e-journal

A conceptual framework of accounting policy choice under SSAP 20

---

To provide a framework of accounting policy choice associated with the timing of
adoption of the UK Statement of Standard Accounting Practice (SSAP) No. 20, “Foreign Currency
Translation”. The conceptual framework describes the accounting policy choices that firms face in a
setting that is influenced by: their financial characteristics; the flexible foreign exchange rates; and the
stock market response to accounting decisions.
Design/methodology/approach – Following the positive accounting theory context, this paper
puts into a framework the motives and choices of UK firms with regard to the adoption or deferment of
the adoption of SSAP 20. The paper utilises the theoretical and empirical findings of previous studies
to form and substantiate the conceptual framework. Given the UK foreign exchange setting, the
framework identifies the initial stage: lack of regulation and flexibility in financial reporting; the
intermediate stage: accounting policy choice; and the final stage: accounting choice and policy review.
Findings – There are situations where accounting regulation contrasts with the needs and business
objectives of firms and vice-versa. Thus, firms may delay the adoption up to the point where the
increase in political costs can just be tolerated. Overall, the study infers that firms might have chosen
to defer the adoption of SSAP 20 until they reach a certain corporate goal, or the adverse impact (if any)
of the accounting change on firms’ financial numbers is minimal. Thus, the determination of the timing
of the adoption is a matter which is subject to the objectives of the managers in association with the
market and economic conditions. The paper suggests that the flexibility in financial reporting, which
may enhance the scope for income-smoothing, can be mitigated by the appropriate standardisation of
accounting practice.
Research limitations/implications – First, the study encompassed a period when firms and
investors were less sophisticated users of financial information. Second, it is difficult to ascertain the
decisions that firms would have taken, had the pound appreciated over the period of adoption and had
the firms incurred translation losses rather than translation gains.
Originality/value – This paper is useful to accounting standards setters, professional accountants,
academics and investors. The study can give the accounting standard-setting bodies useful
information when they prepare a change in the accounting regulation or set an appropriate date for the
implementation of an accounting standard. The paper provides significant insight about the behaviour
of firms and the associated impacts of financial markets and regulation on the decision-making
process of firms. The framework aims to assist the market and other authorities to reduce information
asymmetry and to reinforce the efficiency of the market.

Keywords Accounting standards, Accounting policy

---

Ketersediaan

Tidak ada salinan data

Informasi Detail

Judul Seri

Managerial Auditing Journal

No. Panggil

-

Penerbit

: Emerald Group., 2005

Deskripsi Fisik

Managerial Auditing Journal Vol. 20 No. 7, 2005

Bahasa

English

ISBN/ISSN

-

Klasifikasi

-

Tipe Isi

-

Tipe Media

-

Tipe Pembawa

-

Edisi

-

Subjek

AKUNTANSI

Info Detail Spesifik

-

Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

Lampiran Berkas

Komentar

---

Anda harus masuk sebelum memberikan komentar