Measurements of Accounting Conservatism in Research Intensive Industries from Different Financial Reporting Settings.

摘要

Accounting issues can be very challenging to comprehend, because many business transactions possess complicated attributes. Accounting conservatism is vital to many participants in business activities, including investors and creditors, because they need relevant and timely data about companies for prudent decision making purposes. The problem to be addressed is that financial reporting may be less conservative in research intensive industries resulting from variations in the accounting approach between U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS). The purpose of this quantitative, comparative study was to examine the degree of difference in accounting conservatism for research-intensive industries by comparing companies from one financial reporting jurisdiction (United States) with companies from another financial reporting jurisdiction (European Union). A causal, comparative research design featured the measurement of accounting conservatism through a professionally accepted financial measurement tool. The results generated by the analysis of the market-to-book (MTB) ratio were in alignment with important empirical evidence related to the developing trends in the ratio over a time series. There were clear time trends for the MTB ratio for both the U.S. independent group and the E.U. independent group. The mean results for the MTB ratio for the U.S. group were .393 in 2011, .417 in 2012 and .522 in 2013. The mean results for the MTB ratio for the E.U. group were .149 in 2011, .242 in 2012 and .353 in 2013. The larger means generated by the MTB ratios in the U.S. can be attributed to the differences in the accounting for the development component of R & D expenditures and other reporting differences, which escalate the dollars recorded into asset accounts within the E.U. companies in comparison to those firms within the U.S. The asymmetric timeliness coefficient measurement of conditional conservatism for the two independent groups was higher than zero. The coefficient implies the existence of earnings conservatism when the coefficient is higher than zero. Thus, this study produced an inverse relationship between these coefficients on asymmetric timeliness between the U.S. and E.U. groups compared to the MTB ratios for the same jurisdictions. The primary value added from this study relates to the potential for generating greater efficiencies within the R & D intensive industries through a better understanding of resource stewardship and cost control. A logical interpretation of the results provides assistance in comprehending the impact from the capitalization of the development component of research and development (R & D) expenditures by E.U. companies, and concluding that the impact is apparently strong statistically. Future research activities could continue this form of analysis beyond the year 2013 as companies engage in progressive growth phases and expand their research activities in more diverse manners. Other research efforts should be directed toward a more complete understanding of the two forms of accounting conservatism and the methods used to measure each of them.