Output-based measurement of accounting comparability: A survey of empirical proxies

Abstract

Accounting comparability has been the subject of significant interest in empirical financial accounting research. Recent literature, particularly that following De Franco et al.'s (2011) influential study, has focused on utilizing the output of the financial reporting process to measure accounting comparability. In this paper, we conduct an early survey of studies using output-based measures of comparability. We provide two distinct contributions to the literature. First, we describe and comment on four important measurement concepts as well as the studies that introduced them. With this methodological contribution, we aim to facilitate the measurement choice for empirical accounting researchers engaged in comparability research. Second, we classify the sub-streams of literature and related studies. In providing this content-related contribution, we sum up what has already been achieved in output-based accounting comparability research and highlight potential areas for prospective research. As a whole, our study attempts to guide empirical researchers who (plan to) undertake studies on accounting comparability in selecting relevant topics and choosing adequate approaches to measurement. 'Comparability is the qualitative characteristic that enables users to identify and understand similarities in, and differences among, items. Unlike the other qualitative characteristics, comparability does not relate to a single item. A comparison requires at least two items.' 'Consistency, although related to comparability, is not the same. Consistency refers to the use of the same methods for the same items, either from period to period within a reporting entity or in a single period across entities. Comparability is the goal; consistency helps to achieve that goal.' 'Comparability is not uniformity. For information to be comparable, like things must look alike and different things must look different. Comparability of financial information is not enhanced by making unlike things look alike any more than it is enhanced by making like things look different.' From the above definitions, some of the dimensions linked to comparability in financial accounting become apparent. First, comparability can be related to single or multiple items in the financial statements; while the former is called 'consistency' in the IFRS Conceptual Framework and described as a subordinate concept linked to comparability, the latter is directly referred to as 'comparability'. Second, comparability can be useful both from a longitudinal perspective on a single firm and a cross-sectional perspective on multiple firms; this can, e.g., also be illustrated by referring to research on comparability in financial accounting: almost all of the empirical studies that we will describe in the further course of this paper use panel data, which means that researchers employ both a longitudinal and a cross-sectional perspective in their research designs. Third, comparability comprises a 'similarity facet' as well as a 'difference facet', since it both * The comparabi...

The Impact of Financial Statement Comparability on Earnings Management: Evidence from Frontier Markets

“…Financial disclosure is at the forefront of international standard setters' agenda and it occurs when firms with similar economic outcomes report similar accounting outcomes (Gross and Perotti 2017). The international standardisation of accounting standards, 5 has led to higher financial comparability.…”

“…DeFond et al (2011) found that increased comparability occurs following IFRS adoption, as it contributed to reduced information acquisition costs and improved forecast accuracy. Gross and Perotti (2017); Young and Zeng (2015) find greater evaluation accuracy to be a benefit from greater comparability.…”

“…The enhanced firm information environment that stems from greater comparability leads to better decision making and, thus, the argument for comparability is particularly cogent. Gross and Perotti (2017) note that comparability is positively associated with analyst forecast accuracy and enhances the information environment. Accounting parallels should endure across firms, despite the discretionary flexibility afforded to managers under International Financial Reporting Standards (IFRS) (DeFond et al 2011).…”

Los IFRS y la armonización contable material de los inventarios de las empresas colombianas cotizantes no financieras

“…Cuando se prescribe la aplicación de los mismos estándares de contabilidad en un marco normativo o un conjunto de ellos, se dice que hay una armonización formal o "in jure". No obstante, en estos se permiten diferentes principios o reglas que implican variadas opciones a la hora de establecer el tratamiento contable de un evento económico, lo que genera disparidad en la práctica contable 1 (Tay & Parker, 1990;Rahman, Perera & Ganeshanandam, 1996;Chumaceiro & Hernández, 2012;Gross & Perotti, 2017;Archibold, Aguilera y Escobar, 2017;Cantillo y Rivero, 2019).…”

“…Para estudiar la armonización material se han desarrollado varios tipos de indicadores estadísticos, estos acumulan la frecuencia en el uso de una práctica por un conjunto de empresas en casos en los que la normatividad permite tratamientos contables alternativos. Un ejemplo es el índice de Herfindahl que se emplea para el análisis a nivel país, mientras que modificaciones de este como el índice de comparabilidad internacional se utilizan para el contexto de una región (la Unión Europea, principalmente) o a nivel global (Morris & Parker, 1998;Pierce & Weetman, 2002;Gross & Perotti, 2017;Roncallo, 2019;Cantillo y Rivero, 2019). En seguida se describen algunos textos al respecto, resaltando los relativos a la aplicación de los IFRS en Colombia, en el caso inventarios.…”