会计政策选择英文文献

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1、Income Strategies of Listed and UnlistedCompanies: An Empirical Study ofAccounting Method ChoicesAbstract This paper explores whether the political and contracting environments for listed and unlisted companies gives rise to different wealth incentives for management to judiciously select a portfoli

2、o of accounting procedures for the firm. The analysis indicates significant differences in the method choices made by the managers of listed and unlisted firms. For the listed firms, size as a proxy for political costs is negatively related to portfolio choice, supporting the political cost hypothes

3、is. In addition, leverage and directors percentage ownership are positively related to portfolio choice and thus support the debt contracting cost hypothesis. In contrast, none of the contracting or political cost variables are significantly related to the choice of accounting method portfolio by un

4、listed firms. Overall the evidence provides some support for the positive accounting hypothesis that firms choose income strategies.INTRODUCTIONMuch empirical research has developed and tested Watts 1977 and Watts and Zimmennans 1978, 1979 positive theory of lobbying and accounting method decisions.

5、 However, the majority of the voluntary method choice studies concentrate on single accounting method choices. They examine individual accounting method choices for a cross-section of firms in isolation from all other accounting method choices made by those firms. The exception to this generalizatio

6、n is Zmijewski and Hagennans 1981 portfolio choice study which maintains that managers do not choose accounting methods in isolation. Rather managers choose a portfolio of accounting procedures. The choice is a function of the net management wealth effects associated with the contracting and politic

7、al costs the firm faces. In order to maximize management wealth Zmijewski and Hagennan 1981 contend that managers will choose accounting methods so at any point in time their firm will employ an optimal mix of accounting methods. That is, the firms portfolio of methods will minimize the contracting

8、and political costs to the firm and thus maximize the bonus payments and net share returns to managers.This paper extends the sparse research to date (see Ronen and Aharoni 1989, and working paper by Aitken and Loftus 1991) that builds on the notion that accounting choices are made at the portfolio

9、level rather than at the individual level. The contribution of the paper is to explore the portfolio choices made by the managers of firms operating in significantly different political and contracting environments. Listed firms have a higher public image than unlisted firms and are subject to the d

10、iscipline of public debt and equity markets. Thus it is expected that political and debt contracting cost variables as well as the level of managerial ownership will have a greater influence on the accounting portfolio choices of listed firms. The current paper focuses on explaining the joint choice

11、 of the methods used to account for inventories, depreciation, and asset revaluations. The analysis indicates the portfolio of methods chosen by listed and unlisted firms are different, but that only the method choices of listed firms are associated with contracting and political cost variables.PORT

12、FOLIO OF METHODSGAAP affords managers discretion in the choice of method to use in recording a range of business transactions. However, in this study we are interested in only those method choices that impact on the determination of reported income. The set of possible method choices to study is fur

13、ther restricted to those methods for which the actual choices made by firms are cross-sectionally different for a reasonably large sample of firms. This excludes method choices such as the decision to expense or capitalize research and development (R & D) expenditure, because the treatment of R&D ex

14、penditure is disclosed by only 17% of New Zealand listed companies. Three discretionary methods are identified as appropriate for the current study: inventory valuation, depreciation method for plant and equipment, and the basis (revalued or historic cost) for depreciating buildings.Statement of Sta

15、ndard Accounting Practice 4 (SSAP4) covers the valuation and presentation of inventories. The standard allows the use of any of several methods of inventory valuation, including first in first out (FIFO), weighted average cost (WAC), last in first out (LIFO), base stock, and specific identification.

16、 However, SSAP4 as drafted for 1985, the sample year of this study, states in paragraph 5.5 that . the historical cost of inventories should be accounted for using the FIFO formula or a weighted average cost formula.In addition, paragraph 5.6 allows the use of specific identification for of goods th

17、at are not normally interchangeable or that are associated with a specific project. Paragraph 5.7 allows the use of LIFO or base stock formula subject to disclosing the difference between inventory calculated on that basis, and inventory calculated on a FIFO or WAC basis. New Zealand tax law does no

18、t, however, allow the use of LIFO. Thus managers have in effect a choice between two formulae, FIFO and WAC. The former has an income increasing effect and the latter an income decreasing effect on current reported income, under the assumption that prices are increasing.SSAP3 covers the depreciation

19、 of fixed assets，and states in paragraph 5.2 that:The depreciable amount should be allocated as fairly as possible to the periods expected to benefit from the use of the asset. The method of allocation should correspond to the expected pattern of exhaustion of the assets service potential.Clearly th

20、e method chosen requires one to exercise judgment as SSAP3 does not recommend the universal use of any particular method. However, SSAP3 (Para 2. 1(e) as drafted for the reporting years prior to 1985 states that . the most suitable method for general application is the straight line method of calcul

21、ating depreciation.The New Zealand Society of Accountants shifted the emphasis of SSAP3 from a preferred method to requiring professional judgment, thus allowing managers more discretion as to which method they adopted. Nevertheless, for both the 1984 and 1985 income years the New Zealand Inland Rev

22、enue Department allowed the use of diminishing value depreciation, an accelerated depreciation method, for plant and equipment. Some companies employ this depreciation method in their financial reports while others use the straight line method. Presumably tax minimization incentives would ensure mos

23、t if not all companies adopt the tax allowed rates for tax purposes. Hence, management is able to choose one of two accounting methods to calculate the depreciation for plant and equipment reported in the firms financial reports. Choosing straight-line depreciation increases current reported income,

24、 while choosing diminishing value, or accelerated depreciation, deflates current income. It is standard practice in New Zealand and Australia for companies to revalue their land and buildings on a regular basis. The revalued amount is normally credited to an asset revaluation reserve in the sharehol

25、ders funds section of the balance sheet. Although it is common practice to revalue buildings, it is not mandatory; companies can choose whether or not to revalue their buildings. Generally, the revaluation of itself has no effect on current reported income. However, the income effect of the revaluat

26、ion induced change in depreciation base can be quite considerable. SSAP3, as it applied to the 1985 reporting year states in paragraph 5.6 that for assets which have been revalued . the change for depreciation should be based on the revalued amount. By revaluing buildings, management avails itself o

27、f a greater depreciation charge each year. Thus revaluing buildings has a deflating effect on current reported income.However, there are some companies that revalue their buildings and do not depreciate them. For these companies the revaluation is income increasing as they will report reduced expens

28、es. This revaluation and no-depreciation option is adopted by only a few companies but will be more income increasing than historical cost depreciation. Firms adopting the no depreciation option have been excluded from the sample for the current study.Alternatively, some companies may revalue and ch

29、arge deprecation on the revalued base and then amortize the revaluation reserve back into income, as recommended by Technical Practice Aid 3. This amortization effectively offsets the higher depreciation due to the revaluation and thus results in the revaluation decision having no income effect. Unf

30、ortunately the data for this paper were collected before this possibility was considered so the exact proportion of firms affected thus is indeterminable. Nevertheless, only a very small proportion of firms are expected to adopt this strategy and the coding problems it poses are considered to be ins

31、ignificant.HYPOTHESES AND MEASURES A common criticism of the accounting choice studies is the inconsistent use of proxy variables to measure political and contracting costs. Although the hypothesized relationships are well specified, the results of empirical testing are equivocal because of inconsis

32、tent and inappropriate choice of proxies. To overcome the inconsistency problem the current study uses proxies that have been employed widely in prior studies. Further, the appropriateness of the proxies is determined by evaluating the evidence of prior studies and the nature of the contracting and

33、political environment surrounding the reporting of income by New Zealand firms. The positive accounting literature maintains that large firms are subject to public scrutiny and that higher reported earnings increase the probability of government regulation and other political costs. Hence, large fir

34、ms are more likely to choose accounting methods which decrease reported income. The conventional firm size hypothesis (Watts andZimmerman 1978, 1986) predicts a negative relation between firm size and income strategy, because the income increasing portfolios (i.e. 4, 5, and 6) imply high political c

35、osts. In this study size is measured by gross revenue and total assets as both measures are used extensively in the literature. The hypothesis tested is:HYPOTHESIS 1: Ceteris paribus, firm size is negatively related to choice of income strategy.The problem with size, however, is that it could proxy

36、for any number of underlying factors, including political costs (Ball and Foster 1982). Further, Bowen, Noreen and Laceys 1981 evidence implies that firm size on its own may not capture a firms political costs. Ball and Foster 1982 suggest that industry membership is a more appropriate proxy for the

37、 political costs a firm might incur. There is some empirical evidence that industry membership is related to method choices in a fashion consistent with the political cost hypothesis (see Bazley et al 1985 and Bowen et al 1981). The Commerce Act 1975 provides a measure of the political sensitivity o

38、f New Zealand industries. The first and second schedules to The Positive List of Controlled Goods and Services 1981 regulations specify goods and services subject to price control under Part IV of the Commerce Act 1975. Firms dealing in goods and services appearing on the positive list as it stood a

39、t the start of 1985 are likely to be under political scrutiny during 1985. A binary dummy variable is used to proxy for this political sensitivity (if firm dealt in goods and services on the list, and 0 otherwise). Hence the following hypothesis is tested:HYPOTHESIS 2: Ceteris paribus, membership of

40、 a politically sensitive industry is negatively related to choice of income strategy. An alternative size-industry hybrid proxy is Zmijewski and Hagermans 1981 firm sales to industry sales concentration ratio. Large firms in politically sensitive industries are expected to attract greater political

41、attention, and hence political costs, than relatively small firms in the same industry. This suggests the hypothesis that:HYPOTHESIS 3: Ceteris paribus, sales concentration is negatively related to choice of income strategy. Reported tax rate, defined as reported income tax expense divided by net in

42、come before tax, is an alternative measure of political costs. Wong 1988a notes that New Zealand company reported tax rates are highly political, giving firms an incentive to use export tax credits to manage their income and reported tax expense ratios.4 Wongs 1988a analysis can, however, be extende

43、d to any method choice which both alters reported income, and creates an offsetting permanent taxation difference so as to leave reported tax expense unchanged. Such method choices that change reported income relative to reported tax expense would therefore have an impact on reported tax rates and t

44、hus represent a tool for reducing political visibility associated with low reported tax rates. Of the three methods examined in the current study only the basis for building depreciation has an impact on income and creates a permanent difference which increases the reported tax rate. Basing building

45、 deprecation on a revalued amount reduces income but creates a permanent difference that leaves, ceteris paribus, tax expense unchanged. Thus, this choice increases the reported tax rate. None of the other methods, however, affect the reported income - tax expense relationship, rather they impact on deferred tax. Therefore, as the revaluation option features in the more income decreasing strategies it is hypothesized that:HYPOTHESIS 4: Ceteris paribus, reported tax rate is positively related to choice 0f income strategy