmates: Shane Dikolli, Susan McCracken and Steve Fortin, for their guidance on the original thesis study. I am also very thankful to Peggy Ng for advice on the statistical analyses, to Yongzhong Ma for insightful research assistance. I thank N.Bastine, S.Fitze, D.Hoffman, R.Lee, N.Najafi and S.Stanko for diligent work on data collection and word processing. Comments on various versions of the study by P. Clarkson, A. Kilgore, H. Hunt III, A. Hutton, Y. Li, V. Magness and P.O'Brien are also very much appreciated. I am very thankful to the two anonymous referees for thoughtful and constructive comments that were a great help in revising the paper.

No abstract

The Enron/Andersen scandal provides a unique opportunity to examine the role of signaling in auditor choice. Not surprisingly, many clients dismissed Andersen quickly after Enron declared bankruptcy -in some cases even before a replacement auditor was engaged -and lawsuits against the audit firm were mounted. However, many clients did not dismiss Andersen until its auditing practice was shut down by the court. This study investigates why some clients did not make a quick auditor switch, that is: was the timing of the switch a signal? Our predictions are based on the theory that those that switched early (compared to those that switched late) were sending a signal that they were high-quality financial reporters. We test a sample of 711 companies from the final portfolio of Andersen auditees. Consistent with our hypotheses, we find that subsequent to the change of auditors, management of those companies that dismissed earlier was more likely to initiate the restatement of their financial statements than those that dismissed later. It appears as though the early switchers were attempting to distance themselves from Andersen and the financial reporting used with Andersen. In contrast, those clients that dismissed Andersen later had more restatements imposed on them than those that dismissed earlier, suggesting that their financial statements were of lower quality.