European traditions in Accounting

Transcription

European traditions in Accounting
How do selected countries differ in their Accounting traditions?
Each article contains
a short invited essay that describes one or several aspects of the
research tradition or institutional environment in a particular European
country.
Northern Europe:
Denmark, Finland, Iceland,
Sweden
Western Europe:
France, Germany, Ireland,
Netherlands
Southern Europe:
Italy, Portugal,
Spain
Eastern Europe:
Croatia, Estonia,
Hungary, Poland,
Romania, Slovenia
Contents
1. Rohde, Carsten (2013): Accounting in Denmark: The impact of
business economics and practice, in: EAA Newsletter (Issue 1/2013),
pp. 20-22.
2. Järvenpää, Marko (2011): Accounting research in Finland: Times they
are a changing, in: EAA Newsletter (Issue 1/2011), pp. 15-17.
3. Guðbjartsson, Einar (2014): Accounting in Iceland, in: EAA Newsletter
(Issue 1/2014), pp. 15-17.
4. Catasús, Bino and Gerdin, Jonas (2010): Accounting research in Sweden:
a look at dissertations, in: EAA Newsletter (Issue 1/2010), pp. 8-9.
5. Capkun, Vedran and Pervan, Ivica (2010): Accounting research
in Croatia: The reflection of transition, in: EAA Newsletter
(Issue 4/2010), pp. 10-11.
6. Haldma, Toomas and Lääts, Kertu (2012): Accounting tradition
in Estonia: The reflections of accounting changes in the
dynamic context, in: EAA Newsletter (Issue 1/2012), pp. 16-19.
7. Kardos, Barbara and Madarasi-Szirmai, Andrea (2013): Accounting in
Hungary, in: EAA Newsletter (Issue 3/2013), pp. 18-22.
8. Szychta, Anna (2013): Cost and Management Accounting in Poland,
in: EAA Newsletter (Issue 2/2013), pp. 19-23.
9. Albu, Cătălin Nicolae and Albu, Nadia (2012): Accounting tradition in
Romania: Challenges and opportunities in a changing environment, in:
EAA Newsletter (Issue 2/2012), pp. 16-19.
10. Cadez, Simon, Slapnicar, Sergeja and Valentincic, Aljosa (2011):
Accounting research in Slovenia - the intertwining of research
and practice, in: EAA Newsletter (Issue 2/2011), pp. 17-18.
11. Arena, Claudia, Saggese, Sara, Sarto, Fabrizia and Viganò, Riccardo
(2014): Accounting in Italy, in: EAA Newsletter (Issue 2/2014),
pp. 15-17.
12. Major, Maria (2011): Accounting Tradition in Portugal, in: EAA
Newsletter (Issue 4/2011), pp. 22-24.
13. Gonzalo, José Antonio and Mora, Araceli (2010): Accounting research
in Spain: two decades of evolution, in: EAA Newsletter (Issue 3/2010),
pp. 16-18.
14. Berland, Nicolas and Pochet, Christine (2010): Accounting research in
France: the institutional setting, in: EAA Newsletter (Issue 2/2010),
pp. 13-15.
15. Fülbier, Rolf Uwe and Gassen, Joachim (2011): German Accounting
Tradition, in: EAA Newsletter (Issue 3/2011), pp. 13-16.
16. Pierce, Aileen (2012): Ireland’s blend of academic and professional
accounting, in: EAA Newsletter (Issue 3/2012), pp. 22-25.
17. Camfferman, Kees (2012): The Netherlands – accounting in the polder,
in: EAA Newsletter (Issue 4/2012), pp. 21-24.
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eaa newsletter, issue 1/2013
European traditions in accounting
A c c o u n t i n g in D e n m a rk : The i mpact of business economics
and practice 1
Carsten Rohde
Denmark is a small country in terms of
both size and population, which stood
at around 2.5 million in the late nineteenth century and has risen to around
5.6 million today. Well into the twentieth century, the Danish economy was
primarily based on agriculture, although the sector was to a large extent
rationalised from the 1860s onwards
with the formation of large cooperatives. Commerce and industry developed relatively late, and it was not
until after World War I that it became
possible to take a business degree that
went much beyond the basics of
bookkeeping. Denmark was undergoing a process of industrialisation, and
new measurement and management
tools were found necessary.
The establishment of Copenhagen
Business School (CBS) in 1917 came
to play an important role for the development of business teaching and research in Denmark at the time and also
later. In the very beginning, two key
individuals (Hans Christian Riis and
Max Kjær-Hansen) were involved in
the development of accounting as a
field at CBS. The first of them to be
employed was Hans Christian Riis, a
translator who became a teacher of
bookkeeping and later a lecturer of
accounting at CBS. There was little
teaching material in Danish, which
first led to the publication of a textbook for accounting students entitled
“Study of the Balance Sheet” and later
to a book entitled “Costs and Their
Treatment in Book-Keeping and Costing in Commercial and Industrial
Companies”. Both books were inspired
mainly by German sources, which Riis
translated into a simplified form as
practical knowledge to be passed on to
the students at CBS. Riis also contributed on the institutional front by forming a “Commercial Knowledge Study
Club” with the purpose of disseminating knowledge from CBS to practice
and publishing the “Commercial
Knowledge Journal”. Over time, the
Club’s publications turned into an
especially important channel for accounting knowledge, and at the same
time it added to the significance of
CBS as the main institutional source of
accounting knowledge.
While at the time it was generally seen
as a practical subject, in the mid-1920s
the German concept of accounting as
an element of more general business
economics was imported to CBS
through Max- Kjær-Hansen. He was
hired to CBS in 1924 but took leave
from the School for a year in 1926 to
study business economics under Professors Dr Eugen Schmalenbach and
Dr E Geldmacher at the Business
School in Cologne. Inspired by his
stay in Cologne, on his return KjærHansen wrote a textbook in Danish
entitled "General Business Economics", in which the concept of business
economics was defined in Danish for
the first time. In his book, KjærHansen
stresses
how
essential
knowledge of business economics is to
the running of a modern company. It
no longer suffices to run a company on
the basis of prescriptive rules passed
down from father to son; it requires
theoretical knowledge. The book
builds on the terminology and ideas of
the Cologne school, and in his work on
accounting, Kjær-Hansen directly
adopts Schmalenbach’s terminology;
1
however, he is also inspired by other
German developments.
During the thirty years up to 1950, a
Danish literature on management accounting evolved, based on German
ideas, and for quite some time this
development relied on a relatively
small number of professors at Copenhagen Business School. The growing
number of works published on accounting was an important starting
point for the next generation. Management accounting was not professionalised in the same way as in the UK and
US, as there were no professional journals
disseminating
accounting
knowledge in Danish beyond those
produced
by
the
Commercial
Knowledge Club, and by the end of
this period, CBS had become a centre
of dissemination of the emergent management accountant ideas. In some
ways, CBS served as a kind of stage
gate through which advanced accounting knowledge, which in this period
was almost anything beyond basic
book-keeping, was passed on to not
only students, but also practitioners.
All this development took place in a
network that included prominent businessmen and organisations as well as
CBS, in which accounting was expected not just to be an isolated subject, but rather an important and integrated subject defined through its
place and importance in business economics.
(continued on the next page)
Page 21
Accounting tradition in Denmark (cont’d)
(continued from the previous page)
Accounting and business economics
after WW II
After World War II there was a period
of adjustment to the new world order.
The US decided that it was necessary
to assist European reconstruction directly by giving aid, and in 1947 what
became known as the ‘Marshall Plan’
was implemented. Although Denmark
emerged relatively unscathed from the
war, the country did receive aid, and
this was to have a direct effect on the
development of accounting and business economics field from the late
1950s onwards, in particular through
the work of Palle Hansen2.
In 1954, Palle Hansen was appointed
by the Ministry of Trade’s Productivity Committee to lead a Danish team on
a 6-week visit to the US. This Marshall
Plan-funded visit to the US seems to
have reinforced the post-war tendency
to look to American rather than German literature for inspiration. The
objective of the study visit was to conduct technical studies of the cost accounting systems and budget control
methods applied by American corporations and, against this background, to
present a report aimed at providing
Danish manufacturing companies with
inspiration on how to handle these
issues, and thus enhance efficiency in
Danish industry.
When the trip was organised, it was
generally acknowledged that Danish
industry only to a very limited extent
had started using budgeting and costing methods. One of the subjects
which especially required study was
the function and required educational
background of the ‘controller’.
Hansen was particularly influenced by
the then ongoing debate on the relative
benefits of full costing and contribution margin analysis. He became convinced that the contribution margin
method was the way forward. On his
return to Denmark from the US, he
immediately began organising courses
in the contribution margin method for
both accountants and managers, although it was some time before he began to write books and articles on the
subject. His courses were based on the
philosophy that traditional cost accounting models were too sophisticated for most Danish businesses, which
by international standards were fairly
small. His aim was to make accounting
systems more flexible in order to enable better control of costs and profitability in companies. At the same time,
they should build on principles in line
with those of managerial economics.
In addition to having an important role
in management accounting, Hansen
also became a dominant figure in financial accounting. Following the
approach he used in management accounting, he advocated that the contribution margin method should be used
in financial accounting. So through his
efforts, the contribution margin principle became generally used in the preparation of both cost and management
accounts and annual financial statements. This changed however, with
Denmark’s membership of the European Community, and following the implementation of the 4th Directive
through the Financial Statements Act
of 1981, the contribution margin method could no longer be used for financial statements (Elling & Hansen,
1984). According to Elling & Hansen,
this change caused considerable problems, as the introduction of the absorption costing principle was both cumbersome and costly, since most Danish
companies had no experience in allocating fixed production costs by functions and products.
Towards internationalisation
The most recent period from around
the 1980s has thus been characterised
by internationalisation of a more intensive kind. In the old days, foreign ideas in foreign languages were brought
to Denmark by professors, who then
translated and worked on their imported accounting knowledge, relating it to
2
existing Danish knowledge in order to
refine and contextualise it. The accounting knowledge was then served
for local consumption by accounting
students and the country’s academic
institutions and by commerce and industry in general through articles in
Danish and various forms of presentation and consultancy. Today, the increasing impact of internationalisation
has made this import-driven model
more or less redundant.
Academics have changed gradually
from being mainly orientated towards
teaching students and practitioners to
researching to produce knowledge for
publication in international peerreviewed journals. In many cases what
is expected is production of knowledge
that has a certain degree of universal
validity.
International publications
were needed not only by individual
academics, but also by their universities as the age of international evaluations and accreditation of learning
institutions dawned. The business
economics context in which accounting flourished in the mid-20th century
is not at the moment of great interest,
except in terms of education. Individual subjects like accounting have their
own international research communities, and knowledge develops in channels, which means that students are
often left to make their own connections.
In the international world of research,
Danish academics link up with international colleagues to produce international articles. Networks of researchers develop across boundaries. Practitioners of management accounting find
themselves using standard accounting
packages of varying levels of sophistication. In teaching, textbooks on management accounting and information
systems in English have to some extent
challenged and replaced textbooks in
Danish.
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Accounting tradition in Denmark (cont’d)
However, there is still a need for the
process of translation and adaptation
of foreign management accounting
knowledge into Danish language and
context, whereas the Danish management specialties as developed by people like Palle Hansen and Vagn Madsen are becoming somewhat less important. Perhaps an export drive is
needed, for they may be able to add
new insights to the current international debates in accounting.
Further reading:
Elling, J.O., & Hansen, C.K. (1984).
EEC Accounting Harmonisation: Implementation and Impact of the Fourth
Directive. In S. J. Gray, A. G. Coenenberg (Eds.), E.E.C. accounting harmonisation, pp. 29-42, Amsterdam: North
Holland.
Israelsen, P., Andersen, M., Rohde, C.,
& Sørensen, P.E. (1996). Management
Accounting in Denmark: Theory and
Practice. In A. Bhimani (Eds.), Management Accounting: European Perspectives (pp. 31-53). Oxford: Oxford
University Press.
Loft, A., J. Mouritsen & C.Rohde
(2012). Accounting and Business Economic In Denmark. In Y. Biondi & S.
Zambon (eds.), Accounting and Business Economics: Insights from National Traditions. Routledge, pp. 201-223.
Näsi, S. & Rohde, C. (2007). Development of Cost and Management Accounting Ideas in the Nordic Countries. In C. Chapman, A.G. Hopwood
& M.D. Shields (eds.), Handbook in
Management Accounting Research,
Vol. 2, pp. 1091-1118.
1
This article builds directly on research that I have done together with
my colleagues Anne Loft and Jan
Mouritsen, to whom I am grateful. I
have also found inspiration in earlier
work that I have done together with
my Finnish colleague Salme Näsi as
well as my Danish colleagues Michael Andersen, Poul Israelsen and
Poul Erik Sørensen. However, I
personally take full responsibility for
any mistakes and misinterpretations
in this article.
2
Other important individuals who
should be recognised for their contributions to the development of management accounting at the time were
the two professors Eric Scneider and
Vagn Madsen from Aarhus University. Although both of them have
made important contributions to the
literature in the field as well as to
their students, neither of them has
ever had such a direct influence on
practice as Palle Hansen.
Carsten Rohde is a Professor of Cost
and Management Accounting at Copenhagen Business School, Denmark.
3
Page 15
eaa newsletter, issue1/2011
A c c o u n t i n g r e s e a r c h i n F i n l a n d : Ti m e s t h e y a r e a
changing
Marko Järvenpää
Finnish accounting
researchers
have been participating very actively in EAA congresses over the
course of the last
three
decades,
particularly when
one considers the
relatively
small
national population. For example
in some congresses as much as 20 %
of the presentations in management
accounting sessions were made by
Finnish researchers. The congress has
twice taken place in Finland: in Turku
1993 and in Tampere in 2009. Professor Reino Majala acted as a President
of the EAA in 1993-1994 and Professor Pekka Pihlanto as President of the
congress in 1993. Professor Salme
Näsi chaired the congress in 2009.The
work done by Professor Kari Lukka on
EAA committees and as the editor of
the EAR during 2000-2005 should also
be mentioned in this European context.
But what is the background of such an
active presence of the Finnish accounting academics in EAA context? I shall
be trying to answer that question in
this article.
The history of accounting in the form
of bookkeeping in Finland goes back
to the 14th and 15th centuries, and the
history of double-entry bookkeeping
begins in the 17th century. From the
middle of the 19th century accounting
in Finland may be considered as a
practice in the modern sense of accounting practices owing to a period of
economic liberalism in Russia - for
Finland was a Grand Duchy of Russia
from 1809-1917 that led to an expansion of commercial and industrial activity in Finland too. References to the
obligation to keep books can first be
found in acts passed in the 1860s. Our
second official language is Swedish
since prior to 1809 Finland was part of
Sweden with a consequential strong
Swedish influence on Finnish culture
generally.
After Finland became independent in
1917 accounting legislation developed
rapidly. The first Accounting Act (The
Bookkeeping Obligation Act) was
passed in 1925 and the Financial Statements Publication Act in 1928. At
those times, accounting practice was
still relatively undeveloped, so the
framework for financial accounting
had to be established mainly through
legislation. The static balance equation
theory was a fundamental idea in accounting, and the balance sheet was
seen as a primary financial statement.
These ideas were adopted mainly from
German theories. The German influence is also still observable, for example in the Finnish education system.
A new Accounting Act was passed in
1945. The need for more regulated
financial accounting was based on
increased control by the government,
and the war economy. Financial statements were now drawn up according
to a uniform model. The act was still
mainly based on the static balance
equation theory and asset calculation.
Profit measurement was regarded,
however, as the main function, a fact
which indicates that some dynamic
influence was now involved. Developing businesses also started to use managerial accounting practices such as
costing, capital budgeting and financial planning, which in turn led to increasing teaching and researching activities around these topics.
A dynamic "expenditure-revenue theory" of accounting was outlined and
demonstrated in Finland in the 1940s
and the 1950s by Professor Martti
Saario. Both the 1968 Company Income Tax Law and the 1973 Accounting Act were based on the expenditurerevenue theory of Professor Saario.
This theory, which emphasized the
role of income statement and profit
calculation, became a basic explanatory theory in the 1950s and it was gen-
4
erally accepted by the accounting profession in the 1960s as the only valid
theory. It was a unique in international
accounting history that prescriptive
rules could be deduced from a single
theory that had been developed by a
single professor – a situation scarcely
imaginable these days.
While the laws allowed wide income
smoothing and flexible taxation in the
spirit of accounting theory, it also suited the purposes of the government to
control economic development and
industrialization and provided a genuine win-win situation between firms
and government, though it was difficult for shareholders to ascertain the
financial position and performance of
the companies. This was considered
not to be a major problem, however, in
the weak and narrow capital markets in
Finland of those times.
Economic development and increasing
internationalization lead to the Accounting Act Reform of 1993 and the
new Accounting Act of 1997, which
were aimed at unifying regulations for
financial statements with those of the
4th and the 7th Directives of the European Community and to make the financial statements internationally
comparable. The last step of harmonization with IFRS was taken in the law
reform of 2005. The expenditurerevenue theory remained as the theoretical base until the changes of 1993,
but since that it has gradually been
removed from the way of IFRS as
there has been an increasing need by
shareholders for transparency in international capital markets.
Early Finnish accounting research was
greatly influenced, like the first Accounting Act, by German accounting
traditions. In fact the title of the first
Finnish accounting dissertation of
Ilmari Kovero (1911) was “Die Bewertung der Vermögensgegenstände in
den Jahresbilanzen der privaten Unternehmungen“.
Page 16
Accounting research in Finland (cont’d)
Actually, the history of accounting
research in those pioneering years
before the Second World War was
much of the business and management
studies, because most of the dissertations and research in general were in
the area of accounting. 1911 was also
another milestone for Finnish accounting as an academic discipline in the
sense that Helsinki School of Economics (HSE, nowadays part of the Aalto
University) was founded in the same
year as the first Finnish speaking university level business school in Finland. For the Swedish speaking students in Finland the higher education
was started already in 1909, when the
Swedish School of Economics and
Business Administration (known as
Hanken) was founded (university status awarded 1927). Currently the master level education in accounting is
offered in 11 universities in Finland,
and there are no tuition fees at any
levels of higher education.
internationalization since the 1980s
have also provided excellent research
laboratories for scholars focused on
financial accounting and the financial
markets in the interface between accounting and finance. There have been
ambitious and successful research
groups focusing on these aspects in
HSE, the Swedish School of Economics and in the Universities of Vaasa
and Oulu, and since the 1990s they
have published plenty of high level
journal articles on a variety of topics
on financial accounting and finance.
There is more than 30 dissertations
completed in financial accounting
during the twenty year period from
1990 to 2009, though it is not easy to
define the exact number because the
distinction between the categorization
of financial accounting and finance is
often somewhat arbitrary regarding the
topics, between university departments
and faculties, and in the publication
series.
Up to the 1960s accounting research in
Finland was mainly theoretical and
conceptual by nature. International
publication activity was very rare.
Dissertations were typically the highlight of research activity and their topics related to different aspects and
items of the balance sheet, income
statements and valuation and profit
measurement. In management accounting the focus was on major issues of
capital budgeting and costing. During
the 1960s, the statistical explanatory
research and decision making models,
influenced by models in the United
States, took on an increasingly large
role in Finnish accounting research.
This mainstream approach has maintained its leading position in financial
accounting research right up to today,
though not exclusively, as a few dissertations and journal articles do now
apply other methodologies.
Many contemporary topics, like accounting history, gender issues and
social and environmental accounting,
have been gained in popularity over
the course of the last years and they
have generated a few dissertations. In
these studies, a broader methodology
is typically employed, including discourse analysis, archival studies, and
case studies (firms in Finland are familiar with collaboration for the purposes of research, and usually it is
fairly easy to obtain access to companies). Moreover, with the growing
importance of the auditing profession
during the last two decades and the
establishment in the country of a number of professorial chairs in auditing,
research into auditing has been steadily increasing, and there were 14 dissertations on auditing from 1990 to 2009.
Changing legislation and international
harmonization have provided plenty of
research opportunities in the world of
Finnish financial accounting. Moreover, weak financial markets and their
rapid liberalization, development and
In management accounting research,
the early studies in the 1940s and
1950s focused mainly on basic issues
like costing. In the 1980s however the
behavioral and organizational aspects
of management accounting gained
attention. The popularity of management accounting research in Finland
5
exploded in the early 1990s, when
relevance lost debate and activitybased costing, non-financial measures,
balanced scorecard, strategic management accounting and new roles of
management accountants etc. became
part of research agenda. Because it has
been a very popular topic it too has
produced plenty of dissertations and
internationally recognized journal papers in high level journals such as Accounting, Organizations and Society
(AOS), Management Accounting Research (MAR) and European Accounting Review (EAR) to mention few.
Management accounting research has
been particularly popular in the HSE,
Turku School of Economics, and the
Universities of Jyväskylä and Tampere. It may be said, in spite of the risk of
sounding biased, that an important
cornerstone for Finnish management
accounting research was established
when AOS was founded. This journal
has provided both inspiration and insights into social and organizational
context of accounting, which can be
observed also in Finland since the
1980s. Furthermore, the curious and
open-minded spirit of its founder and
long time editor, Anthony Hopwood
has had remarkable effect on Finnish
management accounting research.
Moreover, many Finnish authors have
been both influenced by and contributed to the two other main source of
publications, MAR and EAR during
last couple of decades.
Later on the research agenda has shifted from studying management accounting innovations and their implementation to more theoretical questions related to accounting change and
accounting practices. Interpretative
theories, like actor-network theory,
structuration theory and particularly
different versions of institutional theory, have gained in popularity. Currently, topics like ERP-systems, shared
service centers, management control
system packages and control of new
organizational forms and growth firms
are under intensive studying.
Page 17
eaa newsletter, issue1/2011
Accounting research in Finland (cont’d)
Interpretative,
ethnographic
and
grounded theory based case and field
study approaches have been popular in
Finland and we may say that they form
the heart of Finnish management accounting research. Several studies
have successfully employed also survey strategy and applied contingency
theory too. According to recent study
of Kihn and Näsi (2010) there were 43
dissertations completed during 19902009 in management accounting in
Finland. 47 % of them used interpretative, 20 % quantitative, 13 % constructive and 20 % mixed methodologies.
Currently there is a spirit of methodological pluralism in Finland. There has
been also a tradition of very lively
methodological discussion, producing
several journal articles on this topic
and, furthermore, one ‘Finnish speciality’; ‘four Finnish research approaches
(‘nomothetical’ (i.e. mainstream statistical),
‘decision
analytical’,
‘conceptual’ and ‘action oriented approach’ (close to interpretative approach)) defined by Neilimo and Näsi
in 1980. Methodologically we can
separate three or four major turning
points in the Finnish accounting research tradition, at an average interval
of about 15 years. The first major turning point was the abovementioned
move from conceptual studies to a
quantitative ‘mainstream’ approach in
the 1960s, which remained as the leading practice in financial accounting.
The second was the emergence of the
interpretative and qualitative approach
in the 1980s, particularly in management accounting research, in which it
has maintained its strong position ever
since. The third was the introduction
of the constructive research approach,
the interventionist case study methodology introduced by Kasanen, Lukka
and Siitonen (1993), which has been
very popular in masters theses, applied
in a few PhD theses and in some international articles too. Fourthly, and
more tentatively, as its potential is not
yet fully tested, I may mention the
recent
methodological/theoretical
opening made by Malmi and Granlund
(2009), in which they proposed if man-
agement accounting theory as such
should be developed, and if so in
which ways, instead of using only
theories developed in other disciplines.
The number of dissertations (almost
one hundred in total during the two
last decades) has increased gradually
due to the efforts made in universities,
to improved possibilities to research
funding, to pressure from the ministry
of education and university executives,
but also due to co-operation on a national scale, particularly in the form of
Graduate School of Finance and Financial Accounting (GSFFA, founded
in 1994) and the Graduate School of
Accounting (GSA, founded in 2000).
Moreover, the increasing international
co-operation between the universities,
in EIASM and EAA and in other international associations has meant a lot
for the internationalization of Finnish
PhD education. Traditionally, it has
taken relatively long time, about eight
years, to complete PhD studies in Finland. Earlier, up to the 1990s, it was
obligatory to complete licentiate degree between master and doctoral degrees. It is still possible to do, but
more and more PhD candidates complete their doctoral degree without the
licentiate stage. Typically too in Finland PhD students are usually faculty
staff, with both teaching responsibilities and administrative work to perform as well. The career track has typically included posts ranging from assistant (or researcher) through to assistant professor, associate professor and
full professor. Currently, however the
Finnish career development are under
change process, and it is moving towards tenure track system in some
universities.
The national source of academic publication has traditionally been the Finnish Journal of Business Economics,
published since 1952. It is a double
blind reviewed general journal for all
business studies that is published quarterly, and its current editor is Professor
Teemu Malmi. Most of the articles are
published in English.
6
In Finland, there are only a few important professional accounting associations.
CPA association (KHTyhdistys) is an association of auditors
certified by the Central Chamber of
Commerce. CPA was founded in 1925,
it is a member of IFAC and FEE and it
has about 770 members. Further there
are the HTM-auditors association,
which is an association of auditors
authorized by regional chambers of
commerce (800 members, founded in
1951), the Association of Finnish
(authorized) Accounting Firms (784
member firms) and the Institute for
Internal Auditors (founded in the
1950s, 650 members), but management accountants do not have their
own association, nor is there any official certification for management accountants as there is in some other
countries.
The dominance of leading international journals and the increasing importance of university rankings will
probably affect the methodological
choices and focus areas of research in
Finnish accounting academia too. Let
us hope that it will not lead to narrower possibilities, either in research questions or in methodologies. Hopefully
we may retain something of our Finnish originality, and the many opportunities there have been for rich accounting research will remain, while at the
same time we continue to be able to
further improve the quality of our research.
Marko Järvenpää is Professor of accounting at the University of Jyväskylä.
Page 15
Accounting in Iceland
Einar Guð b jart sson
Iceland in the North Atlantic Ocean
Iceland is one of the Nordic countries,
and it is the smallest. The size of the
country is around 103.000 km2 and the
population is about 320.000. That
makes Iceland the most rural location
in the world, about three inhabits pr.
m2. Iceland was a part of Denmark
until June 1944. Danish influence in
administration and law making have
always been great. As the time passed,
the independence began to manifest in
Icelandic regulation and law making
environment, but the recent years EU
have impact the law making, specially
in accounting via IFRS.
The Accounting Act Development
1938-2013
The early years
In 1938 was for the first law passed by
Parliament which specifically dealt
with accounting, Act No. 62/1938 on
bookkeeping. The Act focused mostly
on two things, firstly, classifying firms
regarding mandatory to keep accounting records, secondly, how to do the
bookkeeping. In articles 10 to 12 it is
mentioned who to prepare the balance
sheet and all assets which have been
pledged or any warranties to third person shall be disclosed. This law was
enacted by The King Christian X of
Denmark.
In the next thirty years there were no
major changes in the accounting legislation. It was not until 1968 that a new
accounting law was adopted by the
Parliament
(Alþingi),
Act
No.
51/1968. In the Act, it was stated for
the first time, in details, how accounts
should be prepared and the structure of
the annual accounts and which issues
should be accounted for in the balance
sheet and the profit and loss account.
The Cash flow statement was not mentioned in the Act.
Many new issues were observed but
the eight main issues in the Act were
as following: 1. Requirement to keep
accounts. 2. Exemptions from the use
of double-entry accounting listed. 3.
The term generally accepted accounting principles applied. 4. Process for
doing accounting defined. 5. Documentation in bookkeeping applied. 6.
Valuation of inventories. 7. New provisions for the preparation of annual
accounts (financial statements) and
valuation. 8. The Minister may, by a
government regulation, establish further provisions regarding the enforcement of this Act, and decide that industries should have a standardized
accounting system.
The concept "generally accepted accounting principle" was introduced in
the law for the first time in the Accounting Act No. 51/1968. In comments under Article 4., in the law bill,
it is stated that the concept implies in
particular that "... accounts are kept
and annual accounts are prepared in
accordance with the views, that are at
any given time generally dominated by
skilled and conscientious people,
working with bookkeeping and accounting." The term "conscientious
people" is noteworthy as it refers to the
people that shape the generally accepted accounting principles.
During the high inflation period of the
1970s and 1980s, the using of the cost
method of accounting, to value properties in the annual accounts, became
7
subject to criticism. Unlike the assets,
the debt became more inflationindexed and therefore revalued at every balance sheet date. As a result of
that, shareholders equity dropped.
Therefore, it was considered necessary
to revaluate assets for inflation. This
was the first step toward inflationadjusted accounting.
New Annual Accounts Act, No.
144/1994
In 1994 a new law on Annual Accounts was passed,
Act. No.
144/1994. This new Act had a huge
impact on the accounting environment.
This was the first time that provisions
on preparation and presentation of
annual accounts was placed in one
single act. Before it was to be found in
several different laws. The provisions
of the Act No. 144/1994 were largely
based on the “Nordic model”. The
agreement with the European Union
regarding European Economic Area
(EEA) was signed by Iceland in 1994.
Many new provisions were introduced
in this Act which had a huge impact on
the accounting environment in Iceland:
1. In chapter IX the Accounting Standards Board is mentioned for the first
time. The main task of the Accounting
Standards Board is to promote and
develop the generally accepted accounting principles. This is a change
from the provisions in Act No.
51/1968, when individual professionals did develop the generally accepted
accounting principle.
2. In chapter VI the concept
"consolidated accounts" is mentioned
for the first time. It mainly deals with
internal transactions and how shares in
associated companies should be accounted for.
Page 16
Accounting tradition in Iceland (cont’d)
3. Chapter VIII deals with the obligation of companies to elect an external
auditor at the annual general meeting.
The chapter also contains general requirements concerning size limits,
sales, assets and equity, which have
impact on the duty to elect an auditor.
4. In Chapter V, the content of the
director´s report is discussed. The Act
specifies what information should be
included in the director´s report, e.g. it
must be disclosed who owns more than
10% share in the company.
5. Emphasis was placed on the high
relevance of the disclosures of the
annual accounts.
6. The valuation rules were detailed
and many accounting terms were adjusted to international standards, i.e.
revenue recognition, the matching
principle and inventories valuation
methods.
7. The impact of inflation is taken into
account as "inflation-adjusted accounts", i.e. the assets, liabilities and
operations were adjusted to inflation.
Under Article 25, it was permitted to
adjust the annual accounts by taking
into account the impact of general
price level changes on operations and
financial position of the companies. By
using the permission, the company was
required to establish a revaluation reserve within the equity accounts, that
were used to offset the inflation adjustments. Almost all loans were inflationindexed which had a negative impact
on the principal balance of the loans.
These circumstances led to discrepancies between non-indexed assets and
indexed liabilities. The Inflation rate
was calculated on a monthly basis.
Inflation-adjusted accounting was intended to correct the difference in valuation of assets and liabilities arising
from the inflation.
Effects on the profit and loss
In manufacturing companies where the
debts/loans were inflation-indexed, a
gain was generated in order to reduce
the financial expenses impact of indexation due to inflation. In financial institutions where the loans/advances
were mostly inflation-indexed, expenses were generated to offset the
(inflation) gain. The price adjustments
transaction is recognized as financial
income or expenses. The accounts
were adjusted to the price level. Profit
or loss was shown at real value, i.e.
after inflation had been taken into account.
From 1995 and on
An amendment was made to the Annual Accounts Act, no. 144/1994, in
1995, which imposed new sanctions
and procedures for reporting of financial fraud and for those parties who
neglect to take measures to prevent
that wrong information, financial or
non-financial, enter the market.
In context with the EEA Agreement,
new amendments to the annual accounts were adopted in 2001 and a
new surveillance authority was established, The Register of Annual Accounts, to keep a register of all companies that have to prepare annual accounts according to law. The new
amendments make it mandatory for all
companies to submit their annual accounts (financial statements) to the
Register of Annual Accounts.
In Iceland, the Icelandic krona is used
as the functional currency, but with
changes to the law on the annual accounts, the accounting law and the law
on income tax it was permitted to present annual accounts in other currency
than the Icelandic krona, i.e. the real
functional currency. The presentation
currency can be other than the Icelandic krona. This required a special authorization from the Register of Annual Accounts. It is a possible to choose
8
between three languages, regardless of
currency, i.e. Icelandic, Danish or
English. Nonetheless, companies that
wish to register their accounts in foreign currency are required to register
their accounts in Icelandic currency for
tax purposes. Assessment of public
expenditure shall be in Icelandic currency as well as the payment of fees
and taxes.
Inflation–adjusted accounting was
abolished by an amendment to the
Annual Accounts Act in 2001. Companies were given a two-year transition
period from beginning of 2002 to the
end of 2003 to amend their accounts in
accordance with the new rules. They
were also allowed to take into account
price changes in preparation of the
accounts, without justifying the continued use of the method. During the
transition period “three sets of” annual
accounts were prepared, first, with
price adjustments and second, without
price adjustments and thirdly, big international companies used IASB/IAS
standards.
Many major accounting topics were
added to the Act, in 2003, such as, a
true and fair view, consolidated accounting, explanations on impairment
test. Companies were now required to
prepare consolidated financial statements. Two methods were allowed for
the preparation of consolidated accounts; the purchase method of accounting or the pooling-of-interests
method of accounting. It may be noted
that FASB agreed two years earlier, in
July 2001, to prohibit the use of the
pooling-of-interests method of accounting for preparation of consolidated accounts.
Page 17
Accounting tradition in Iceland (cont’d)
On 1st of January 2005 a law was
passed by the EU that all companies
with listed securities, shares or bonds
on the open market should use the
IASB/IFRS accounting standards in
the preparation and presentation of
their annual accounts. In 2004, all
international accounting standards
were translated into Icelandic. This
had a huge impact on the accounting
environment, as many Icelandic companies changed their accounting policies with the adoption and implementation of IAS/IFRS.
At the beginning of 2006, a new comprehensive law on Annual Accounts
was introduced in Iceland, Act No.
3/2006. The new law contain the additions to the former Act that occurred
between 1994 - 2005. Various changes
have taken place since then, as described before.
In 2008, special provisions on audit
committees were adopted in Icelandic
law. Companies, defined as a public
interest entities shall (are obligated to)
have an audit committee. The Audit
Committee‘s role is discussed in this
new law. Among other things, the
audit committee shall assess the independence of the auditor or auditing
firm and recommend to the board of
directors on the choice of auditor or
auditing firm.
Accounting and education
The International Financial Reporting
Standards (IFRS) was adopted in Iceland on 1 January 2005 and the largest
companies in the country and international companies have prepared there
annual accounts according to IFRS.
The Register of Annual Accounts
grants permission and keep record of
companies that prepare their accounts
under IFRS. It also monitors the preparation and presentation of the annual
accounts and compliance with IFRS.
Some industries do not use IFRS,
among them are municipalities and
pension funds.
The Accounting Standards Board was
established in 1992. Until then, a special committee on accounting procedure operated within the national Association of Certified Accountants.
The role of the Accounting Standards
Board includes promoting the formulation of accounting principles, cf. the
Annual Accounts Act.
The Public Auditors Oversight Board
was established in 2008. It‘s role is to
monitor compliance in the work by
auditors and audit firms with the provisions of Act No. 79/2008 on Auditors,
the Code of Ethics of the Institute of
State Authorised Public Accountants
and other rules that apply to the work
of auditors. In Article 15, of the Act, a
special emphasis is put on the following five issues:
1. Auditors meet the conditions for
certification.
2. Auditors meet the requirements
relating to continuous education.
3. The professional activities of auditors and audit firms are subjected to
regular quality control.
4. A Code of Ethics and auditing
standards are in place.
5. Auditors take in account provisions
of law on money laundering and financing of terrorists.
Until 2006 it was not required for an
individual to hold a master’s degree in
order to become state authorized public accountant in Iceland. It was sufficient to hold a bachelor's degree, with
specialising in accounting, or equivalent undergraduate degree. In 2006 a
change occurred, in order to become a
student and an employee of an audit
firm, a master degree in accounting
and auditing from a university is required. According to the law, the Audit
Oversight Board has to approve the
content of the master’s program.
To be licensed as a State Authorized
Public Accountant an individual must
have three years relevant work experience and have passed a comprehensive
examination conducted by the Audit
Oversight Board. The examinations
are held once every year. So far only
25% of the participants have passed
the exam (met the minimum requirements).
Einar Guðbjartsson is an Associate
Professor of Accounting and Audit, at
The School of Business at the University of Iceland.
9
Page 8
Accounting research in Sweden: a look at dissertations
Bino Catasús & Jonas Gerdin
It is a delicate
task to give a
representative
overview of accounting
research in Sweden
in a short note.
For better or
worse, we decided to use doctoral theses published during the
last five years as
a proxy for contemporary
accounting
research. Before entering into details of
the picture that emerged, however, we
would like to say a few words about
the Swedish academic context.
The Swedish setting
In Sweden, the great majority of accounting research is undertaken at
business schools, universities and socalled university colleges. The first
two business schools—in Stockholm
and Gothenburg—were founded in
1909 and 1923, respectively, followed
by the establishment of departments of
business administration at the ‘older’
universities some 30-40 years later.
Since the 70ties, there has been an
ongoing and rapid expansion of the
system of higher education in Sweden,
leading to that accounting is currently
taught at some 25-30 institutions.
While the accounting discipline has
always constituted a cornerstone in
Swedish business research and education, it received an unexpected and
significant pickup in interest in 2007
when the Swedish Agency for Higher
Education published a report relating
to the right to award the traditionally
most demanded degree for Swedish
students, namely, the one-year master
called “Civilekonom”. The premise is
that of the twenty-three institutions
that applied for the degree, a majority
was rejected based on the argument
that there were too few accounting
scholars (PhDs and professors) within
their schools and departments. Although this was indeed bad news for
the organizations in question, it certainly increased the interest in the accounting discipline as such.
As we see it, two important consequences of the report on the accounting discipline can be discerned. The
first one is how the term ‘accounting’
is becoming used. Before the report, a
professor (and lecturer) in accounting
was typically associated with a
‘financial accounting’ or ‘auditing’
scholar, while professors in management accounting were referred to in
terms of ‘management control’ scholars. That is, unlike the English word
‘management accounting’, the since
long used Swedish term
‘ekonomistyrning’ does not include the
word ‘accounting’. At present, however, we find that new positions are
often termed ‘accounting’ in general,
and that it is explicitly stated that both
scholars specialized in financial accounting/auditing and management
accounting may hold such position.
The second major consequence of the
report is that the ‘market’ for the limited number of accounting scholars
improved significantly. There has also
been a significant pickup in demand
for promising PhD-students interested
in accounting issues.
Dissertations in accounting
According to LIBRIS (the database
kept by the Swedish national library),
some 150 theses in accounting have
been published by Swedish business
schools and universities between 1950
and 2009. Although there might be
10
some errors in this number (on account
of classification issues), it does give a
picture of a research arena with a limited amount of studies. As suggested
above, however, the discipline has
received renewed interest and is rapidly expanding. Expressed in figures,
we find that no less than half of the
total number of dissertations was published between 2000 and 2009. And a
closer look at the last five years (in
total 40 dissertations) suggested the
following pattern:
It is management control studies
that are in majority followed by
studies of/in financial accounting
(about a third of the total) and less
than a handful of studies of/in
auditing.
The phenomena studied are very
disparate, ranging from armlength research on capital markets
to ethnographically inspired studies of management narratives.
Broadly speaking, however, three
partly overlapping topics seem to
dominate, namely, (i) antecedents
and consequences of different
accounting system design and use;
(ii) accounting change processes
and; (iii) accounting in ‘new’ contexts such as interorganizational
relationships, cultural production,
and in entrepreneurial firms.
There is a high diversity in terms
of theories used and developed.
Just to mention a few, we find
studies applying sociology
(including institutional theory,
structuration theory and actor network theory), economics, critical
theory, and contingency theory.
Notably, accounting theory is
rarely used.
(continued on next page)
Page 9
Accounting research in Sweden (cont’d)
The case method and field studies
are preferred, in particular in the
management accounting and control area, but also in financial accounting and auditing. In fact,
almost 75% of the dissertations
reviewed apply these research
methods. None used experiments
or could be classified as
‘analytical’ (i.e. applied mathematical modeling).
Seen over the five-year period of
study, we find that the traditional
‘monograph format’ dominates.
However, a few (but growing
number of) dissertations consist of
4-5 papers with an introduction
framing the different studies.
Typically, one or more of these
papers have been published in
peer-reviewed journals.
Overall then, the emerging picture is
very much characterized by multiplicity. That is, seen as a whole research
performed by ‘coming’ Swedish accounting scholars is highly fragmented
both in terms of phenomena studied
and theories used. And interestingly,
this pattern also holds for individual
business schools and departments,
which suggests that the research
agenda is largely set by individual
PhD-students, supervisors and/or research groups.
Despite this diversity, however, it is
worth noting that very little work is
currently done on the role of accounting at the individual level, e.g. studies
of individual decision-making informed by cognitive psychology. The
same applies to more broad-sweeping
studies on the societal level. It is also
worth noting that cross-sectional studies and, in particular, studies with an
experimental design are clearly underrepresented. Instead, current PhD work
is dominated by case and field study
methods. It is difficult to have a strong
opinion about why this is the case, but
one explanation might be the belief
among Swedish researchers that we
have a comparative advantage in terms
of excellent access to firms and organizations. This might be particularly true
when it comes to public sector research since the principle of free access to public records is a constitutional right in Sweden.
Finally, we note a tendency towards
reporting PhD research in English and
in a ‘paper format’. A possible reason
for this quite fundamental change is
the ‘publish or perish’ culture that is
becoming the norm in the Swedish
11
higher education system. Having said
that, however, we find (yet) little evidence of PhD theses being specifically
tailored to fit the research agenda and
style set by highly ranked American
journals. On the contrary, contemporary accounting research in Sweden is
still firmly rooted in what has been
referred to as the Scandinavian tradition. That is, the dominating part is
characterized by a close and typically
long relationship with the organizations studied which, in turn, enables
rich descriptions and analyses of multiple aspects of accounting practices.
Bino Catasús is professor of accounting and auditing at Stockholm University, Sweden.
Jonas Gerdin is professor of management accounting at Örebro University,
Sweden.
Page 10
Accounting research in Croatia: The reflection of transition
Vedran Capkun and Ivica Pervan
Croatian accounting
research
should be put in
the context of transition of the society,
economic
system, accounting and higher education. At the beginning of the 1990s, Croatia began the
process of transition from a planned
socialist to a market economy. The
transition to market economy required
a change in accounting standards that
shortly followed. In 1993 Croatia
adopted International Accounting
Standards (IAS). This transition to IAS
served as a conduit for an increase in
accounting research.
The Croatian academic and professional accounting community is organized in three associations. The first
association of accounting professionals
in Croatia was founded in 1954 under
the name of Croatian Association of
Accounting and Finance Professionals
(HZRIFD). In 1992 HZRIFD became a
member of the European Accounting
Association (EAA), and in 1994 it
became a member of the International
Federation of Accountants (IFAC). In
addition to the HZRIFD, there are the
independent association of Croatian
Accountants (UHR) and the Chamber
of Croatian Auditors. HZRIFD and
UHR both organize annual meetings
where research and applied research
papers are being presented. Since 2009
HZRIFD also organizes a section
within its annual meeting where accounting and auditing MSc and PhD
students present their theses. From
2011 on UHR, in cooperation with
private business schools and state universities, plans to add more research
paper presentations to their annual
conference. Research articles presented will deal with issues in accounting in Croatia and in other countries in
South-Eastern Europe.
Research activities in accounting are
predominantly conducted at state-run
universities either in departments of
accounting or within departments of
finance (and accounting). As of October 2010, there were around 40 active
accounting researchers at all state universities in Croatia, combined. Faculty
at state universities are divided into
four ranks: docent (assistant professor), izvanredni profesor (associate
professor), redovni profesor
(professor) and redovni profesor u
trajnom zvanju (professor with tenure).
Faculty is tenured only at the rank of
full professor. The criteria for advancement are research based (number
of publications) and teaching based
(the number of hours of teaching) and
are set by the National Council for
Science. The ministry in charge of
oversight of universities is the Ministry of Science, Education and Sports.
number of studies in that area of research has increased significantly. It
has, however, remained limited to
Croatian capital markets and focused
mostly on issues of information content, value relevance, earnings management and voluntary disclosure.
Croatian accounting scholars predominantly focus on financial accounting,
with managerial accounting research
being less developed. During the
1990s accounting research was mainly
focused on transition to International
Accounting Standards (IAS) in Croatia. As a result of low investments in
science by the government in the
1990s, the main constraint in conducting accounting research was the limited or even non-existent access to
financial databases and journals. Since
2000, however, Croatian accounting
researchers diversified into other research topics and are making continuous efforts to improve the quality of
their research. The newly acquired
access to journal databases provides
them with an insight in the international state of the art of research. The
constraint that still remains is access
(or lack thereof) to financial databases,
which limits the ability to perform
research on non-Croatian data. Together with the development of capital
markets in Croatia after 2000, the
Studies are presented at Croatian and
international conferences, but are predominantly published in Croatian academic journals. The Croatian accounting community does not have an academic peer-reviewed journal specialized in publishing research in accounting. Accounting research is published
in Croatian general business and economics journals, namely Ekonomski
Pregled (Economic Overview), Ekonomska Istrazivanja (Economic Research) and Financijska Teorija i
Praksa (Financial Theory and Practice). While these journals are more
and more included in databases and
indices like EconLit or SSCI (Social
Sciences Citation Index), their impact
factors remain low, indicating that
Croatian accounting research, together
with other business and economics
research, has a rather low impact internationally.
12
Along with the development of new
and more specialized undergraduate
and post-graduate accounting related
programs, Croatian universities have
recently broadened their research interest into new research fields. An example worth mentioning is the University
of Split, which within its interdisciplinary Center for Forensic Studies
started a Master in forensic accounting
and finance in the academic year
2010/2011. Within its Center for Forensic Studies and its Faculty of Economics, the University of Split is planning to develop research on forensic
accounting.
Page 11
Accounting research in Croatia (cont’d)
Journals specialized in accounting do
exist, but solely as practitioner journals. While from time to time they
publish research papers, this can be
seen as more of an exception than a
rule. These journals are: Racunovodstvo i Financije (Accounting and Finance), Racunovodstvo, Revizija i
Financije (Accounting, Auditing and
Finance), Financije i Porezi (Finance
and Taxes) and Racunovodstvo i
Porezi u Praksi (Accounting and Taxes
in Practice).
PhD studies constitute an important
element in accounting research activities in Croatia. PhD students work
with their supervisors, but also attend
doctoral schools and courses organized
at their universities. To better understand the size and the characteristics of
PhD studies in Croatia, we sent out a
questionnaire to five Croatian universities with research active accounting
scholars (Osijek, Pula, Rijeka, Split
and Zagreb). We asked about the number of master theses and PhD theses
defended in the 2000-2010 period. We
also asked for PhD theses to be classified according to the methodology
used. We received responses from
universities of Pula, Rijeka and Split.
Combined, these three universities
represent more than 50% of the Croatian accounting academic community.
In the 2000-2010 period, in those three
universities, there were 72 master theses and ten PhD theses that were defended. Nine out of ten PhD theses
were empirical archival studies, the
remaining one was an experimental
study.
13
It will be interesting to see how Croatian accounting research will develop
in the years to come.
Vedran Capkun is assistant professor
of accounting at HEC Paris.
Ivica Pervan is associate professor of
accounting at Faculty of Economics,
University of Split.
Page 16
Eur opean t r adit i ons i n account i ng
Ac co u n t in g tr ad it io n in Esto n ia: Th e ref l ec tio n s o f
ac co u n t in g ch a n g es in th e d y n a mi c co n t ex t
T oomas Hal d ma and K er t u Läät s
the interests of state and its ministries.
In planning economy conditions, accounting had a relatively low status,
being inflexible and unresponsive to
market innovations. Contrary to the
West, the prestige of accounting was
extremely low in the previous Soviet
Union.
Estonian accounting tradition should
be viewed in the transitional context of
political and economic systems. More
than 20 years occurred transformations
from a centrally planned to a market
economy involved significant legal
and institutional changes in the whole
accounting area. Estonia, as a rather
small country (population 1.34 million,
territory 45, 215 km²), can be considered as a distinguishable example of
these changes. We hope to shed more
light on the accounting reforms and
their effects on the Estonian accounting research and practice.
Accounting reforms in Estonia
More than fifty years lasted Soviet
period in Estonia, when the planning
economy principles via rigid state regulations were assumed to maintain the
macro-economic balance of the economic system. The employed accounting methods and techniques had centralized state focus and were used at all
enterprises without detailed customization to the particular circumstances at
the organisation’s level. In the planning economy conditions the main
goal of enterprises was to fulfil a plan,
which had been drawn out by the state
institutions.
The enterprise managers had not much
responsibility about production efficiency and products quality. The accounting system was the dominant
instrument for planning and budget
control. In general accounting did not
serve the interests of enterprises, but
Through the collapse of centrally
planned economy in the late 1980s the
situation in the accounting area in Estonia changed substantially. Estonia
started to aspire towards market economy when it was still a part of the
Soviet Union.
The accounting reforms in Estonia
during last two decades can be viewed
as an example, how to build up its
national accounting system in the conditions of economic transformations.
The accounting reforms can be distinguished between three different stages:
the introductory stage (1990-1994), the
system-building stage (1995-2002) and
the system improvement stage (since
2003).
Introductory stage
In July 1990, more than a year before
independence was regained in August
1991, the Regulation on Accounting
was adopted by the Estonian Government. This event was the first step
towards creation of market-economy
accounting environment in Estonia
marking the beginning of the spread of
accounting disharmony within the
Soviet Union. This event started also
the introductory stage in formation of
market-economy accounting environment. Although, in the contemporary
sense, the Regulation was quite modest
in content and volume, consisting of
only ten pages, the actions spurred by
the Regulation greatly contributed to
and helped create a favourable environment for the adoption of the basic
principles of market economy accounting, preparing movement to the second
14
stage of the Estonian accounting reform.
After the introduction of the Estonian
Regulation on Accounting in 1990,
there was some discord between the
legal requirements and the actual accounting practice, as many accountants
with their Soviet-era background failed
to grasp the intrinsically different nature of financial accounting in the conditions of market economy. However,
various retraining programmes and
accounting disciplines taught at the
universities and other higher education
institutions have had considerable
influence on the accounting profession
and
supported
the
accounting
knowledge transfer into the organisations.
System-building stage
The significant incentive for the system-building stage of accounting reform has been the European integration decision, when Estonia submitted
an application to join the European
Union in the middle of the 1990s. The
most important question for Estonia
(and probably for other transition
countries) was: how to build a forward
-looking and flexible accounting regulation system, which would enable
integration into and harmonization
with the European accounting framework. First of all, this concerned business accounting, but the question was
expanded to the whole accounting
area. In June 1994 the first Estonian
Act on Accounting (EAOA) was
passed by the Estonian Parliament and
came into effect in January 1995. One
of the most conceptual issues of the
EAOA was an attempt to create the
facilities for merging the Continental
European approach with the AngloAmerican approach.
Page 17
Accounting tradition in Estonia (cont’d)
System improvement stage
In these circumstances the accounting
framework and procedures in Estonian
companies and institutions have since
1995 been legally regulated by the
EAOA as a frame-law and by the Estonian Accounting Standards (EAS)
issued by the Estonian Accounting
Standard Board. This combination had
a number of advantages, in particular
in the initial period of the accounting
reform, speeding it up and enabling the
transition process to be flexible. In
1995- 2000 the EASB issued 16 EASs
to improve particular aspects of accounting in Estonia.
The system improvement stage of accounting reform in Estonia was needed
to meet the requirements of the improved European accounting framework following the European Commission’s decision from 2002. The initial
steps were arranged through the new,
amended version of the EAOA and a
revised set of the EAS, which came
into force in 2003.
Corporate accounting and information
disclosure practices are influenced by
the nature of enterprise ownership,
sources of finance and the stage of
development of capital markets. Tallinn Stock Exchange opened for trading in 1996, where seventeen domestic
companies were listed. In 2001, the
Helsinki Stock Exchange (HEX)
Group from Finland acquired strategic
ownership in the Tallinn Stock Exchange Group and trading in Estonian
securities in the HEX trading system
started in 2002.
These events pointed to a need for
internationally acceptable accounting
standards and improved the requirements on disclosure and reporting
principles of listed companies. The
income tax reform in year 2000
changed considerably the country’s
corporate income taxation principles.
The moment of corporate taxation
shifted from the period of earning
profits to the period of their distribution in either explicit (dividends) or
implicit ways (the latter include fringe
benefits, expenses unrelated to business, etc.). The idea was to increase
competitiveness of a transition country
like Estonia and to encourage private
investment and expansion of economic
activity.
The main characteristic of the new
EAOA and the new set of EAS is their
clear orientation to the International
Financial Reporting Standards (IFRS).
Since 2003 the Estonian Accounting
Standard Board (EASB) has revised 18
standards and brought them in line
with the requirements of the new law
and the IFRS The new Act allows all
companies to apply the IFRS instead
of the national accounting standards in
both consolidated and stand-alone
financial statements for statutory purposes. This change was also supported
by the abovementioned fact that in
Estonia the corporate tax is charged on
dividends, not on profit. Therefore, the
accounting framework does not affect
the tax basis or the state budget revenues.
The new Act has also expanded the
scope of the legal accounting framework, involving also governmental
institutions. The EAOA is specified by
the general rules for organisation of
the accounting and financial reporting
of the state and the state accounting
entities
(riigi
raamatupidamise
üldeeskiri) which are based on and are
in compliance with the accounting
principles generally accepted in Estonia and the international public sector
accounting standards. Thus the transfer
of the Estonian public sector from cash
-basis to accrual accounting can be
regarded, in the light of the New Public Financial Management Framework,
as an attempt to adopt the accounting
principles that apply in the private
sector. It can be summarized that the
new EAOA has covered the regulation
of the accounting principles for all
entities either business or public ones.
15
Consequently, starting from 2003,
there are no considerable differences
in recognition and measurement policies between IFRS and Estonian accounting principles. Minor differences
remained mainly in disclosure as the
Estonian accounting principles is primarily meant for small and mediumsize entities requiring less disclosure
than IFRS. In 2011 the EASB updated
the Estonian Accounting Standards
according to the IFRS for SME-s. Development of the Estonian accounting
system throughout its three stages can
be regarded as a process of harmonization, which more or less consciously in
different stages moved from regional
focus (until the middle of the 1990s)
towards global harmonization (until
now).
The central role in the Estonian accounting reform has been played by
the EASB. The Board started as a department of the Ministry of Finance,
but from stage to stage it became more
independent of the Ministry in its decisions concerning the accounting regulation. To enable a flexible manner of
accounting regulation and to speeding
up the reform, particular accounting
themes are regulated by the accounting
standards issued by the EASB.
The way how the profession is organized and the public attitude towards
accountants and auditors affects auditors’ ability to influence or control the
behavior of companies and their reporting systems. In 1990, a step towards creation of a proper auditing
environment was made by establishment of the Estonian Regulation on
Auditing and the Board of Auditing. In
1994 the first set of auditing guidelines
was enacted. It has to be emphasized
that the Estonian Government continuously brought up the topic of auditing
framework. The Chamber of Auditors
was authorized under the Act on Auditing in 1999. The Chamber oversees
the registration, education, certification and disciplining of auditors, setting of auditing standards and the regulation of audit practice.
Page 18
The Estonian Association of Accountants was established in 1996 as an
accounting interest group open to anybody, without any qualification requirements. In the beginning, the main
objective of the Association was to
provide retraining in order to improve
the accounting system. In January
2001, the Vocational Law was enforced in Estonia, which created basic
conditions for organizing the certification of accountants in improved circumstances.
The present requirements set to the
accounting profession in Estonia are
based on the Guidelines on National
Requirements for the Qualification of
Professional Accountants. Currently
the main objectives of the association
concerning their potential impact are
to distribute accounting knowledge
and practical experience, and to represent their professional opinion in public discussions (including comments
and suggestions on the drafts of the
EAS opened for public discussion on
the website of the EASB). The Estonian Association of Accountants is not
directly involved in the accounting
regulation setting, but a representative
of the association is a member of the
EASB, the issuer of the EAS. The
association organizes conferences and
seminars to contribute the profession.
Challenges
During the transition period the management roles had been redefined in
order to focus their attention more on
the market alterations, customer demands and organizational changes.
Therefore, for enterprises it was necessary to develop their management accounting systems, which could provide
accurately, measured cost information
for pricing-decisions, budgeting or
performance measurement purposes in
order not only to survive but also to
gain success in contemporary fast
changing environment. Similarly to
other transition countries the adaptation process in Estonian companies to
new and constantly changing conditions has demanded very deep alterations in the functioning of management accounting systems. Conceptual
changes in financial accounting served
as a precondition for the design, introduction and improvement of cost accounting and management accounting,
and the development of companies’
management accounting systems.
Market economy countries have not
experienced such a conceptual change
in financial accounting in such a short
time during the last decades. Therefore
the evolution of financial accounting
has influenced the development of cost
accounting and management accounting and the legal accounting reform
represents an essential and inevitable
motivator of these management accounting changes to occur.
An interesting feature of management
accounting change in Estonian organisations is that due to the economic
restructuring they had an opportunity
to develop the traditional financial or
cost based and innovative accounting
tools simultaneously. Hence, management accounting change represents a
combination of the introduction of
traditional market economy based
practices and the application of contemporary accounting tools, expressed
by the system’s sophistication. The
increasing need for management information, the availability of competent
accountants, changes in managerial
practice and dissatisfaction with performance measurement indicated the
drivers of management accounting
changes. During 1990s the shifts in the
management accounting systems of
Estonian organizations represented
mainly technical and conventional
developments focusing on issues of
cost information accuracy and conventional management accounting approaches (i.e. the replacement of the
full costing method with variable costing). The prevalence of production
oriented and narrow-scope accounting
information reflected the main features
of management accounting practices.
16
Later we can track the shifts towards
more sophisticated and contemporary
approaches (i.e. activity-based costing,
balanced scorecard). More often the
organisations’ management accounting
systems started to emphasize the necessity for the wider spectrum accounting information including market
and customer performance indicators
delivered by the integrated performance measurement methods and approaches.
Accounting research in Estonia
Curriculum on accounting has been
developed
at
four
universities
(University of Tartu, Tallinn University of Technology , Estonian University
of Life Sciences and Estonian Business School. The accounting researchers’ community is relatively small
(about 15 people) representing mainly
the university members including the
doctoral students, concentrated at the
University of Tartu and Tallinn University of Technology.
Most popular research topics include
management accounting, financial
accounting, public sector accounting
and accounting history. The research
funding, mainly arranged by Estonian
Science Foundation, is based more and
more on sophisticated bibliometric
models. Although accounting researchers in Estonia find it hard to compete
for research funding with researchers
from other areas of social sciences,
they still have received a number of
research grants for the projects on
accounting during last decade. The
focus of empirical accounting research
in the politically and economically
changing context was initially largely
devoted to the financial accounting
and auditing issues. There have been
carried out studies by the university
staff and also practitioners, describing
the accounting principles and financial
reporting application by the companies.
Page 19
The reforms of legal accounting regulations represent the necessary motivator for management accounting developments in the organizations’ practices
to occur. There are few published studies dedicated to the financial accounting developments and problems in
Estonia. But these describe only some
fragments of the accounting developments in Estonia. Since 1999 there
have been conducted studies on the
management accounting area, which
findings are internationally available
(see reading list). Nevertheless, current
stage of management accounting research is characterised by the limited
amount of well-documented and systematic research evidence on this area
in management accounting.
Besides the teaching and research activities, Estonian accounting scholars
has a certain influence on accounting
regulation and business practice. As
members of the EASB, accounting
scholars have contributed to the development of national accounting standards and their alignment with the IAS/
IFRS. But they also publish papers for
practitioners that are based on empirical research of Estonian companies
and organizations, retrain top managers and also serve in different professional positions, such as on professional certification boards, supervisory
boards and as legal experts in practice
etc. This intense intertwining of research work and practical experience
has influenced the growth of accounting popularity among undergraduate
and graduate students.
Organisation of the 37th
EAA congress in Tallinn
Today the Faculty of Economics and Business Administration at the University of
Tartu is the leading business
administration
(including
accounting) research institution in Estonia. It has already
hosted the international conferences (ISSWOV 2006;
EIBA 2008; EACES 2010,
ESU 2010).
We consider the opportunity of organising the annual 37th EAA congress in
2014 in Tallinn as a great honour and
prospect for promoting accounting
research and profession in both Estonia and the Baltic Sea region. The
doctoral colloquium will be held within the facilities of the University of
Tartu, one of the oldest university in
Northern and Eastern Europe (founded
in 1632).
Toomas Haldma and Kertu Lääts are
academics at the Faculty of Economics
and Business Administration at the
University of Tartu.
Reading list:
Bailey, D., Alver, J., Mackevicius, J.
and Paupa, V. (1995) Accounting law
reform in the Baltic states: the initial
steps, The European Accounting Review, vol. 4(4), 685-711.
Haldma, T., Lääts, K. (2002) Contingencies Influencing the Management
Accounting Practices in Estonian Manufacturing Companies. Management
Accounting Research, vol.13(4), 379 400.
Haldma, T. (2006) Factors Affecting
Accounting Development in the Harmonization Process with the International Framework: the case of Estonia.
– International Accounting. Standards,
Regulations and Financial Reporting.
(ed. Gregoriou, G. N., Gaber, M). Oxford, Burlington: Elsvier: 57-482.
Alver, J., Alver, L. (2009) Development of Accounting and Implementation of International Financial Reporting Standards in Estonia, Accounting
Reform in Transition and Developing
Economies. (ed.McGee R.W): New
York: Springer: 101-113
Lääts, K. , Haldma, T., Moeller, K.
(2011) Performance measurement
patterns in service Companies: An
empirical study on Estonian service
companies. Baltic Journal of Management, vol.6(3), 357 - 377.
17
Page 18
Accounting in Hungary
Ba rb ar a Ka rdos and An d r e a M a d ar a si - S z i r ma i
gaps. The trader was allowed to modify his records, but the original content
of the records had to remain readable,
deleting or scraping off data was not
allowed.
From the Past – before the second
word war
In Hungary, the oldest rule related to
business bookkeeping can be found in
the 53rd section of the 1723 commercial decree of Charles III, king of Hungary. According to it, every tradesman
had an obligation to maintain his
books fairly and regularly, and record
correctly his receivables and liabilities.
The laws of 1840 are especially important. Laws 15 and 16 of 1840 contain rules and regulations related to
business bookkeeping, compliance
with regulations and the conclusive
evidence of records. Based on these
rules each transaction – including all
types of commercial and industrial
transactions be it purchase or sale or
other trading or draft transaction –
should be registered in a chronological
order and according to the types of
assets. So, even at that time, the law
required records to be kept in a journal
and general ledger.
The Act on Commerce XXXVII of
1875 is significant from the point of
accounting. It regulates bookkeeping
in the following way: Every tradesman
had the obligation to register business
transactions in a book which had serially numbered pages. These books
presented each business transaction
and the full value of the assets of the
tradesman, but the method and the
language of bookkeeping was optional,
up to the trader. Records had to be
made one after the other, i.e. without
Act V of 1930 introduced the qualification of ‘auditor’ and regulated the
tasks and duties of auditors. As
bookkeeping progressed with time,
bound books used by accountants
started to give way to single pages. In
the end, a Ministerial Decree allowed
the use of single pages in 1948. The
bookkeeping regulations of the above
mentioned commercial laws remained
operative till 1968, but it remains a
fact that after 1945 a new chapter began in the fields of bookkeeping and
accounting.
Past – after the second word war
Between December 1945 and the end
of 1949 the most important institutions
of the private sector were nationalized.
The result was that 91% of mining,
80% of industry, and 95% of the banks
were nationalized.
On 1 January 1947 the first mandatory
chart of accounts was launched. Before
1945, in Hungarian accounting practice charts of accounts were not generally used, only some companies decided to use a chart of their own. Based
on the mandatory chart of accounts a
chart of account was produced for each
sector of the economy i.e. commerce,
agriculture, industry. In 1948 the Finance Ministry became the authority
responsible for accounting in Hungary.
In the following years some modifications were made to the 1947 mandatory chart of accounts, but these were not
essential changes.
In 1949, in response to the establishment of the Organization for European
Economic Co-operation, the Council
for Mutual Economic Assistance was
set up. The same year Hungary became The People’s Republic of Hungary and, until 1990, it was a centrally
18
planned economy. From 1950, during
the planned economic system, accounting was given new tasks. The
main aim of accounting was to provide
data for measuring the completion of
plans. Legislation focussed on the
bookkeeping of business transactions
and there was a detailed rule system
for recording each transaction. Rules
were based on soviet accounting literature and mainly tried to satisfy the
needs of the nationalized industry.
According to the regulations, the main
aim of accounting was to meet the
information needs of central governmental institutions.
1954 is an important date: it was in
this year that a Decree of the Financial
Ministry prescribed the mandatory
content of the financial statements of
companies.
The reforms of 1968 changed the requirements for accounting. As the
economic control system changed,
there was a new requirement that accounting could be used to provide
information to compare and measure
the effects of business transactions.
For that purpose the charts of accounts
for the various sectors of the economy
became standardized. Along with the
standardization of structure, the standardization of the content matter was
also essential.
Decree XXXIII of 1968 stated that it
was the task of the Finance Minister to
establish and control the integrated
accounting system of the people’s
republic. In essence, from 1875 this
was the first law related to accounting.
To execute Decree XXXIII, the Finance Minister issued a decree which
stipulated the details of bookkeeping.
Page 19
Accounting tradition in Hungary (cont’d)
According to this decree accounting
contains:




bookkeeping,
(prime)cost calculation,
the balance sheet,
the profit and loss statement.
With this regulation the Chart of Account of The People’s Republic came
into force. It described the main rules
of the bookkeeping system. Based on
it, the charts of accounts for the various sectors were worked out. The Integrated Chart of Accounts of the people’s republic was unified and ensured
a unified information service for the
institutions controlling the economy.
As a consequence, government regulation was very detailed, and, basically,
the requirement was to comply with
the written regulations.
The regulation of accounting was the
task of the Finance Minister. This entailed the regulation of:




the bookkeeping system of companies and government agencies,
inventory taking, evaluation and the
compilation of the balance sheet
and income statement,
the documentation system of accounting,
cost and prime cost calculation.
Decrees XIV and XV 1977 – along
with the modification of the Civil
Code which ensured the independence
of companies – contained rules for
private tradesmen and craftsmen, thus
opening the doors to entrepreneurs and
private companies. In 1981 the opportunity arose to run smaller shops and
restaurants based on lease contracts.
To establish small and medium sized
enterprises, and to make our economy
more flexible, it was allowed to form
subsidiaries, and corporate business
communities.
From 1983 a new decree prescribed
the development of corporate governance, and the tasks and powers of Supervisory Boards, Boards of Directors
and Chief Executive Officers.
Since 1987 there has been a two-tier
banking system in Hungary, so the
functions of commercial banks and
those of the central bank have been
separated. In the middle of same year
the Tax and Financial Control Administration was established – earlier it
was one of the departments of the
Ministry of Finance.
Act VI of 1988 created a new framework for the establishment of private
companies. Since that year we have
had a new taxation system based on
personal income tax, company tax and
value added tax. The Finance Minister
modified the regulation of accounting
to suit the requirements of company
taxation. At the time unified governmental control was prevalent in the
regulation of accounting. These principles and methods were applied in data
processing.
Present – market economy
The transformation of the ownership
system, large-scale privatization and
the liberalization of the economy in
general all made it necessary to remove the obstacles to free competition.
This entailed the modernization of the
whole system of accounting. There
was a need for an accounting law to
create the framework for a system of
accounting which would meet the
needs and requirements of a market
economy. The Act on Accounting
came into force in 1991. The basic
requirement of the Act was already
expressed in its Preamble: “For the
operation of the market economy it is
essential that objective information
based on past data be available on the
financial and earnings position of undertakings, non-profit organizations
and other types of economic organizations, as well as on the development
thereof, in order for the participants on
19
the market to be able to make wellfounded decisions based on the information made accessible.”
The second Act on Accounting came
into force in 2001. It is based on the
first one, but was updated, developed,
and modified to fit international rules.
The law may have been modified but
the underlying philosophy has not
changed: the idea is to provide a fair
and true view about the assets, liabilities and profits of companies in financial statements.
Since 1992 Hungary has had a twolevel accounting regulation system. On
the highest level, the Act defines the
requirements for the preparation of
financial statements and recording
business transactions, the principles
and the rules based on those principles
to be used in bookkeeping, and the
requirements related to disclosure and
audit. The Act on Accounting delegates power to the government to regulate the accounting of certain business
entities, governmental and other institutions; also, it is the government that
may set the special rules of liquidation
and dissolution. That is the second
level of the system.
The regulation of Hungarian accounting is controlled by the Hungarian
Parliament and the Hungarian government, so it can be rightfully called
“state regulation”. (The Ministry of
Finance, of course, has an important
role in the preparation and implementation of the laws.) The National Accounting Committee also played an
important role, first from 1946 to
1952, then from 1992 to 2012. The
Committee was established to develop
the theory and methods of accounting
and to facilitate the implementation of
accounting principles in practice.
Page 20
The Hungarian act-based regulations
are much more detailed than the directives. They contain more detailed conditions, structures and evaluation rules.
The Act contains a lot of instructions
which, in other EU member states, are
not incorporated in an Act but rather in
decrees. The reason we need more
detailed regulations is that the Hungarian legal, taxation and control experts
cannot accept standards as mandatory
rules, it is only legal regulations that
may be enforced.
to prepare annual financial statements. They can choose to prepare
simplified annual financial statements
if they meet the requirements laid
down in the Act.
Company may prepare a simplified
annual financial statement if it meets
two of the following three criteria on
the balance sheet day in two consecutive business years:



According to the Hungarian Accounting Act, the detailed rules and methods
supplementing the stipulations of the
Act, which are necessary for the
presentation of a true and fair view,
have to be written in national accounting standards. In spite of this rule and
the activity of the members of the
Standards Board, there are still no
standards in force in Hungary today.
Present - nowadays
Hungarian accounting system is based
on EU directives and its central element is Act “C” on Accounting of
2000. This is where the various conditions relating to company size and
information needs, which may affect
financial reporting, are laid down.
From business year 2013 – if the conditions specified in the Act permit –
businesses may choose to prepare on
of the following reports:
Annual financial statement
 Simplified
annual financial statement
 General
 Simplified annual statement for
micro businesses
 Consolidated annual financial statement
 IFRS

The Act on Accounting stipulates that
entrepreneurs subject to the Act have
Total Assets may not exceed
HUF500m (€1,666,667);
Net Sales may not exceed
HUF1,000m (€3,333,333);
The average number of employees
in the business year may not exceed
50.
Simplified annual financial statements
may not be prepared by public limited
companies, parent companies and entrepreneurs whose securities can be
traded on the stock exchange or a request for the authorization of such
activity has been submitted to the authorities.
The gradual increase of the above limits granted by the EU directive on accounting and gradually adopted by the
Hungarian accounting system ensures
that the majority of entrepreneurs can
use the simplified form. This simplification, according to the Hungarian
rules, means that cash-flow statements
do not need to be prepared, separate
detail lines can be combined, the Notes
may include fewer data and the simpler evaluation methods may be used.
The parts of the simplified annual financial statement are the Balance
Sheet, the Income Statement and the
Notes. The Balance Sheet gives fewer
details on assets and liabilities; and the
Income Statement gives fewer details
on incomes and expenses.
A consolidated annual financial
statement must be prepared by a business which is considered to be a parent
company in relation to one or more
companies. A consolidated annual
financial statement presents the finan-
20
cial standing of a group of companies
– after the elimination of cumulative
effects – as if it operated as a single
corporation. The Act provides exemptions from the obligation to prepare
consolidated statements and one important criterion is the size of the
group of companies. The parent company does not need to prepare a consolidated financial statement for the
business year if it meets two of the
following three criteria on the balance
sheet day in the two preceding – and
consecutive – years:
HUF2,700m (€9,000,000);
 Net
Sales may not exceed
HUF4,000m (€13,333,000);
 The average number of employees in
the business year may not exceed
250.

To calculate the necessary figures, the
aggregated figures of the parent company and those of its subsidiaries and
jointly managed businesses need to be
taken into account before consolidation.
The reporting format allowed by the
Act from 2009 to 2013, known as
‘special simplified annual financial
statement’, can be regarded as a temporary solution. It included only a
Balance Sheet and an Income Statement and released the entrepreneur
from the obligation to perform most of
the evaluation tasks at the end of the
business year. The problem was that
the Act made this an option only for
limited and general partnerships and
sole proprietorships which are not
obliged to undergo external audits. The
reason for this was that EU law at the
time stipulated the content and use of
simplified annual financial statements
along stricter rules for Hungarian limited liability companies and private
limited companies.
Page 21
In fact, one of the obstacles of a more
wide-spread use of special simplified
annual financial statements was the
high number of limited liability companies among Hungarian macro and
small enterprises. These companies,
because they met the relevant criteria,
could have opted for the special simplified annual financial statement but
EU law did not allow for that. On
Hungary’s initiative, certain changes
were made in the EU’s 4th company
law directive and the modified version
(EU/6/2012) took effect in April 2012.
The new regulation allowed companies
with total assets of less than €350,000,
sales of less than €700,000 and fewer
than 11 employees, to prepare statements similar to the Hungarian special
simplified annual financial statements.
These statements incorporate some
more rules on evaluation than their
Hungarian counterparts. The modified
directive refers to the member states
the competence of transposing this
regulation in their legal system. Hungary decided to transpose the regulation in 2013.
As a result of this, the so-called simplified annual statement for micro
businesses1 was created, the detailed
rules of which are set forth in Government regulation 398/2012 (20/12).
The statement for micro businesses
can be an option if the business meets
two of the following three criteria on
the balance sheet day in two consecutive business years:
HUF100m (€333,333)

Annual Net Sales may not exceed
HUF200m (€666,667)

The average number of employees
in the business year may not exceed
10.

Another important criterion is that the
entrepreneur should not be obliged to
undergo an external audit. According
to the Act on Accounting (being in
force in business years 2012 and 2013)
external audits need not be carried out
if the following two criteria are met:
a) In the two business years preceding
the current year the average annual
net sales did not exceed HUF200m
(€666,667) and
b) In the two business years preceding
the current year the average number
of employees did not exceed 50.
The following entities may not opt for
the above exemption from external
audit, i.e. they are obliged to undergo
external audits in all cases, which
means they may not choose to prepare
the simplified annual statement for
micro businesses:
a) Entrepreneurs who maintain a
double entry system and are obliged
by law to undergo external audits
b) Savings co-operatives
c) Companies undergoing a bail-out
d) The Hungarian branch of a foreign
based company
e) Entrepreneurs who – under the Act
on Accounting – in exceptional
cases deviate from the letter of the
law in the interest of fair and reliable reporting.
Whether an entity is allowed to use the
statement for micro businesses depends on the form of business. The
statement for micro businesses can be
used by entrepreneurs as defined by
the Act, such as business organizations, sole proprietorships, cooperatives and the Hungarian branches
of foreign based companies, but not by
some other organizations as defined by
the Act, for example non-government
organizations, housing associations,
law firms.
A business involved into consolidation
financial statement may not use the
statement for micro businesses because, despite the fact that it is considered an entrepreneur and irrespective
of its financial data, it is obliged to
undergo an external audit. The Hun-
21
garian branch of an EU-based foreign
company, however, is exempt from the
obligation of being audited so it can
choose to make a statement for micro
businesses.
According to the Act, an entrepreneur
whose business year is different from
the calendar year may not use the
statement for micro businesses. It is
worth noting, however, that entrepreneurs maintaining their books and
preparing their statements in foreign
exchange are allowed to report using
the statement for micro businesses.
Considering the above restrictions for
entrepreneurs and audits, it seems that
the potential users of the statement for
micro businesses will be smaller business organizations and sole proprietorships: approximately half of the companies may opt for the statement for
micro businesses.
The Act on Accounting, in line with 19
July 2002 decree of the EU Parliament
and Council (EU 1606/2002) on the
use of international accounting standards, stipulates the application requirements of the International Financial
Reporting Standards (IFRS). Under
the Act, companies which are listed on
the stock exchanges of the EU and
prepare consolidated accounts are
obliged to make their financial reports
in line with IFRS.
In Hungary, the use of IFRS is not as
deeply rooted as in larger economies
built on stock exchanges. We can say
that Hungarian companies are not yet
fully aware of the great responsibility
that financial statements represent or
of the need to provide high quality
information in them. IFRS require
companies to make a lot of disclosures
and that, in turn, requires a lot of effort, which costs a lot of money and so
harms profits.2
Page 22
When creating the standards, the main
aim of the standard setters was to enable outside parties – the users of the
financial information in the statements
– to get reliable and fair information;
the creation of regulations which were
favourable for businesses seems to
have been rather less important for
them. Companies need to spend a lot
of energy and effort to prepare their
financial statements according to
IFRS. An advantage of IASB policy
may be that it does not force the management of a company to meet extra
requirements which they would be
unable to do anyway. This is the realization of the cost-benefit principle.
Also, when management prepare their
IFRS report, they can use already existing or accessible information.
In 2009 the International Accounting
Standards Board (IASB) introduced its
standards for small and medium-sized
enterprises (IFRS for SMEs) but they
have not been too enthusiastically welcomed by players in the economy. A
research in 2011 initiated by ACCA
(Association of Chartered of Certified
Accountants)
and
IAAER
(International Association for Accounting Education and Research)
aimed to find out how open the SME
environment is towards IFRS. The
findings show that current market conditions (tax regulations, not quite realistic SME categories, the audit requirement, other outside parties) are not yet
fully suitable for accommodating such
changes and, what is more, the enterprises themselves cannot see themselves benefiting from the changeover.
All of the micro, small and mediumsized businesses are privately owned;
also, they cannot stand up to comparison on an international level so, for
them, the introduction of IFRS is not a
burning issue.
In Hungary, too, IFRS have failed to
attract SMEs. Preparing statements
according to IFRS is viable for companies involved in global markets or if
the publication of individual and/or
consolidated IFRS statements is allowed. Companies obliged to report
according to IFRS in Hungary today
will use the full IFRS as they are listed
companies. For other companies, such
reports would not give any added value. The international practicability of
SME standard raises serious questions
since, for the time being, it is quite
impossible to set the same quantity
stipulations for different countries. The
aims set by and the regulation of the
standards are good, unfortunately,
however, the world is not quite ready
to embrace them.
Footnotes:
1) The implementation of the mediumterm government program [1405/2011
(25/11) Annex 12] called Simple State
to reduce the administrative burdens of
entrepreneurs
2) In Hungary 52 companies publish their
consolidated financial statements according to the IFRS, these are the
companies registered in the Hungarian
stock exchange and trade A and B
shares.
Barbara Kardos and Andrea Madarasi-Szirmai are Associate Professors of
Accounting at Budapest Business
School
22
Page 19
Cost and Management Accounting in Poland
An n a S zy c h ta
In each of these five periods there
were events and processes important
for the development of accounting in
Poland, but due to the limited size of
this paper only major issues relating to
the
evolution
of
management
acccounting for business entities will
be addresed.
Introduction
Poland is a medium-sized country (an
area of 312 thousand sq. kilometres
and a population of 38 million) lying
in the centre of the European continent, an economically important member of the European Union since 1
May 2004. Owing to its location as
well as economic and population potential, Poland has played an important
role in East-Central Europe since the
Middle Ages.
The evolution of accounting practice
in Poland, which started in the 14th 15th centuries, and the development of
accounting regulation, education and
theory since the 19th century are closely related to the political situation of
the Polish nation over the centuries
and the socio-economic transformations which took place in the country. With the exclusion of World War
II, five development stages can be
identified:
1) the period of Old Poland (until the
third partition of Polish lands in 1795),
2) the period of territorial division and
annexation of Poland by Russia, Prussia and Austria (1795-1918),
3) the interwar years – creating the
foundations of a market economy after
the regaining of independence (19181939),
4) the period of a centrally-planned
economy (1945-1989),
5) the period of democracy and market
economy developed since the early
1990s.
Simple forms of bookkeeping as a
basis for managing landed estates
and manufactories until the 19th
century
The history of commercial, state and
agricultural accounting in Poland dates
back to the medieval times, which is
evidenced by archival documents, such
as single entry books of the city of
Cracow from 1300-1400, registers
from salt mines in Bochnia (13941421) and Wieliczka (1497-1594), a
ledger of Gdańsk merchant Jan Pis
(1421-1454), and written references to
inventories as well as cash and farm
produce registers used in large estates
in central and southern parts of Poland
already in the 15th and 16th century.
Application of such practices was recommended by A. Gostomski in 1588
in the first Polish publication on agricultural economics, entitled Gospodarstwo (Farm Management). Among
other preserved materials are books on
mercantile double entry bookkeeping,
published in German in Gdańsk in the
16th-18th centuries1.
Management accounting in the modern
sense has been used in business entities in Poland since the 1990s, i.e.
since the restoration of a market-based
economic system after half-a-century
break, although some accounting tools
for management purposes were used
on Polish lands in the period of Old
Poland. Farm accounting (financial
and production records in the form of
registers, stock-books and summary
statements) was employed in the 17th
century and during the Partitions as an
instrument of controlling and managing manors and latifundiums. Examples of publications include the first
23
manual of agricultural accounting (six
editions) published in 1675 by J. K.
Haur in the form of nine Modelleusze
arytmetyczne, appended to his book
Oeconomica ziemiańska generalna
(General agricultural economics), a
book by J. Hermann (1662) entitled
Ziemianin albo gospodarz inflandzki
(Landed proprietor or the Livonian
farmer), and instructions in the form of
manuscripts (for the years 1666-1671)
by a landowner, S. K. Bieniewski.
These works, as well as many handbooks on economy (so called Instruktarze ekonomiczne) published
during the Enlightenment period by
representatives of the gentry and landed aristocracy, e.g. by Duchess Anna
Jabłonowska (1786) – a handbook
Ustawy dla dóbr moich rządców
(Instructions for my land-stewards),
Duke A.I. Ogiński (1786), A. Tyzenhaus (1777) and T. Sapieha (1782),
included descriptions of the duties of
administrators responsible for keeping
the records and managing the estates.
According to M. Turzyński2, the term
„rząd” (,,administration”) in use at that
time denoted measurement (of the
quantity and value), oversight and
management of the physical and financial resources to attain the objectives
set by the landlord, and provision of
information on the performance of the
subordinates. It is interesting to note
that A. Tyzenhaus, a landed proprietor
actively engaged in farming management, introduced in the 1770s the obligation to prepare monthly and annual
plans of activity for his estates and to
verify them on the basis of book entries, to evaluate the results of farming
and the condition of the manor farms.
Page 20
Accounting tradition in Poland (cont’d)
In industrial enterprises, mainly textile
plants, which started to appear in the
Kingdom of Poland in the 1820s, the
range and quality of accounting methods and practices was diverse. Some
textile manufactories employed double
entry bookkeeping systems (e.g. A.
Harrer's company in Sieradz set up in
1823, Moes brothers' factory in Zgierz,
K. Scheibler's weaving-mill in Żarki),
while other enterprises used simpler
bookkeping systems based on singleentry principle. A fairly sophisticated,
for those times, system of keeping
score of inventories and costs was
applied e.g. in the weaving-mill in
Żarki and in I. Poznański's factory in
Łódź, i.e. in enterprises where the organizational system and scope of activity (form of company, location of
manufacturing plants) made it necessary to replace personal control and
supervision by the owner by strict
numerical control. This type of recordkeeping was mainly used for establishing the state of a factory's assets and
results of its operation3.
Cost accounting development before
1990
Cost accounting had been used in enterprises in Poland for several decades,
though it was mainly oriented to financial accounting purposes. Already in
the interwar period (1918-1939) the
largest enterprises, e.g. in Warsaw,
Łódź, and Starachowice, employed
costing methods, which were based on
standard costs, and financial reporting
in those enterprises was timely and
adequate to management needs at that
time4. Some interwar publications
addressed cost accounting issues. Cost
categorization and principles of cost
calculation were presented by A. Bieniek (1938), the idea of break-even
point was explained in articles published in ,,Czasopismo Księgowych w
Polsce” (,,Journal of Accountants in
Poland”), issued in 1921-1939, and
such issues as formats and rules for
financial statements preparation “to
present to the management a true state
of the company’s affairs”5, analysis of
solvency, profitability, sales, costs and
expenditures, budgets and their execution were addressed, among others, by
J. Aseńko (1934). W. Baliński (1937)
wrote about types of operating budgets
and rules for their preparation in a way
similar to modern publications dealing
with this subject.
In the period of a centrally planned
economy in Poland (1945-1989),
accounting, including cost accounting,
followed uniform principles prescribed
in legal regulations. The aim of accounting practice was to safeguard
state-owned property and to provide
information about the implementation
by a given enterprise of the assigned
portion of the national plan. The conditions determining cost accounting
practice before the 1990s were: central
planning of the economy, domination
of fiscal requirements over accounting
regulations and the centralized mode
of managing enterprises. Cost accounting practice had to follow the rules
contained in obligatory charts of accounts (uniform industry-specific, and
from 1976 – also standard charts of
accounts) which were subject to frequent revisions, as well as decrees and
directives issued by central authorities
and detailed instructions for particular
industries (branch associations). Cost
accounting, thus, was practiced, especially before 1983, according to prescribed procedures ensuring uniformity of the types of costs and their different classifications as well as standardization of production inventory valuation and calculation rules. Cost accounting systems used in enterprises,
based on full costing principles, supplied data for national statistics, taxes
and subsidies, and were – just as the
accounting system as a whole – an
instrument for exercising control over
state-owned enterprises.
Uniform cost accounting principles
and procedures were thus seen until
the early 1990s as facilitating cost
control and accomplishment by enterprises of targets set in national socioeconomic plans. However, the lack of
24
conditions favourable to improving
internal organization of enterprises and
easiness of achieving high profitability
were not conducive to taking active
interest in costs and cost accounting by
state enterprises. This does not mean
that there was no cost reduction or
progress. Nevertheless, formal cost
planning (budgeting) did not provide a
driving force in this respect, because it
did not set objectives nor identify ways
of their achievement. Budgeting, thus,
did not entail taking appropriate actions. Moreover, accounting records
and calculations of actual costs were
often inaccurate due to defective methods used or their incorrect application,
which reduced their usefulness6.
Along with changes taking place in
Poland’s economic policy in the 1980s
(greater independence and selffinancing of enterprises) there was a
growing awareness that cost accounting should be suited to such characteristics of an enterprise as size and type
of activity, nature of production, type
of organization, and staffing and computational potential. This view was
embodied in the Order of the Finance
Minister of 19837 on the rules of recording, calculation and analysis of the
costs of industrial production. It increased flexibility in this area, introduced the principle of including overheads in the period of their incurrence
in the cost of products sold, i.e. valuation of finished products at their production cost, and provided for the possibility of using for interim calculation
of production costs the solutions typical of direct costing (possibility of
valuing mass and big lot production in
progress using direct costs or costs of
materials). Cost accounting principles
set out in the Order (1983) and Standard Charts of Accounts, issued on the
basis of the Uniform Chart of Accounts of 1976, constituted the foundation for the development of cost accounting systems comprising two circles of costs.
Page 21
The outer circle (cost by nature) was
mainly oriented to macroeconomic
purposes, and the inner circle provided
the framework for the sub-system of
cost recording and calculation designed to supply detailed information
for enterprise management purposes.
In the period of a centrally-planned
economy in Poland vast literature was
created in the field of cost accounting
and management accounting, although
before the 1990s the censorship did not
accept the term “management accounting”. This literature was the result of
research conducted by Polish academic
accountants from the 1950s in response to the growing demand for
textbooks and manuals explaining the
principles of cost accounting set out in
changing legal regulations. It should
be noted, however, that already in
1948 professor S. Skrzywan, whose
academic work, textbooks and professional activity laid foundations for the
development of accounting in the postwar period in Poland, argued, that
“(…) the main goal of accounting is to
provide solid numbers (financial information) relevant to management decision-making”, with management being
defined as “all factors that perform
directing, supervising and controlling
functions within the enterprise and
beyond, in supervisory bodies”. He
also claimed that “If (…) accounting is
to provide guidelines for the management, it should have the same orientation as this management; it should
provide ex ante as well as ex post calculations”8.
From the early 1950s the issues in cost
accounting and general theory of accounting were two major thematic
groups of academic dissertations written by the faculty of Accounting Departments. Research projects carried
out in that period resulted in a number
of valuable works in the field of costing and management oriented accounting, published before 1990. The most
important publications include monographs and textbooks by S. Skrzywan,
E. Wojciechowski, W. Malc, Z. Fedak,
B. Siwoń, W. Nowaczek, P. Tendera,
H. Sobis, T. Wierzbicki, B. Binkowski, A. Jaruga, J. Skowroński, K.
Sawicki, J. Matuszewicz, E. Burzym,
Z. Messner. Academic dissertations
and textbooks discussed the rules and
conditions for the application of standard costing, the tasks and structure of
cost accounting for industrial production and its role in effective management of an enterprise, the principles of
measurement, allocation and control of
indirect costs, cost budgeting in responsibility centers, the nature and
function of direct costing and break–
even point, and the rules of cost analysis. In addition, various methods of
cost calculation and the principles of
selling price and transfer price determination were presented and evaluated. An original model of production
factor costing, developed by J. Skowroński, deserves special attention. It
combined the features of full costing
and marginal costing and placed emphasis on the decision-usefulness of
cost accounting9.
Cost accounting issues discussed by
Polish authors after World War II until
the late 1980s were roughly the same
as those addressed in the literature of
countries with market economies, except for the fact that the macroeconomic framework of the socialist state
had to be taken into account (such as
the absence of market conditions or
expanded social sphere). Many academics were well familiar with cost
accounting and management accounting solutions developed in Germany
and English-speaking countries. The
Accounting Department in Lodz University conducted experimental research, headed by A. Jaruga, into managers' behaviour in response to alternative accounting data, in particular the
various indicators of enterprise performance, such as sales, profit, value
added, or sales profitability. Also,
experimental research investigating the
impact of different cost accounting
25
models on results of decisions was
carried out, using a computersupported interactive management
game10.
Cost accounting issues were in the
period of a centrally-planned economy
in Poland increasingly included in
teaching programmes of economic
studies at higher education schools.
Management accounting has been a
separate subject taught since the early
1990s (at some universities it has been
taught even longer, e.g. at the University of Lodz since 1982). Academic
accountants established cooperation
with accounting practitioners in the
area of designing and implementing
standard costing. Numerous academic
accountants were authors of a number
of projects implementing costing in
enterprises.
The evolution of cost accounting in
Poland led to the establishment of
management accounting as the subject
of research and education in our country, which was mainly due to the contribution of Professor Alicja Jaruga
(1928-2011), who presented and elaborated various management accounting
models and methods and thus laid
solid foundations for their application
in business practice after 1990 in the
new, market conditions.
Management accounting since the
early 1990s
The reestablishment of a market economy in Poland after 1989 and subsequent implementation and improvement of its mechanisms have had a
great impact on changes in accounting
regulation, practice, research and education. Since the early 1990s, therefore, significant changes started to take
place in accounting systems of enterprises in Poland, which were mainly
due to:
Page 22
- revised financial accounting legislation in line with requirements of EU
Directives on accounting and International Financial Reporting Standards
(IFRS), or directly the rules set out in
IFRS (obligatory since 2005 for consolidated statements of publicly traded
companies),
- growing competition on the domestic
market and the impact of globalisation
processes on Poland's economy.
New accounting regulations introduced in 199111, revised in Accounting
Act 1994 (amneded many times, e.g.
in 2000, 2004, 2008)12, created – for
the first time in the postwar period –
the opportunity to develop cost accounting systems in a way appropriate
to the particular line of business and
conditions in which a given enterprise
operates. Business entities are now
allowed to use individually developed
charts of accounts best suited to their
particular information needs, providing
that they ensure that financial statements are prepared in conformity with
the principles and formats prescribed
by legal regulations and make possible
preparation of statistical statements.
The factors listed above create a pressure not only towards modernization
of financial accounting systems, but
also for implementation and improvement of cost and management accounting systems in companies. Management accounting in Poland has been
evolving since the early 1990s to meet
two challenges: economic restructuring and dynamic development of management accounting in the world. Accounting practice of Polish enterprises
is being shaped under the influence of
two major models: management accounting in the Anglo-American manner, and Controlling according to the
German approach.
Development of management accounting systems is a challenge for employees of accounting departments and
managers, mainly of large and medium
enterprises. Growing interest in man-
agement accounting among Polish
accounting and management practitioners is visible, among other things,
in:
- growing numbers of postgraduate
students on management accounting
and controlling courses (e.g. at the
University of Lodz since 2002), and
increased interest in training courses
and conferences organized by various
universities and other institutions;
- steadily growing numbers of employees performing management accounting tasks in business; their posts are
given various titles such as management accountant, controller, financial
controller, financial analyst, expert in
analysis and planning;
- descriptions of the application of
methods used in management accounting systems implementation in companies in Poland, presented in professional journals, e.g. the monthly journal "Controlling i Rachunkowość
Zarządcza" (Controlling and Management Accounting, issued since 1999),
and on conferences attended by practising accountants;
- engagement of consulting firms and
some academic accountants in modification, designing and implementation
of management accounting systems for
companies.
Over the past 20 years management
accounting has become a subject
taught on economic courses in higher
education institutions all over the
country. Many textbooks and articles
addressing management accounting
have been published and their number
is growing steadily. Research in this
field has been expanded and intensified. Its results are published e.g. in
,,Zeszyty
Teoretyczne
Rachunkowości” (,,Theoretical Journal of
Accounting”), issued by Accountants
Association in Poland (AAP)13 since
1977,
a
monthly
journal
“Rachunkowość” (,,Accounting”, issued by AAP since 1949), and increasingly, though with some difficulty, are
presented in foreign publications and
at international conferences.
Research findings suggest that management accounting practice in companies operating in Poland is undergoing
evolution involving improvements to
currently used methods and techniques
and implementations of innovative
solutions. Polish business entities
mostly apply the methods and techniques of operational management
accounting and attach greatest importance to two of management accountants' tasks: cost and expenditure
control and performance measurement.
Recently, however, enterprises are
showing a growing interest in methods
of strategic management accounting
(ABC/M, BSC and Target Costing).
Accounting practitioners, managers
and academic accountans are undertaking cooperation to promote innovative
solutions in the field of management
and accounting, e.g. in 2012 and 2013,
at the initiative of prof. I. Sobańska,
the Accounting Department of the
University of Łódź organized conferences on Lean accounting as an integral component of lean management,
attended also by practitioners.
The development of the management
accounting profession in Poland has
been spontaneous, without institutional
support, as is the case in Anglo-Saxon
countries. So far there was no organization associating management accountants for shaping the development
of the new profession. In 2003 the
Committee on Management Accounting and Controlling (CMAC), within
the Scientific Committee of the Accounting Association in Poland was set
up in an attempt to spur progress in
management accounting research and
practice. In 2012, at the initiative of
CMAC, AAP set up the Committee for
Development of the Principles of Management Accountants Certification,
which undertook work on preparation
of the organizational and program
framework for certification by AAP of
the management accounting profession
in Poland.
26
Page 23
przemysłowej, Ministerstwo Finansów,
Warszawa, 1983.
8
The impact of intensifying globalization processes, including, among others, operation in Poland of branches of
international corporations, and dissemination of management accounting
knowledge in Polish enterprises by
academics and new graduates of economic studies, including Finance and
Accounting, result in gradual convergence of cost and management accounting methods and procedures with
the solutions used in western countries,
and in internationalization of management accounting systems used in companies in Poland.
Footnote
1
See E. Wojciechowski (1964), Zarys
rozwoju rachunkowości w Dawnej
Polsce, Państwowe Wydawnictwo
Naukowe, Warszawa.
2
M. Turzyński (2011), Rachunkowość
w zarządzaniu majątkami ziemskimi w
Polsce w epoce oświecenia, „Zeszyty
Teoretyczne Rachunkowości”, tom 63
(119), Warszawa, p. 217.
3
J. Gorgolewski (1965), Księgowość
w przedsiębiorstwach włókienniczych
w Królestwie Polskim w latach 18201870, „Zeszyty Naukowe Uniwersytetu Łódzkiego”, Seria III, Nauki
Ekonomiczne,
Zeszyt
11,
Rachunkowość, Łódź, pp. 48-67.
4
A. Jarugowa, J. Skowroński (1994),
O wierny obraz rachunku kosztów,
„Rachunkowość", No. 4, p.166.
5
S. Skrzywan (1964), Wspomnienia,
„Rachunkowość”, No. 7, p. 206.
6
Z. Fedak (1982), Rachunek kosztów
w służbie programu oszczędnościowego, „Rachunkowość”, No. 11-12, p.
308.
7
Zarządzenie Nr 83 Ministra Finansów z 7.11.1983 r. w sprawie zasad
ewidencji, kalkulacji i analizy kosztów
przemysłowej, [in:] Zasady ewidencji,
kalkulacji i analizy kosztów produkcji
S. Skrzywan (1948), Rachunkowość
w przedsiębiorstwie przy gospodarce
planowanej. Cele i funkcje, Gospodarczy Instytut Wydawniczy Sp. z
o.o., Warszawa, p. 33.
9
See A. Jarugowa, J. Skowroński,
Rachunek kosztów w systemie informacyjnym rachunkowości, PWE, Warszawa, 1st ed. 1975, 3rd ed. 1986.
10
A. Jarugowa, (1989), Niektóre
kierunki badań naukowych z dziedziny
rachunkowości, „Acta Universitatis
Lodziensis. Folia Oeconomica” 88,
Wydawnictwo Łódzkie, Łódź, pp. 8-9.
11
Rozporządzenie Ministra Finansów
z dn. 15 stycznia 1991r. w sprawie
zasad prowadzenia rachunkowości,
Dziennik Ustaw 1991, nr 10 i 1992, nr
96.
12
Ustawa z 29.09.1994 r. o rachunkowości, Dz. U. 2009, No. 152,
poz. 1223, with later amendments.
13
Accountants Association in Poland
is the oldest and the largest Polish
organisation of accounting and financial professionals, which continues the
traditions of accountancy bodies operating on the Polish territory since
1907.
References
Accounting publications and research
in Poland and Ukraine. Mainly twentiew century, [in:] Richard Mattessich
(2008), Two Hundred Years of Accounting Research, Routledge New
Works in Accounting History, London,
New York , pp. 264-269.
Jaruga A., Kabalski P. (2010), Poland,
[in:] A Global History of Accounting,
Financial Reporting and Public Policy: Europe, G.J. Previts, P. Walton, P.
Wolnizer (eds.), Emerald Group Publishing, Sydney.
Jaruga A., Szychta A.. (1996), Poland,
[in:] The History of Accounting. An
27
International Encyclopedia, Garland
Publishing, USA, pp. 465-467.
Jaruga A., Szychta A. (1997), The
Origin and Evolution of Charts of
Accounts in Poland, „The European
Accounting Review”, Vol. 6, No. 3.
Szychta A. (1995), Bibliographical
Calendarium of Accounting in Poland
(XVIth - XIXth Century), Foundation
for Accountancy Development in Poland, Warszawa.
Szychta, A. (2002), The scope of application of management accounting
methods in Polish enterprises,
“Management Accounting Research”,
Vol. 13, No. 4.
Szychta, A., (2005). Overview of accounting development in Poland in the
interwar period, [in:] Changes of Services Industry: Challenges on Age, 2nd
Lithuanian-Polish Seminar, Kauno
technologijos universitetas, Technologija, Kaunas.
Turzyński M. (2011), Bookkeeping in
Manor Farms of Polish Gentry in 17th
Century, „Eurasian Journal of Business and Economics”, No. 4(8).
Anna Szychta, dr hab., Associate Professor, Department of Accounting,
Faculty of Management, University of
Łódź,
Poland,
email:
[email protected]
Page 16
Eur opean t r adit i ons i n account i ng
Ac co u n t in g tr ad it io n in Ro man i a: Ch all en g es an d
o p p o rtu n it ies i n a ch an g in g e n v iro n me n t
Căt ăl i n Ni col ae Al bu and Nadi a Al bu
French or Italian, and the first original
book of a Romanian author (Theodor
Ştefănescu) was published in 1873.
Accounting education also developed
in the same period.
With a population of around 20 million
inhabitants, Romania is the seventh
largest member of the European Union, and has the largest GDP in South
Eastern Europe. A number of fundamental changes occurred in Romania
over a relatively short space of time.
Therefore, Romania is an interesting
case to discuss the process of change,
starting from the economic and political level, and continuing with accounting regulation and practice. Accounting education and research had to keep
the pace with these changes and reinvent in order to respond to the challenges of each period of time.
Evolution and change of the country’s accounting model
The pre-communist period
Beginning with the 16th century, Romanian territories were under the influence of the Great Powers, i.e. the
Ottoman, the Habsburg and the Tsarist
Empires. The Romanian territories’
struggle for independence, the combats
and the conflicts resulted in a late economic development, despite a very
favorable position for commerce (the
Romanian territories being a bridge
between Central Europe and the Far
East). Independence was gained only
in 1877, and the first strong signs of
economic development became visible. Accounting developments were in
line with the economic and political
ones. The first accounting books in
Romanian were written in the late
1830s, as translations from German,
Advancements were more obvious
after 1918, when the modern Romania
was created by the unification of the
Romanian provinces. The increasing
role of accounting, the prior
knowledge accumulation and the country’s economic development permitted
the progress of accounting practice and
theorization. This is the time of refinements, personal contributions,
and scientific debates.
In 1908, the first Romanian accounting
journal was created – General Journal
of Commerce and Accounting (ro.
Revista Generală de Comerţ şi Contabilitate); in 1913 the Academy of High
Commercial and Industrial Studies (ro.
Academia de Inalte Studii Comerciale
şi Industriale, the current Bucharest
Academy of Economic Studies, ro.
Academia de Studii Economice din
Bucureşti) was established in Bucharest, while the Body of Chartered Certified Accountants and Authorized
Accountants of Romania (ro. Corpul
Contabililor Autorizaţi şi Experţi, the
current Body of Expert and Licensed
Accountants of Romania, ro. Corpul
Experţilor Contabili şi Contabililor
Autorizaţi din România - CECCAR)
was established in 1921. In 1940 discussions on the topic of accounting
regulation emerged, the plan being to
have a strong orientation towards the
chart of accounts (as developed by
Schmalenbach). But these developments were not continued, and the
regulation of accounting was a plan
never finalized under the intended
conditions.
which led to the switch to a planned
and centralized economy. The theoretical and methodological basis was the
“Soviet experience”, and Soviet accounting books were translated into
Romanian. Under the communist regime, a form of Soviet accounting was
introduced, in which prices were regulated by the State, and accounting was
merely a means for gathering information by and for the State. CECCAR
was dismantled in 1951, and
'undesirable' academics were removed
from their chairs.
Consequently, for 40 years during
communism Romanian accounting
had a low status and was largely a
matter of clerical bookkeeping. As
regards accounting research and education, the Soviet experience had to be
followed, and little room remained to
develop the pre-communist legacy.
The post-communist period
After the fall of communism in December 1989, Romania underwent a
number of dramatic economic and
accounting reforms that better reflected western business principles. Until
today the Ministry of Public Finances
remains the accounting regulator. In
terms of accounting (financial reporting) model, there were three main
steps in the accounting reform.
The first step of reform was based on
the French accounting model, given
the historical, economic, political and
cultural considerations. The French
model revived some concepts and theories used in Romania before the communism. For example, Romania, like
other European continental countries,
had a tradition of using the patrimonial
(from the fr. patrimoine) view in accounting.
The communist period
After the Second World War, Romania
entered the Soviet Union’s influence,
28
Page 17
Accounting tradition in Romania (cont’d)
However, the economic problems after
1990 led Romania to consider applying for and ultimately secure several
agreements with the World Bank and
International Monetary Fund. As a
prerequisite of these agreements, IASs
were adopted starting 1999 for all
large entities. This second wave of
reform was carried out under the auspices of the British Know How Fund,
and therefore it is called the AngloSaxon influence on the Romanian
model. The IASs and the then existing
IASC’s Framework (with a few carve
outs such as consolidation and inflation accounting) were translated and
included in the national regulations,
along with a chart of accounts and
other provisions in line with the European Directives. The empirical research conducted regarding that period
found a reduced level of IASs application in practice. IASs’ complexity, the
importance of taxation or the lack of
demanding users were the main explanations for this state of affairs. For
example, Bucharest Stock Exchange
was established in 1995, had and still
has a relatively small number of listed
entities. The small and medium sized
entities benefited from simplified regulations, in line with the European Directives.
In 2005, in order to prepare the EU
membership, new accounting regulations were issued. This third step of the
accounting reform represented the
enactment of the European Directives. Currently IFRSs are mandatory
for listed entities in consolidated financial statements and financial institutions (starting 2012, banks use only
IFRSs and some other public entities
are required to prepare a second set of
financial statements under IFRS).
Accounting profession
Dismantled by the communist regime
very quickly, CECCAR was recreated
immediately after 1990, and has today
more than 55,000 members. Also as a
request of the International Monetary
Fund and of the World Bank, the
Chamber of Financial Auditors of Romania (ro. Camera Auditorilor Financiari din România - CAFR) was established in 1999, this professional body
having today over 2,500 individual
members and 800 firm members. Both
professional bodies are IFAC members.
Besides these national professional
bodies, a significant role is played by
the ACCA (Association of Chartered
Certified Accountants). By entering
the Romanian market in the early
1990s and by promoting a strong education curriculum, ACCA is regarded
as providing a high level qualification.
Very recently, two other international
bodies, ICAEW and CIMA entered
the Romanian market, but despite their
international recognition, the local
market is more familiarized with the
ACCA qualification.
A significant role in the accounting
profession is played by the big accounting firms, which contributed
with knowledge and resources to facing the challenges of the accounting
reforms, especially concerning IFRS
application. While the professional
bodies had and continue to have a
close relationship with academia, there
seems to be a certain gap between
practice and academic research. However, recent improvements have been
made, such as for example the KPMG
Romania Professorship program started in 2011, and various collaborations
regarding students’ internships and
training exist.
The accounting profession was negatively influenced by the communist
inheritance, in terms of a low status
and inadequate competencies for a
market economy. There still is a shortage of skilled labor, and in terms of
roles and competencies there seems to
be a slow movement from bookkeeping towards consultant and business
analyst. The profession is emergent
and continuously changing, and clear
correlations between job title, respon-
29
sibilities, required experience or training, remuneration, size of the entity
cannot be established.
Accounting education and research
Accounting education
Accounting education is delivered in
Romania in more than 35 universities,
of which the most prestigious are the
public ones. A Romanian Accounting
Association was created in 1994, but it
is not active and therefore the community of accounting educators and researchers is not well connected. We
estimate that there are over 350 accounting academics affiliated with
Romanian higher education institutions, working in accounting or finance
departments.
The Bucharest Academy of Economic
Studies (ASE) is the largest Romanian
university providing education in economics, with around 26,000 students.
ASE is also recognized as a leader in
the accounting education and research,
the World Bank considering that the
accreditation of the Faculty of Accounting and Management Information
Systems by the ACCA is an example
to follow for other Romanian universities.
Academia
The academic hierarchy in Romania
traditionally comprises five positions:
junior assistant, assistant, lecturer,
associate professor, and full professor.
Promotion criteria are established by
the Ministry of Education, Research,
Youth and Sports, and the associate
professor and professor positions are
also validated by the Ministry. These
criteria are also used by universities
for internal evaluation, usually with
very small differences. Academics
must be evaluated at least once every
five years against the criteria in use at
that time for the position they occupy.
Page 18
For this internal evaluation, especially
in the last years, the criteria used are a
little bit easier than those issued by the
Ministry (compensations can be made
for some of the requirements). Faculty
members have to fulfill both research
and teaching criteria, because for the
time being there is no separation between teaching and researching positions. Usually accounting academics
remain and promote in the same university they graduated from (which is
common across all the fields of education in our country).
For 10 or 15 years after the fall of
communism in 1989, the role of accounting academics was especially to
write books and prepare teaching materials in order to keep the pace with
the rapid changes in the business environment and in the accounting regulations. The orientation was towards
introducing new accounting techniques
and ideas (such as the substance over
form principle, IAS/IFRS, ActivityBased Costing, Balanced Scorecard
etc.). In that period, evaluation criteria
were based on the teaching activity
and the number of books and papers
(irrespective of the type of journal).
Only starting 2005 attention started to
be paid to the ranking of universities
and journals. A national journal ranking was proposed, including only Romanian journals and without making
differences between domains. The
criteria used for classification were
quantitative and referred to the databases in which the journals were abstracted or indexed. The most prestigious journals are considered those
listed ISI (Thomson Reuters Web of
Knowledge).
In 2011 a new set of promotion criteria
was established. In accordance with
these criteria, Romanian academics are
required to publish in ISI journals with
a relative influence score greater than
0.25 (which is more restrictive than the
journal’s impact factor). Qualifying
accounting journals are, according to
the list used in Romania, Abacus, Accounting Organizations and Society,
Accounting Review, Auditing - A
Journal of Practice & Theory, Contemporary Accounting Research, Journal
of Accounting and Economics, Journal
of Accounting Research, Journal of
Business Finance and Accounting, and
Review of Accounting Studies. To
date, no accounting academic affiliated
with a Romanian university published
in one of these journals.
Timid developments in terms of international publications are made, and the
efforts will eventually pay off but over
a longer period of time. The drastic
change in orientation from writing
books and publishing in professional
journals to getting published in international top journals demotivated most
Romanian accounting academics, especially that various ways to fulfill
these quantitative criteria can be found
on the short run.
Research methodology became a part
of the doctoral studies only for the last
decade, and had a general character.
The changes in the promotion criteria and the quantitative approach did
not recompense the commitment of
accounting academics to improve their
research skills. For example, the evaluation system encouraged participation
at conferences publishing conference
proceedings, eventually with ISBN
number (similar to the case of other
countries in the region). This could be
an explanation for the still reduced
(although increasing) number of Romanian academics attending the annual
congress of the European Accounting
Association or other prestigious international
accounting
conferences
worldwide. Also, the system did not
require the publication of papers in
accounting journals, and did not encourage increasing the international
visibility within the field. As a consequence, to date there is a reduced number of papers published by Romaniabased authors in international accounting journals.
30
Under these circumstances, most accounting publications are still mainly
theoretical and descriptive, with empirical research starting to be developed over the last years. Besides the
difficulties in gathering data for research (lack of databases with financial data, reluctance of practitioners to
answer questions or to provide data),
there is a pressure for quick publication and a quantitative approach in
evaluating research (based on number
of papers, not on research quality),
which demotivates most researchers to
engage in thorough research projects.
There is only one Romanian academic
journal dedicated to the field of accounting (“Journal of Accounting and
Management Information Systems”,
published by the ASE), but the current
journal ranking system or evaluation
criteria do not distinguish between
academic or professional journals or
between domains. Therefore, many
publications of accounting academics
occur in generalist journals or even in
journals outside the economic domain.
On the other hand, the changes in accounting and in the economic environment provide a lot of research opportunities. Little is known in the international literature about the case of Romania, and besides this need to produce research results with international
visibility, the business environment
might benefit from the results of more
practice oriented research.
Opportunities and challenges for the
future
The initiatives to improve the current
system include a sustained effort of
Romanian accounting academics over
the last years to attract international
scholars and to create the conditions
for improving the research skills of
Romanian academics.
Page 19
Internationally renowned accounting
researchers regularly attend accounting
conferences organized in Bucharest by
the ASE (the International Conference
on Accounting and Management Information Systems, organized annually,
already at the 7th edition in 2012) and
in Cluj-Napoca by the Faculty of Economics and Business Administration
of the Babeş-Bolyai University of Cluj
-Napoca (Accounting and Audit Convergence Convention, organized every
other year).
A major support for the International
Conference on Accounting and Management Information Systems is provided by the International Association
for Accounting Education and Research (IAAER), ACCA, IFRS Foundation and KPMG, in terms of organizing or sponsoring IFRS teaching
sessions and paper development workshops in conjunction with the last 4
editions of the conference.
Professor Donna Street (University of
Dayton, former President of IAAER
and currently its Director of Research
and Educational Activities), with assistance from the ACCA, played the leading role in these events by launching a
program to enhance the research and
teaching skills of scholars in emerging
economies, one of the centers chosen
to implement this program being Bucharest. These efforts are presented in
an ACCA’s magazine as “sowing the
seeds”, with potential high long term
benefits, also based on the perpetuation of the circle of knowledge and
research.
Given the fact the academics’ behavior
is a direct result of evaluation criteria,
a major reform is needed, with long
term objectives and stable and fair
criteria. Decisions in these areas are to
be made at the university level, but
also at the national level (Ministry of
Education and other institutions managing the research funds). The current
Bucharest Academy of Economic Studies
challenges involve the adjustment of
promotion criteria into ones that would
stimulate long-term performance, the
development of internal evaluation
criteria, the separation between teaching and research positions (with separate evaluation criteria) and the encouragement of increasing international visibility in the accounting domain,
but also the relevance for accounting
practice.
Further reading:
Albu, C.N., Albu, N., Alexander, D.
(2010) Accounting change in Romania
– a historical analysis, paper presented
at the 6th workshop on European Financial Reporting EUFIN 2010, 1-2
September, Stirling, Scotland.
Albu, N., Albu, C.N. (2012) How to
perform in the field of accounting research? The case of Romania, International Journal of Critical Accounting,
4(2): 145 – 174.
Albu, N., Albu, C.N., Bunea, S., Calu,
D.A., Gîrbină, M.M. (2011) A story
about IAS/IFRS implementation in
Romania: An institutional and structuration theory perspective, Journal of
Accounting in Emerging Economies, 1
(1): 76-100.
31
Feleagă, N., Feleagă, L., Dragomir,
V.D. (2011) Corporate governance in
emerging economies: evidence from
Romania, paper presented at the 7th
European Conference on Management,
Leadership and Governance, 6-7 October, Nice, France.
Ionaşcu, I., Ionaşcu, M., Olimid, L.,
Calu, D.A. (2007) An empirical evaluation of the costs of harmonizing Romanian accounting with International
Regulations (EU Directives and IAS/
IFRS), Accounting in Europe, 4(1-2):
169-206.
Mustaţă, R.V., Fekete, S., Matiş, D.,
Bonaci, C.G. (2011) Motivating accounting professionals in Romania.
Analysis after five decades of communist ideology and two decades of
accounting harmonization, Journal of
Accounting and Management Information Systems, 10(4): 169-201.
Cătălin Nicolae Albu and Nadia Albu
are associate professors of accounting
at the Bucharest Academy of Economic Studies, Romania.
Page 17
Accounting research in Slovenia - the intertwining of
research and practice
Simon Cadez, Sergeja Slapnicar, Aljosa Valentincic
influential part of the professional
accounting and auditing community in
Slovenia. They organise a series of
symposia, conferences and seminars,
have exclusive rights to run a range of
professional certification programmes
(i.e. certified accountant, certified auditor, certified business appraiser etc),
and issue two professional magazines
in the Slovenian language (i.e. Iks and
Revizor – Auditor).
Scientific production in accounting in
Slovenia mirrors the size of the country. It is a country of two million and is
home to four universities, only two of
which have an accounting and auditing
department, yet they boast some remarkable recent research achievements.
The origins and current state of accounting and auditing research
Pre-independence accounting in Slovenia followed the Yugoslav model. This
model comprised ideals of decentralised self-management and social ownership with substantial implications for
accounting – the concept of owners’
equity had no meaning and the emphasis was on production rather than ownership. Immediately after gaining independence from Yugoslavia in 1991,
“The Association of Accountants and
Treasurers” developed the first set of
domestic accounting standards based
on international accounting standards
of the time, but with some original
features. One distinctive characteristic
of Slovenian accounting standards was
the
compulsory
revaluation
(indexation) of assets with the inflation
rate that completely distorted owners’
equity in times of relatively high inflation. An even more unique facet of
Slovenian accounting standards is that
they also provide guidance for the
provision of management accounting
information, not only for financial
reporting. In 1994, the Association
established a subsidiary institution
“The Slovenian Institute of Auditing”.
Today, both institutions form a very
Despite the Association’s influence on
the professional community, accounting research in Slovenia has always
been a domain of academia. Although
for a long time the term research was
usually a synonym for publishing textbooks in the Slovenian language and
papers in national professional magazines and general business journals
with no international recognition,
much has changed in the last decade.
The accounting research community in
Slovenia is small, comprising 20 active
researchers at best. The Faculty of
Economics at the University of
Ljubljana (despite the name this is de
facto a business school) has an accounting and auditing department with
seven full-time faculty members. The
Economics and Business Faculty at the
University of Maribor also has an accounting and auditing department with
seven full-time faculty members. The
remainder are researchers at other departments and other schools who are
also engaged in accounting-related
research. The number of active researchers is unlikely to rise in the future, at least in the mid-term, because
currently very few students are pursuing a PhD in accounting. The relative
infamy of pursuing an accounting research career seems inconsistent with
the fact that accounting is one of the
most popular programmes in terms of
student numbers at the master’s level.
However, it does indicate that in Slovenia professional careers in accounting and auditing are more rewarding
than academic careers.
32
Faculty at the state universities are
divided into four ranks: assistant, assistant professor, associate professor
and full professor (a tenured position).
While the ranking system of university
positions has a long-standing tradition,
the promotion criteria have more recently changed considerably. Before
the country’s independence from Yugoslavia, the main promotion criterion
was seniority and international publications did not play a significant role.
After independence, however, the criteria for promotion became increasingly research-based. Today, the promotion criteria are almost exclusively
bibliometric.
Slovenia features one of the most
quantified and transparent systems of
research evaluation in the world. Both
universities mentioned above as well
as the Slovenian Research Agency as
the main funder of scientific research
have developed highly sophisticated
bibliometric models of research evaluation. In these models the entire portfolio of a researcher’s output (not only
journal papers and monographs, but
also conference presentations, student
textbooks and student supervisions etc)
is quantified. The universities use their
models for promotion purposes. The
Slovenian Research Agency uses its
model for the purposes of fund allocation and project funding. While a
transparent and objective system may
seem fair, in reality it has become a
hindrance to quality research in many
disciplines, including accounting. The
use of bibliometric methods is not a
problem per se, the problem is that the
same evaluation criteria are applied to
all disciplines. As a result, accounting
researchers in Slovenia find it hard to
compete for promotions and research
funding with researchers from other
business disciplines, let alone researchers from the natural sciences,
because other disciplines have completely different publishing patterns.
Page 18
Accounting research in Slovenia (cont’d)
An important feature of Slovenian
academia in general as well as accounting is academic “inbreeding”.
Typically, young prospective graduates are recruited as teaching assistants
at the same institution where they
graduated. They continue with their
doctoral studies at the same institution
and later stay on and develop their
academic career. The problem of inbreeding has been effectively tackled
by the Faculty of Economics at the
University of Ljubljana. About a decade ago the Faculty started encouraging teaching assistants to do full or at
least part of their doctoral studies at
reputable international academic institutions. Acknowledging the fact that
accounting research is dominated by
Anglo-Saxon researchers (i.e. the USA
and the UK represent 73% of publication authorship in accounting (Chan et
al., 2007), whereas their combined
global scientific publication authorship
is merely 28% (Knowledge, networks
and nations, 2011)), some of the young
accounting staff have spent longer
periods at recognised universities in
Australia, the UK and the USA, where
they received quality research training.
This research training and international
co-operation has resulted in some
world-class publications, including in
prestigious accounting journals such as
Accounting, Organizations & Society
and the Journal of Business Finance &
Accounting.
Today, work-in-progress is regularly
presented at the main conferences in
the field and the Faculty of Economics
regularly hosts research seminars with
international guests. Recently, the
Faculty of Economics also started recruiting foreign visiting professors
who complement the accounting training for students and are involved in
research. Research methods deployed
in Slovenia follow the European tradition of research method diversity, including the use of archival data, surveys, experiments, interviews and
cases. Popular research topics include
management accounting, financial
accounting, and corporate governance.
The contribution of accounting scholars to accounting regulation and
business practice
An important distinguishing feature of
Slovenian accounting scholars relative
to their international counterparts is
their significant influence on accounting regulation and business practice.
As board members of the Slovenian
Institute of Auditing, accounting
scholars have influentially contributed
to the development of the national
accounting standards and their alignment with the IAS/IFRS. Their impact
on business practice is probably even
greater than on regulation. Not only do
they publish articles for practitioners
that are based on empirical research of
Slovenian companies and train top
managers and supervisors, but they
also serve in a range of different professional positions, such as on the
board of the Slovenian public agency
for auditors’ supervision, supervisory
boards, boards of directors and audit
committees of major Slovenian blue
chips, as legal experts in court processes etc. This intense intertwining of
practical experience and research work
has created a unique profile of accounting scholars in Slovenia. This
might be the reason that graduate and
undergraduate degrees in accounting
have over the last few years substantially gained in popularity.
33
Organisation of the 35thEAA congress in Ljubljana
Today, the Faculty of Economics at
the University of Ljubljana is not just
the leading accounting research institution in Slovenia, but probably in all of
Eastern Europe. It holds two major
international accreditations (EQUIS
and AACSB) and has already hosted
most of the major conferences within
EIASM (EGOS 2004; EFA 2007,
EURAM 2008, EARIE 2009, EMAC
2011). We see the opportunity of organising the next annual 35th EAA
congress in Ljubljana as a great honour
and providing inspiration for future
high-quality accounting research in
both Slovenia and the entire region.
Reference
Chan Kam, Chen Carl, Cheng Louis
(2007): Global ranking of accounting
programmes and the elite effect in
accounting research, Accounting &
Finance, 47, 187-220.
Simon Cadez, Sergeja Slapnicar and
Aljosa Valentincic are academics at
the Faculty of Economics at the University of Ljubljana.
Page 15
Accounting in Italy
Cl audi a Ar en a, S ar a S agg es e, F a b ri zi a S ar t o an d R i c c a r d o V i g a n ò
accounting theory and practice will be
discussed. Finally, it will be highlighted the state of the art of accounting
research in Italy.
Influence of the Economia Aziendale
on Accounting
The Italian accounting developed as
part of a wider discipline intended to
capture all the economic aspects of a
particular kind of an economic entity the azienda.
International scholars are conscious of
the contribution of Italy to the development of accounting practice. In fact,
the historical origins of accounting
were grounded on the bookkeeping
and in particular on the method of
double-entry which was first promulgated by the Italian Luca Pacioli.
Nevertheless, there is less appreciation
of the distinctive Italian position in
accounting theory. As happened in
other countries (e.g. Germany), it developed as part of a wider discipline
aimed to capture all the economic aspects of the azienda: Economia Aziendale. This discipline, mainly attributed
to the thought of Gino Zappa and his
followers, is concerned with the study
of the azienda’s management, accounting and organization. Despite its centrality for Italian accounting thought,
the relationship between Economia
Aziendale and accounting (ragioneria)
is not well understood outside Italy.
In the following, the evolutionary process of Italian accounting studies will
be traced. Starting from the early contributions of the main representative
accounting schools, the discussion will
focus on the scholars that strongly
influenced the Italian accounting theory. Then, the relationship between
Although Italian authors were in the
vanguard in publishing early textbooks
on double-entry bookkeeping, distinctively Italian theoretical approach
emerges only in the XIX century, with
particular significant contribution of
the “Lombard School” and the
“Tuscan School”.
The main representative of Lombard
School was Francesco Villa (1840)
who viewed accounting as a part of a
wider process of administration. It was
concerned not only with recording
economic transaction, but also with
overall organizational and administrative issues pertained to the azienda,
defined as fundamental unit of economic activity.
The Tuscan School played several
important roles. Its members founded
and revitalized the accounting journals
and associations (Accademia dei
Ragionieri; national conference of the
accountants) and individual scholars
cast their influence over subsequent
theoretical views of accounting. Francesco Marchi (1867), for example
attempted to improve on the
“personification views” of accounting
borrowed from French writers. Together with Giovanni Rossi (1882), he
stressed the “juristic nature of accounting”. Giuseppe Cerboni (1886) advocated a science of economic administration of economic units (i.e.
aziende) with accounting seen not only
as computation but also as having economic and administrative aspects.
34
In the XX century, two theories that
strongly influenced the Italian accounting tradition stand out and were based
on the thoughts of Fabio Besta and
Gino Zappa. In his scientific study of
accounting Besta stressed the concept
of the azienda and tried to overcome
the wide variation in the activities of
aziende by focusing narrowly on economic administration. Accounting
becomes the science of economic control at the theoretical level aiming to
develop the general principles for all
kinds of azienda.
Zappa studied under Besta in Venice
in the early years of the twenty century. He conceived the Economia Aziendale as a unifying discipline of all
productive and economic activities for
business as well as government entities. According to Zappa and his scholars, the azienda is regarded as an autonomous and holistic system, and
Economia Aziendale is claimed to
possess its own rules. In addition, the
azienda can be examined in terms of
coordinated “subsystems”. As a consequence, Economia Aziendale is composed by three traditional organic segments: organizzazione (organization),
ragioneria (accounting) and gestione
(management and operations).
The emergence of the Economia
Aziendale as unitary discipline has
lead to a shift in the accounting tradition from a more “patrimonialistic
approach” (patrimonialisti) towards an
“income
oriented
approach” (redditualisti).
The emphasis of the “patrimonialistc
approach” identified with Besta
(1922), was on capital (as the ultimate
accounting reality) as reflected in the
balance sheet. Besta’s emphasis was
on the control of the entity’s wealth
seen as consisting of positive elements
(assets) and negative elements
(liabilities).
Page 16
Accounting tradition in Italy (cont’d)
Within
this
“patrimonial”
or
“proprietorial” approach, events represent changes in net worth (Capitale
Netto): the sum of individual changes
in assets and liabilities over a certain
period gives the measure of income.
The balance sheet is the main account
of the financial statement. The profit
and loss account is a mere addition.
The patrimonial approach is analytical
adopting an atomistic view: the azienda is a simple sum of several components, so every items of net worth is
likely an independent atom with individuality and a single value. Only capital is important and income is the
accounting measurement of the change
in capital over time.
The “income orientated approach”
may be distinguished from the patrimonial approach. In the former, events
occurring in the azienda give rise to
(and measure) positive and negative
changes, as elements of the periodic
formation of income. Because events
are conceived as inseparable over the
entire life of the azienda, income (with
its costs and revenues) is unitary in
both time and space. Differently from
the patrimonialistic view, the proposed
is a synthetic approach: the azienda is
considered as a whole. Every item of
the net worth loses its individuality
and value in favour of its whole upon
which it depends. The main focus is on
income and capital is a derived concept and has not an independent value.
In addition, Besta’s accounting system
was applicable to all kinds of azienda,
directly and indirectly aimed at the
satisfaction of human needs. Conversely, Zappa’s income-based accounting system was applicable to the
economic units which produce wealth:
the income that his system measures
and represents. It is interesting to note
that the patrimonialistic notion comes
much closer to the modern approach
propagated in North America than
does Zappa’s approach – even though
the latter is still fervently defended in
Italy.
In conclusion, in the track laid down
by these two scholars, their disciples
contributed to the promulgation and
development of their ideas, giving
energy, through the decades, to the
construction of independent schools of
thought. The most important were: the
Milan School (Onida, Amaduzzi,
D’Ippolito,
Dell’Amore,
Pivato,
Caprara, Zerbi, Masini, Guatri, Rossi,
Cudini, Lo Russo and Tancredi Bianchi), the Tuscan School (Ceccherelli,
Giannessi, Riparbelli, Ponzanelli and
Caramiello), the Genoa School
(Giovannini and Cassandro) and the
Neapolitan School (De Minico and
Amodeo).
Gap between accounting theory and
practice
The success of Economia Aziendale
may be explained by reference to several factors: the authority of ragioneria
scholars; the attraction of an autonomous science studying the azienda as
unitary economic realty; and the deductive rationality of many theoretical
assumptions, enriched with the framework of a new income-oriented
bookkeeping system. However, the
enthusiasm for the new way of thinking perhaps become excessive, stimulating many to extend the concept of
accounting to become synonym of
Economia Aziendale. The original
scientific message was misunderstood:
rather than the recognition of accounting as an organic part of a larger discipline, there was the incorrect conviction that such a new school enlarged
the content of accounting. In the absence of clearly stated theoretical aims,
ragioneria scholars, in the name of
Economia Aziendale, have been moving away from their original research
field and have neglected empirical
problems. The distinctive nature of
Economia Aziendale and the success
of Italian accounting scholarship in
previous periods may have distracted
accounting scholars from an awareness
35
of the international developments in
accounting research and practice.
There was no formal exchange between Italian and American accounting
studies. They simply ignored each
other, and developed towards completely different paths. In Italy, the
neglected analysis of the market of
information and of the mechanisms
that govern the behaviour of actors led
to a gap between accounting theory
and practice. Beyond the features of
Italian setting - the presence of medium-sized family businesses, the access
to capital and resources that is generally not correlated with information provided by financial statements - the
delay in the methodological approach
was crucial.
To appreciate how this delay has contributed to the gap between accounting
theory and practice, it is important to
look at the evolution that the financial
statement experienced within the Italian setting.
Until the 60s the financial statement
was typically internal oriented and had
no other purpose than to try to reproduce the economic reality performed
by operations. Hence, most authoritative scholars of Economia Aziendale
provided important contributions to
identify a theoretical model of financial statement. The reason for this relatively narrow view is mainly related to
the average size and the typical proprietary structure of the Italian azienda at
that time. It was medium or small in
size, often being a sole or one-family
owned, operating in a not well developed capital market. The public financial statement was not required by the
financial community and became more
legally and fiscally oriented than economically based.
Page 17
Accounting tradition in Italy (cont’d)
Since the 70s the gap between Italian
and international studies expanded
gradually. The Italian scholars who
examined the financial statement became less copious. The focus of their
studies was the evolution of the rules
for evaluation and representation of
accounting numbers according to the
fourth directive (then replaced by the
DL 127/91 and the international accounting standards). Meanwhile, in the
international debate the neo-positivist
turn was shifting the focus from the
issue of evaluation itself to the specific
objectives of the companies and on the
behaviour of all the actors demanding
and producing financial information.
The economic effects on companies,
market and the information system as a
whole became important objects of
study. In some cases, new collaborations with scholars in economics and
finance developed, leading to a multiparadigmatic accounting discipline
with a variety of scientific methods of
investigation.
Starting from the beginning of the 90s
in Italy there was a progressive attention to the financial statement as a
document for publication rather than
for internal use. It increased the scholars' interest towards topic such as the
audit certification and the European
directives on financial statements.
Nevertheless, a deductive approach
aimed to describe the new trends and
interpret them in the light of the classical theory continued to prevail.
Until the beginning of the XXI century, with the European harmonization
and the evolution of business operation, the preparation of financial statements became more complex. New
issues and solutions produced by the
accounting standards contributed to the
evolution of accounting practice, although there still was a focus on the
minimization of the tax burden. Hence,
the level of professional knowledge
improved, but not the quality of earn-
ings. Compared to other countries, in
Italy the lack of empirical studies was
strong especially considering the emergence of the importance of the accounting document in the Italian economic context, favoured by the attention on the financial statement fraud,
due to by accounting scandals (e.g.,
Parmalat, Cirio). The deductive approach has not been able to capture
neither the profound changes in the
practice nor the goals and behaviours
of the different actors involved.
Lately, the widespread use of international accounting standard and the
Basel Accord have made accounting
information even more important in
the Italian setting. The importance of
the financial statement grew also for
smaller and capital closed firms. Important issues emerged and they required a deeper investigation by the
scholars in order to identify the features of the new context, profoundly
changed compared to the past. Understanding the behaviour of market participants, their objectives and the economic impact of accounting information was a high priority.
Current situation
Recently, the gap between accounting
theory and practice is progressively
decreasing. On one hand Economia
Aziendale is gradually affirming its
relevance in the international arena
due to its remarkable methodological
and heuristic potential for international
studies in business economics, management, and accounting. Some scholars have traced the historical evolution
of the theory in order to offer a survey
and comparison of Italian accounting
research and academic publications
during the last centuries. Other authors
have focused on the accounting implications relating to Economia Aziendale. Yet other scholars have examined the ethical issues implicitly put
forward by Economia Aziendale theory, by discussing its relevance for business ethics research.
36
On the other hand there are several
indications that the “information perspective of accounting” has arisen
great interest. A number of papers
have discussed this approach for the
benefit of Italian accounting academics. They offers to the Italian audience
(endowed with the necessary mathematical pre-requisites) a concise introduction into some fundamental aspects
of the American information economic
perspective. In the meantime, studies
based on statistical-empirical methodology and relying on “positive accounting theory” have been developing. Topics of interest are: the role
financial reporting in capital markets;
the capital market effect of the introduction of IAS/IFRS; the relationship
between financial reporting and corporate governance; accounting choice
and earnings quality.
The effort of Italian scholars to fill the
gap with the international studies is
also witnessed by the emergence of
new Academic journals mainly aimed
to promote the accounting debate from
an international perspective (e.g. Financial Reporting, Management Control) as well as the evolution of the
aims and scope of some traditional
Italian publications (e.g., Rivista Italiana di Ragioneria ed Economia
Aziendale, Contabilità e Cultura
Aziendale, Rivista dei Dottori Commercialisti). An additional indication
of this trend comes from the internationalization of the main traditional
accounting conferences (AIDEA,
SIDREA), both in terms of the types of
tracks and the inclusion of foreign
participants.
Claudia Arena, Sara Saggese, Fabrizia Sarto and Riccardo Viganò are
academics at the University of Napoli
Federico II.
Page 22
A c c o u n t i n g Tr a d i t i o n i n P o r t u g a l
Maria Major
The 18th Century
Portuguese history
has been closely
linked with the
development
of
mercantilism and
trade throughout
most of the last
five centuries. It is
well known that
accounting
and
commerce go hand in hand. Therefore,
it is not surprising that accounting has
attracted much interest from Portuguese traders, politicians and decisionmakers, following the Portuguese maritime expansion of the 15th and 16th
centuries.
Yet, apparently, it was in the second
half of 18th century with the Marquis
of Pombal (Chief Minister of the Portuguese King Dom José I) that accounting and double entry bookkeeping became recognized as valuable
devices to foster commercial activity
and support the management and administration of new factories. It was in
this period that Aula do Comércio
(School of Commerce) was created,
which, according to some, was the
world’s first official professional technical establishment specializing in the
teaching of accounting. Whether it was
the first formal establishment set up in
Europe and the world to promote professional education is still the subject
of controversy; however, the School of
Commerce was still an important milestone in the development of accounting in Portugal.
Further important events subsequently
occurred. For example, in the 19th
century, the earliest Portuguese Commercial Code was issued, containing
rules on which type of books merchants should keep and how they
should be organized. Moreover, in the
last quarter of the 19th century, and
following the European trend towards
associative movements, the Portuguese
Accounting Association was created,
though its life span was brief. Both of
these events were a reflection of the
dynamism of accounting in Portugal.
One of the drivers for accounting progress during this period was the influence of French accounting writers,
who had a major impact on the way
accounting developed. Authors such as
De la Porte, Barrême, Degrance and
Lefévre were among those that had
been highlighted as the most influential. This influence seems to have extended up until the first half of 20th
century.
From the Republic to the Early 1970s
Immediately after the abolition of the
monarchy and the establishment of the
Republic in Portugal, in 1910, a law
was passed requiring accounting to be
undertaken by ‘capable technicians’.
Furthermore,
two
widelyrepresentative chambers of Accounting
Experts (one for the North, the other
for the South of the country) were
formed in order to supervise the provision of balance sheets, accounting
reports and other related documents to
general meetings of companies.
Overall, the period between the end of
the monarchy and the end of Portuguese dictatorship in the late 1960s
was marked by an interest in accounting and the need to regulate its provision. An example of this was the creation of the National Union of Accountants and Bookkeepers from the Oporto
District (NUABOD) during Salazar’s
corporatist regime. This organization
permitted the advance of accounting
knowledge by promoting study sessions, creating accounting schools and
libraries. It became very influential, as
accountants or bookkeepers who did
not hold a ‘licensing credential’ issued
by NUABOD were prevented from
practicing. This organization folded in
1943, when their members were forced
to join the National Union of Office
37
Clerks, a heterogeneous union controlled by the Salazar regime.
In 1933, the Revista de Contabilidade
e Comércio (Accounting and Commerce Review) was launched. This
journal is still published and has made
important contributions to the advance
of accounting knowledge over the
years. In 1945, the Portuguese Accounting Society was set up with the
main objective of fostering the advance of accounting knowledge. Its
activities included organizing conferences and debates disseminating accounting practices, publishing a bulletin, providing research facilities and
awarding scholarships and prizes.
Moreover, the Portuguese Accounting
Society sought to enhance the regulation of accounting technicians and
reform the way accounting was taught
by proposing three different levels of
teaching (‘professional’, ‘complementary’, and ‘higher’). However, by the
end of the 1980s, this organization was
inactive.
The Industrial Tax Code of 1963,
which was drawn up within the context
of public administration tax reforms,
reinforced the need to develop accounting standards and to regulate
requirements about who was qualified
to prepare entity accounts. Undeniably,
it contributed to leveraging the professional accounting skills required by
accountants and bookkeepers in Portugal. A ‘professional nucleus’ of accounting technicians emerged in this
period with the state-run National Union of Professional Office Clerks lobbying for their interests. At the beginning of the 1970s, the auditing profession was formally recognized and
formed the Câmara dos Revisores
Oficiais de Contas (Official Auditors
Chamber).
Page 23
Accounting research in Portugal (cont’d)
From the 1974 Revolution to the End
of the 20th Century
Following the Portuguese Revolution
of 25th April, 1974, important accounting developments occurred. Firstly, the Associação Portuguesa de
Contabilidade (Portuguese Accounting
Association) was created. Later, at the
end of the 1990s, this association became the Associação Portuguesa de
Peritos Contabilistas (Portuguese Accounting Experts Association). Secondly, the Associação Portuguesa dos
Técnicos de Contas– APOTEC
(Portuguese Accounts Technicians
Association) was created to improve
the skills and competences of accountants. From its inception to the present
day, this association has published a
monthly bulletin (‘Jornal de Contabilidade’). Thirdly, 1977 signaled the
approval of the Plano Oficial de
Contabilidade (Official Accounting
Plan).
More initiatives were put in place over
the next decade that accounted for the
maturity of accounting in Portugal.
One of these initiatives was the creation of the Comissão de Normalização
Contabilística (Accounting Standards
Board) in 1983. Portugal’s entry into
the European Community (currently,
the European Union) in 1986 fuelled
the need for further developments in
this area. There was awareness that,
without public recognition of a professional cadre of state licensed chartered
accountants, Portugal would be unable
to successfully function in its new
environment. To this end, in 1995, the
Statues of Official Accounts Technicians were issued and the Associação
dos Técnicos Oficiais de Contas
(Association of Official Accounts
Technicians) was established. In 1999,
this association changed its name to
Câmara dos Técnicos Oficiais de Contas – CTOC (Chamber of Chartered
Accountants), and later in the 2000s to
Ordem dos Técnicos Oficiais de Contas – OTOC (Order of Chartered Accountants).
From 1995 onwards, all businesses
were required to have an official accountant to calculate their profit in
accordance with both Portuguese
GAAP, mainly set out in Plano Oficial
de Contabilidade (Official Accounting
Plan) and in the specific accounting
directives and standards issued by the
Comissão de Normalização Contabilística
(Portuguese
Accounting
Standards Board). Following EU regulations on IFRS, in 2009 the Portuguese government revoked the Official
Accounting
Plan
(Decree-law
158/2009 from 13 July) and imposed a
new accounting model (Sistema de
Normalização Contabilística) built on
the IASB model. Based on the idea
that accounting teaching was crucial to
enhancing accounting practice, the
Associação de Docentes de Contabilidade do Ensino Superior - ADCES
(Portuguese Association of Accounting Teachers in Higher Education) was
founded in 1994.
Despite these developments at the end
of the 1990s, research in accounting
was rare. There were few individuals
holding a PhD in accounting and consistently undertaking research at an
international level.
The 2000s: A New Age in Portuguese
Accounting Research
The most remarkable changes in accounting, at least from a scientific
perspective, occurred in the 2000s. If,
at the end of the 1990s, Portuguese
scientific production in the field of
accounting was scarce, in comparison,
it had increased substantially ten years
later. Supported by scholarships, often
granted by the Portuguese Ministry of
Science and Technology, many Portuguese scholars went abroad, either to
Spain, the UK or the US to get their
PhDs. This enabled them to acquire
new ideas and build theoretical and
methodological knowledge in accounting. On their return, several of them
brought new approaches and perspectives to the study of accounting, which
proved critical to the advance of accounting in Portugal.
38
As a result of this, a number of articles
were published in top accounting journals, such as Accounting, Organizations and Society, Abacus, The European Accounting Review, Accounting
and Business Research, Critical Perspectives on Accounting, Management
Accounting Research, Accounting,
Auditing and Accountability Journal,
British Accounting Review and Accounting Historians Journal, among
others, in subsequent years. Accounting came to be regarded not as a mere
technique and bookkeeping exercise,
but rather as a social science that needs
to be placed in a broader context when
researched. Different theoretical perspectives have been embraced by Portuguese academics to inform studies
on accounting since then, ranging from
mainstream accounting research to
interpretative and critical research.
Similarly, diverse methodological
approaches, including the adoption of
research methods, such as case study,
archival analysis, questionnaires and
statistical analysis, among others, expanded in accounting studies undertaken by Portuguese researchers.
A reflection of scientific production in
Portuguese accounting is the number
of delegates who have participated at
the European Accounting Association
congresses throughout the 2000s. For
example, at the last EAA congress
(34th Annual Congress Rome 20th22nd April 2010) Portugal had 30 papers accepted, either for a parallel session or research forum. The scientific
areas covered by the papers were diverse and included: Auditing (4 papers); Financial Analysis (3); Financial
Reporting (5); Accounting and Governance (5); Management Accounting
(7); Public Sector Accounting (4);
Social and Environmental Accounting
(1); and Taxation (1). This demonstrates how different areas of accounting have attracted Portuguese academia.
Page 24
Accounting research in Portugal (cont’d)
The number of papers presented at the
last seven congresses is quite impressive, particularly if we compare it with
Portuguese participation at the EAA at
the beginning of the 2000s, which was
almost non-existent. However, Portuguese accounting scholars have not
only been actively participating at the
EAA congresses; they have also had
their papers presented at other scientifically prestigious events, such as the
American Accounting Association
(AAA) congress, EIASM workshops,
Critical Perspectives on Accounting
(CPA) conference, Interdisciplinary
Perspectives on Accounting (IPA)
conference, Asia-Pacific Interdisciplinary
Research
on
Accounting
(APIRA) conference, among many
others.
Portuguese academics’ enthusiasm
towards research in the accounting
field led them to organize the 30th
Annual Congress of the EAA (25th27th April 2007, Lisbon), which signaled a new age for accounting in the
country. Many other important scientific events have been organized by
Portuguese accounting scholars, such
as the ‘8th Conference of the European
Network for Research in Organizational and Accounting Change - ENROAC’ (2011); ‘3rd and 4th GECAMB Conferences on Environmental
Management and Accounting’ (2008
and 2010); and the ‘4th Accounting
History
International
Conference’ (2005), among others.
After a period of long international
isolation, it is now common to find
junior and senior Portuguese accounting researchers visiting European and
American universities, as well as
working on joint international research
projects with colleagues from overseas
universities. Over the last decade, pioneer universities and departments in
the country, such as ISCTE, University
of Minho and University of Porto,
have started offering Master’s degrees
and doctoral programs in accounting.
The teaching of accounting underwent
significant changes as the open and
pluralistic debate on the multiple theoretical and methodological approaches
that a researcher may adopt to inform
solid research in accounting became a
real concern. Research seminars involving reputed academics from universities in the UK, US, Australia and
New Zealand were organized in parallel with the doctoral programs offered
by universities. A result of these efforts is the considerable increase in the
number of Master’s dissertations and
PhD theses in accounting that have
been completed since the beginning of
the 21st century. Some of these MSc
and PhD students come from abroad
(from countries like Brazil and the exPortuguese colonies), which shows
how first-class quality research in accounting can attract new students to
Portuguese universities.
research in accounting history. It is
expected that, in the coming years,
valuable scientific outputs will be obtained from this initiative.
An important vehicle for the dissemination of innovative accounting research during these years has been the
Grupo de Discussão em Contabilidade
– GRUDIS, a research group created in
2003 to endorse high-quality research
in the field. Apart from promoting
continuous discussion between members via an electronic platform, every
year it organizes a congress where
ongoing accounting research is debated. Furthermore, in 2004, the Ordem
dos Técnicos Oficiais de Contas
(Order of Chartered Accountants) with
the scientific support of Associação de
Docentes de Contabilidade do Ensino
Superior - ADCES (Portuguese Association of Accounting Teachers in
Higher Education) started editing a
blind-refereed publication entitled
Portuguese Journal of Accounting &
Management. The journal publishes
high-level research in the field and
accepts papers written either in English, Portuguese or Spanish. Its editorial board consists of well-known international academics and promising
Portuguese scholars. More recently,
the Portuguese Order of Chartered
Accountants created a specific commission for fostering the advance of
References:
39
Future
In summary, after having ended many
years of detachment from international
accounting research, the last ten years
have seen important changes in the
way accounting research is regarded
by Portuguese academics. However,
despite significant advances in the
area, much remains to be done in the
coming years to consolidate achievements. Acquiring an international approach and achieving high-quality and
theoretically well-grounded studies is
undoubtedly a major challenge for the
new generation of Portuguese scholars.
Carqueja, H. O. (2011) “Note on the
accounting in Portugal between 1900
and 1950”, Spanish Journal of Accounting History, 14, pp. 3-49.
Carmona, S. (2007) “The history of
management accounting in France,
Italy, Portugal and Spain”, in Chapman, C. S., Hopwood, A. G. and
Shields, M. D. (Eds) Handbook of
Management Accounting Research
(London: Elsevier), pp. 905-922.
Rodrigues, L. L., Gomes, D. and
Craig, R. (2003) “Corporatism, liberalism and the accounting profession in
Portugal since 1755”, Accounting Historians Journal, 30, pp. 95-128.
Maria Major is Associate Professor of
Management Accounting at University
Institute of Lisbon (ISCTE – IUL).
Page 16
Accounting research in Spain: two decades of evolution
José Antonio Gonzalo & Araceli Mora
Diversity is a
characteristic of
Europe in all
fields, and one of
its strengths. The
EAA mirrors this
diversity,
and
embraces
the
common goal of advancing the knowledge in the field of accounting, while
bearing in mind important institutional
differences and national histories. This
is why we believe that knowledge of
the evolution of the accounting discipline in different countries helps to
better understand the characteristics of
our association and its members, and
this is why we welcome the initiative
of publishing this series of articles
about the history of our discipline in
different countries.
Spanish scientific production in general has doubled in the last twenty
years and nowadays Spain holds the
9th position in the ranking of scientific
production in the world. Accounting
research has been part of this development, and especially so in the last few
years. Spanish accounting academics
nowadays play an important role in the
European Accounting Association.
Their presence in different committees, their participation in the EAA
congresses and their publications in
the journals of the EAA (EAR and
AinE) are significant. However, there
has been a long and winding road to
the development of accounting research in Spain.
Important points on this road were the
organization of several EAA annual
meetings in Spain. The first of these
was the 4th annual congress (1981),
organized in Barcelona by IESE Business School. At that time, no more
than 15% of the almost 150 participants were Spanish. In 1992, the 15th
annual congress was organized in Madrid. It became a catalyst for the mod-
ernization of the accounting academia
in Spain. Finally, in 2003, the 26th
annual congress was organized in
Seville, and since then the presence of
Spaniards in the EAA annual congresses has been very significant
(between the first and third in the ranking of number of delegates and papers). Another important contribution
to this development was the fact that,
in the 1990s, junior and senior Spanish
accounting researchers started to visit
European or American universities as
part of their training and the development of their research, and this practice was quite consolidated by the
2000s. Several Spanish universities
have participated in European Research Projects (i.e. Accounting Regulation in Europe, HARMONIA,
MERITUM, INTACCT…), with academics changing from the role of trainees to that of mentors. Nowadays we
have remarkable research teams working in all areas of accounting research.
This development of the Spanish accounting academia in the last two decades was influenced by several factors,
and we want to highlight those that
played a particularly significant role:
the initiatives and support of some
institutions on one hand, and a change
in the promotion procedures on the
other hand. Finally we will comment
on accounting education at the Spanish
universities and some other relevant
matters of the evolution of accounting
in Spain. We will conclude with some
reflections about the future.
Institutions
Several institutions have played a role
in the evolution of accounting research
in Spain. We want to highlight three of
them, two associations (AECA and
ASEPUC) and the national standard
setter (ICAC).
AECA (Asociación Española de Contabilidad y Administración de Empresas)
The Spanish accounting academia in
its “modern” form has its origins in the
end of the 1970s and beginning of the
1980s, when the Spanish Association
of Accounting and Business Administration (AECA) was created. This
association, with academics and practitioners among its members, has since
promoted many activities related to
both normative matters and academic
research. The accounting standards
issued by AECA in the eighties
showed the influence of the IASC
standards and had a great influence on
the change in the official national accounting standards in 1991. Another
important development took place in
1979 when the AECA started to edit
the Revista Española de Financiación
y Contabilidad - the Spanish Journal of
Finance and Accounting (REFC),
which was the first scientific accounting journal in the country. In the 1990s
this quarterly journal became a blind
refereed publication outlet and a platform to “go international” in terms of
research. Nowadays, it is a very well
reputed quarterly academic journal,
listed in the SSCI and with a wellknown international editorial board.
The history of the REFC is the history
of the Spanish academia. AECA is
also the editor of several publications,
books and other academic journals
created more recently and focused on
specific research topics such as accounting history, digital accounting
and information systems, SMEs, management accounting or accounting
education
AECA was also the main organizer,
together with some universities from
Madrid, of the EAA congress in 1992.
40
Page 17
Accounting research in Spain (cont’d)
It also organizes biannual academic
congresses and biannual professional
meetings where academics and practitioners have a forum to meet and exchange knowledge. The association
also organizes academic and professional seminars and finances several
research activities and projects, especially research projects for young researchers.
ASEPUC (Asociación Española de
Profesores Universitarios de Contabilidad)
In the 90s, the Spanish Association of
University Accounting Academics
(ASEPUC) was created. ASEPUC has
more than 1000 members from the
Spanish Universities. It organizes a
biannual academic congress
(alternating with AECA congresses)
and many workshops and seminars
related to research, practice and education in accounting. The journal of the
association, Revista de Contabilidad Spanish Accounting Review (RCSAR) was created in 1997 and publishes two issues per year.
ICAC (Instituto de Contabilidad y
Auditoría de Cuentas
The 1990s also witnessed a modernization of accounting practice. The first
General Accounting Plan (Plan General de Contabilidad- PGC) was issued
in 1973 by an institution, the Instituto
de Planificación Contable (IPC) that
disappeared in 1988 to be substituted
by the governmental body: Spanish
Accounting and Auditing Institute
(ICAC). Since then, the ICAC has
been the national standard setter and
has also been in charge of the supervision of the auditing profession. In
1991 the General Accounting Plan
(PGC) was changed to be adapted to
the European directives, and more
recently, in 2007, the ICAC, with the
help of several working groups formed
by managers, auditors and academics,
issued a new General Accounting Plan
(including GAAP for SMEs), which
basically adopted IFRS principles.
Apart from being the standard setter,
the ICAC has always played an important role in contributing to the development of academic research, mainly
empirical research in financial accounting and auditing, with specific
funds and grants addressed to carry out
studies and for the dissemination of the
results. Since the creation of ASEPUC
both organizations award annual grants
and rewards for research projects and
doctoral theses.
The change in the promotion system
Another remarkable issue that has
played an important role in the development of accounting research are the
changes that have taken place in the
last decade in the regulations regarding
the promotions of academics. These
changes make it almost impossible for
a scholar to be promoted to a senior
position if the candidate does not demonstrate a certain level of quality research. Obtaining a positive evaluation
of the National Commission for the
Evaluation of Research (Comisión
Nacional de Evaluación de la Actividad Investigadora- CNEAI), an organization that belongs to the Ministry of
Science and Innovation, started to be
important, and after some time essential, to be promoted. Every six years
researchers can select five of their
publications to be evaluated by the
Commission. Obtaining a positive
evaluation implies that one receives a
small permanent bonus in addition to
the salary and, more recently, it has
also become a requirement for promotion and admission to different commissions. The CNEAI works through
its Advisory Committees in each field.
The Advisory Committee for
“Economics” (including all areas of
economics and management) adopt
homogeneous criteria to evaluate the
research of all fields under its scope.
This system was created at the end of
the 80s and there was a change in the
41
criteria for research outputs to be considered of high quality in the 2000s.
Since then, accounting academics are
evaluated together with academics
from other disciplines whose development in Spain in terms of research is
considered more advanced (like economics or finance). To have a positive
evaluation of the 6 year period, publications must be considered “high quality research”. The criteria used to label
research as high quality, similarly to
other countries, relate to the “impact”
of the journal where the research is
published. The internationalization of
the journal and whether it is listed in
an index (as for example the SSCI) are
considered the most objective measures. In spite of its controversial effects (and the limitations and criticisms of the criteria), this practice has
come to constitute an additional motivation for the improvement in research
and for publishing in international
journals. At the same time this has
allowed accounting researchers to
obtain additional funds from the government, from private institutions or
universities to run their research projects and attend international events.
Accounting education
From 2011 on, all Spanish universities
are to adopt a Bologna-based model.
Most of them have already changed
their degrees in format and content.
Some universities now offer a degree
in Accounting and Finance and, in
most of them accounting plays an important role in the degree in Business
Administration. Some universities
have a master in Accounting and/or
Auditing, including in many cases a
research program. In addition, Spanish
universities now play a remarkable
role in the research training of academics from other countries.
Page 18
Accounting research in Spain (cont’d)
Spanish doctoral programs welcome
many students from different countries, with a remarkable number of
students from South America and also
strong ties with Portuguese universities.
Concluding reflections
Although we recognize the current
limitations of the Spanish accounting
academia, most of these limitations are
common to other disciplines, and to
other European countries. Most of the
academics are civil servants, the job
market does not have much flexibility,
there is a high level of endogamy,
budgets are tight these days, and it is
not easy in most of the departments to
get new generations of academics into
the system. However, it is important to
point out that the last generation of
researchers has increased enormously
their research abilities, and we think
that some of them are going to play an
important role in the development of
the European Academia in the near
future. In summary, a lot has been
done in the last two decades while a lot
still remains to be done in the years to
come. Spanish academics look with
enthusiasm at the role that we all can
play in the development of the European academic community in accounting.
Investigation of Possible Nonmainstream and Language Barrier
Biases” European Accounting Review,
19:1, 161-190.
José Antonio Gonzalo is a Full Professor in Accounting and Finance at Alcala University (Madrid). He is also a
former President of the EAA (20032004)
Araceli Mora is a Full Professor in
Accounting and Finance at the University of Valencia.
References
Carmona, S. (2002): History Matters:
lessons from twenty five years of the
European Accounting Association”
European Accounting Review, 11: 1,
9-32.
Raffounier, B and A. Schatt (200): “Is
European Accounting Research Fairly
reflected in academic Journals? An
42
Page 13
Accounting research in France: the institutional setting
Nicolas Berland & Christine Pochet
In the following
panorama of research in France,
we have chosen
to focus on the
institutional dimensions of the
French context rather than on specific
research topics. Although topics sometimes differ from those addressed in
international journals, we do not feel
that these differences are particularly
noteworthy.
The AFC—the Association Francophone de Comptabilité or, to use its
English title, the French Accounting
Association—embraces the community of accounting researchers in
France. It was first set up in the late
1970s in the wake of the founding of
the EAA and has since developed
more or less in parallel to the EAA
(Section 1). Today, this community
brings together 350 members and focuses mainly on congresses and journals (Section 2). The AFC lies within a
research environment shaped by the
duality of research carried out in universities and in business schools, in
which each sector operates according
to specific rules (Section 3).
The AFC’s Background and its
Links with the EAA
The AFC was founded in 1979 by a
number of French researchers. Its
founding should be seen in the light of
the founding of the EAA in 1977. A
number of French researchers at that
time (notably Edmond Marquès) were
involved in the European-wide initiative, earning France the honour of
staging the first EAA congress in Paris
in 1978 and subsequently its eleventh
congress in Nice in 1988. It was therefore in parallel to this European initiative that the AFC began to develop,
organising its first congress in 1980
with some 20 participants. Surpris-
ingly, and in spite of their common
roots, ties between the two gradually
loosened throughout the 1980s and
into the early 1990s. French researchers seemed more preoccupied with
building their own academic community and, as a result, their attendance at
EAA congresses and publications in
journals became rare occurrences.
Over the period 1977-99, France was
ranked eighth among European countries in terms of its share of EAA
members, with French affiliates representing only 4.8% of the Association’s
members (Carmona, 2002). However,
in 1999, a third EAA congress was
held in Bordeaux. Since then, no doubt
as a result of pressure from the regulatory bodies of French academic institutions calling for a greater presence on
the international stage, the attendance
of French researchers at EAA congresses has surged. In 2013, France
will be staging the EAA congress in
Paris. Let us hope that this will mark a
new high point for French researchers
in Europe.
In the early 1990s, French accounting
researchers primarily published their
papers in two journals: the Revue
Française de Gestion (French Management Review) and the Revue Française
de Comptabilité (French Accounting
Review). The first is a generalist academic journal with double blind reviewing whereas the second is a professional journal published by the
Ordre des Experts-Comptables (OEC,
the French Organisation of Certified
Accountants). However, there was a
distinct lack of academic journals for
publishing research in this field. In
response, two journals were established in 1995—Comptabilité, Contrôle, Audit (CCA), directly affiliated
to the AFC, and Finance Contrôle
Stratégie (FCS), backed by the AFC in
its early years but today, independent
of any professional association and run
by a publisher (Economica).
43
Alongside its annual congress, the
AFC has also developed research-topic
workshops. Teaching workshops were
first launched in the mid-90s to serve
as a liaison between the community of
high-school teachers who prepare students to become chartered accountants
and the community of university faculty members. Also in 1995, workshops on the history of accounting and
management were launched and have
since played a very important role in
bringing French academics closer to
the Anglo-Saxon world. Furthermore,
simultaneous translation is provided at
these yearly workshops to enable foreign colleagues to attend. In addition
to these workshops, other initiatives—
between five and ten a year—provide
structure for organising the community’s research work.
In 2002, the French Accounting Association became the French-Speaking
Accounting Association, but continues
to use the name AFC. The purpose of
the Association’s name change was to
emphasise its mission to attract
French-speaking colleagues from Belgium, Switzerland, Canada, the
Maghreb (Tunisia and Morocco),
Lebanon and Sub-Saharan Africa.
Researchers from these countries have
been AFC members for many years, so
the goal was to grant these relations
official status. Accordingly, the AFC’s
congress was held in Louvain in 2003
and in Tunis in 2006, and research
workshops are planned to take place in
2011 in both Lebanon and SubSaharan Africa. Every year, Frenchspeaking or Francophile researchers
from other non-French-speaking countries—Rumania, the United Kingdom,
the United States, the Netherlands, and
beyond—pay us the great honour of
attending our congress.
Page 14
Accounting research in France (cont’d)
Upcoming AFC congresses will be
held in Nice in May 2010 and in Montpellier in May 2011.
Today, the AFC faces two major challenges: internationalisation, and the
replacement of research staff who will
be retiring in the coming years. The
AFC’s response to both these challenges must be found within its national institutional framework.
The AFC’s Lead in Professionalizing Research Activity
Today, the AFC counts 350 members
and welcomes over 400 researchers to
its annual congresses. These researchers mostly come from universities and
business schools that mark the French
academic landscape. French accounting research presents a number of specific features worth mentioning here.
In France, there are relatively high
levels of research activity yet the presence of French researchers on the international stage does not measure up
to this effort. This can be explained
notably by the fact that French researchers have access to a large number of forums within France where
they can present their ideas, thereby
weakening any incentive to communicate on the international stage. Another
factor is undoubtedly the language
barrier. As a result, the AFC has set up
powerful incentives to encourage researchers to move into the international research market, including funding for the translation of academic
papers and financial support for those
travelling to and participating in international congresses.
The dynamism of the French accounting research market has been reinvigorated by a recent trend in business
schools opening up to research work
(although a small number have been
active in this respect for many years).
Today, a fundamental shift is taking
place towards greater numbers of researchers coming from business
schools.
To promote professionalization in its
research the AFC relies on two peerreview journals (CCA and FCS, mentioned above) that operate according to
international standards, including double blind reviewing and a scientific
review board. These journals are circulated in both paper and electronic formats (in the latter case, sometimes
with delayed publication). Both can be
found on EBSCO. CCA is also available to users on the AFC website and
FCS is listed on the RePEc Database.
Furthermore, CCA has laid out plans
to publish a portion of its editorial
content in English to appeal to a wider
readership. Both journals publish three
issues a year, with each issue presenting between five and nine papers. Each
receives slightly over one hundred
papers a year for review, which corresponds to an acceptance rate of around
25%.
The way the AFC organises its congresses also serves to promote a shift
towards greater internationalisation
and professionalization. Two AFC
members carry out double blind assessments of all papers submitted for
presentation. In 2010, only 65% of
papers submitted were deemed to comply with our standards of scientific
quality. On presentation at the congress, all papers are systematically
challenged by a discussant. The purpose of this procedure is to maximise
added value for participants by improving the scientific quality of the
papers presented. Paradoxically for the
French-speaking Accounting Association, submissions can be written in
English (although discussions at the
congress are held in French). Our goal
is two-fold here. Firstly, this allows
Francophile colleagues with insufficient levels in French to write in English and to participate. Secondly, this
means we are not deprived of contributions from French-speaking scholars
who have presented papers at the EAA
(and thus in English) and who would
also like to present them to the AFC.
44
The Institutional Organisation of
Research Nation-wide
Lately, the AFC has carried out a review of all doctoral theses on accounting that have passed the jury in recent
years. It has found that bringing in a
new generation of researchers is a
major challenge facing our profession:
our institutions are struggling to attract
sufficient numbers of researchers, let
alone high-quality researchers. Researchers are often drawn to the siren
song of private enterprise offering
more attractive compensation packages. Equally, the researcher’s social
status has clearly lost much of its prestige in recent years, making the profession all the less attractive to newcomers. However, the situation in France
does not seem all that unique in this
respect, if the efforts made every year
by foreign universities to headhunt
some of our best doctoral students is
anything to go by. Even so, strong
relations with the business world have
enabled us to develop several measures specifically to respond to this
challenge. Notably, the OEC funds a
grant every year for students writing
their doctoral theses (for a three-year
duration) and, for several years now,
so too has the Compagnie Nationale
des Commissaires aux Comptes
(CNCC, the National Institute of Professional Auditors). Unfortunately,
however, there is no such business
organisation to represent the management accounting profession.
In France, a PhD (le doctorat) is supposed to take three years (but, more
often than not, it lasts four or five
years!) and is traditionally carried out
within a Doctoral School. It is a national degree that falls under the aegis
of the Ministère de l’enseignement
supérieur et de la recherche (the
French Ministry of Higher Education
and Research).
Page 15
Accounting research in France (cont’d)
Officially, only public universities are
entitled to grant doctoral degrees.
However, several business schools
have, in recent years, developed their
own PhD standards and courses running parallel to the traditional French
system. Each PhD student is supported
by a supervisor and is encouraged to
present his or her work regularly both
to research teams and at various doctoral colloquia in France and abroad.
The French system is quite unique
insofar as the number of classes in the
doctoral programme is significantly
lower than elsewhere. This is because
students have often completed a oneyear specialisation (Master’s in Research) during the second year of their
Master’s degree, which provides them
with a sound basis in research (with
classes on methodology, epistemology,
theory, etc.). This makes attending
large numbers of classes during their
doctoral courses largely unnecessary.
Nonetheless, due to international pressure and with a view to promoting
exchange, the French system is gradually moving towards international standards. The traditional Master’s in Research has already disappeared from
the syllabi of many universities.
Defence of the thesis can occur after
two referees—both external to the
Doctoral School—have expressed a
favourable opinion in the form of a
detailed report. Once defence is
authorised to take place, the candidate
is certain to obtain his doctorate but
with more or less critical evaluations.
In addition to the two referees, two or
three other members as well as the
thesis supervisor sit on the jury. Customarily, there should be no criticism
and little influence on the final decision from the supervisor.
Once the thesis has been defended,
procedures differ according to whether
the candidate is a business school or a
university student. At business
schools, the process is very similar to
procedure in the Anglo-Saxon world.
At universities, the system is more
unique. To apply for a university
teaching position, the candidate must
first submit an application (a thesis or
related publications) to the Conseil
National des Universités (CNU, the
National Academic Regulatory Committee) where the thesis is reassessed
by two independent referees who then
decide whether or not the applicant is
sufficiently qualified. Many candidates
are disqualified at this stage in a procedure designed to regulate academic
standards nation-wide independently
of individual universities’ recruitment
policies. After authorisation is granted
to apply for a university teaching position, a panel of researchers, both internal and external to the recruiting university, examines the candidate’s application. Today, the norm for qualification and recruitment is a good thesis
(with reputed referees expressing a
favourable opinion) and significant
publication of work (whenever possible, publication in a peer-review journal).
University research laboratories are
assessed every four years by a State
body made up of academics that judge
a team’s research activity. Their judgement relates to the team’s collective
research and not to individual team
members. Its purpose is to check that
the team is following scientific best
practice (with publications in academic
journals, increasingly international),
that its research work has social value
(research contracts, popularisation),
45
and to examine the team’s governance
structure, etc. Collective assessment is
important to the university because it
is on the basis of this judgement that
its right and legitimacy to grant Master’s degrees depends. Individual assessment of university researchers is
carried out by the CNU every four
years, or at the candidate’s request in
the event that he or she is applying for
promotion.
The situation differs significantly for
business schools. In this sector, collective assessment does not exist (above
and beyond systems for ranking
schools) and individual assessment is
typically carried out by the schools
themselves in accordance with their
own strategies and criteria.
Reference
S. Carmona (2002), “History matters:
lessons from twenty-five years of the
European Accounting Association”,
European Accounting Review, 11:1, 932.
Nicolas Berland is professor of accounting at Université ParisDauphine.
Christine Pochet is professor of accounting and director of the IAE, Université Paris 1-Panthéon Sorbonne.
Page 13
G e r m a n A c c o u n t i n g Tr a d i t i o n
Rolf Uwe Fülbier and Joachim Gassen
The Beginning
Although accounting thought in Germany can be traced back (at least) to
the business practices of the Fugger
family, the development of the academic German accounting tradition is
closely connected to the development
of business administration as a separate academic discipline in Germany.
Erich Gutenberg (1897-1984), one of
the most influential German business
scholars in the 20th century, even
claims that accounting research has
helped German business administration to establish itself as a science.
Also one of the oldest and most important associations for business administration
in
Germany,
the
Schmalenbach Society, bears the name
of Eugen Schmalenbach (1873-1955),
an accounting researcher and another
major protagonist of German business
economics in its early era.
Business administration arose as an
academic discipline in the German
speaking countries at the beginning of
the 20th century. Birthplaces were
business
schools
(Handelshochschulen) which were founded as a
result of public demand for higher
management education at university
level (e.g., Leipzig, Aachen, St. Gallen
and Vienna in 1898, Frankfurt and
Cologne in 1901, Berlin in 1906). The
first generation of academic scholars
such as Johann Friedrich Schär (1846-
1924), Leon Gomberg (1866-1935),
Joseph Hellauer (1871-1956), Eugen
Schmalenbach (1873-1955), Friedrich
Leitner (1874-1945), Heinrich Nicklisch (1876-1946), Wilhelm Rieger
(1878-1971), Fritz Schmidt (18821950) and Walter Le Coutre (18851965) published seminal monographs
on various fields, especially financial
accounting and cost accounting. While
mainly instructive and descriptive in
nature, these works laid out the underpinnings of a normative measurementoriented accounting theory. These
thoughts, developed over time to more
sophisticated
theory
constructs,
spawned a long-lasting academic debate about the objective(s) and design
of financial statements.
Development of German accounting
theory
Eugen Schmalenbach and Fritz
Schmidt are probably the best known
representatives of this early era.
Schmalenbach developed theoretical
foundations to cost and financial accounting. He established a system of
cost accounting and cost theory which
systematically links cost to production
volume. He particularly emphasized
the problem of activity levelindependent fixed cost and developed
the concept of imputed costs
(Kalkulatorische Kosten). His notion
of imputed interest on equity inspired
modern value added theories. His concept of imputed costs and the resulting
distinction between costs (Kosten) and
expenses (Aufwand) caused a conceptual gap between cost and financial
accounting. This distinction, which
appears to some extent to be unique to
the German environment, is also driven by the traditional focus of codified
German financial accounting on tax
calculation and profit distribution.
Schmalenbach's main attention, however, was on the measurement problems of financial accounting. Putting a
strong emphasis on income measure-
46
ment, he developed an income statement-oriented form of accrual accounting, published and advanced in a series
of papers and finally summarized in
the first edition of his book Grundlagen dynamischer Bilanzlehre (1920,
later Dynamische Bilanz). His publications stimulated a controversial debate
about the objective of accounting in
Germany during the 1920s and 1930s.
Schmalenbach
confronted
his
“dynamic“ interpretation of financial
statements with the “static“ approach.
According to the “static“ perspective,
the balance sheet as major financial
statement reflects the net asset position, in particular the ability of the firm
to meet its obligations in a timely manner. The calculation of profit or loss,
derived from the change of net assets
over the period, is being viewed as less
important. Early representatives of the
“static“ theory were the lawyer Herman Veit Simon (1856-1914) with his
seminal book about corporate financial
statements in 1886, as well as Schär,
Leitner and later, especially in dispute
with Schmalenbach, Le Coutre, Nicklisch and Rieger. Both theory approaches, static and dynamic, influence German accounting regulation
and practice until today. They also
correspond to the current international
debate about the asset-liability and the
revenue-expense approaches.
Schmalenbach considered business
administration to be an applied and
prescriptive science. Addressing criticism such as Rieger's that pure science
is value free he ironically proclaimed
business administration as an art
(Kunstlehre). The epistemological
question about the role of value judgments was fiercely discussed at the
beginning of the 20th century in the
Werturteilsstreit and has been an open
and controversial issue in German
business economics and accounting
research ever since.
Page 14
Accounting research in Germany (cont’d)
After World War I, the attempts to
attend to the inflation problem in cost
and financial accounting and the development of appropriate instruments
for management and control strengthened the academic foundations of accounting and received a considerable
international attention. The hyperinflation in Germany at the beginning of
the 1920s challenged historical cost
accounting and its ability to measure
the value of net assets and income.
Schmalenbach developed a concept of
real capital maintenance based on
price level adjustments. At the same
time Fritz Schmidt advocated the
maintenance of “real“ net assets measured by current replacement prices.
His current value approach had a wider
scope than just solving inflationary
problems: Schmidt proposed the universal application of his approach to
detect the “real“ return of investment.
In his “organic“ accounting theory (his
book Die organische Bilanz im Rahmen der Wirtschaft was first published
in 1921) the current replacement values of all single net assets add up to
the
reproduction
value
(Reproduktionswert) of the firm,
which equals, under certain conditions,
a specific form of the net present value
of the invested capital. This valuationoriented approach bears some similarities with the fair value notion of current accounting regimes. According to
Schmidt the Reproduktionswert is a
(supply) market-based net present
value. Moreover, the preference for
mark-to-market values, the subordinated role of reliability and the attempt to
distinguish revaluation and speculation
effects from the operating performance
provide further analogies.
Development in Managerial Accounting and Valuation
During Nazi dictatorship academic
accounting thought quickly came to a
near hold. Concepts of centralized
state planning were developed by
those who accepted subordination,
others suffered due to emigration, ban
or other occupational obstructions.
After World War II accounting research separated into a Western and
Eastern stream. While the Soviet-style
centralized planning system of the
German Democratic Republic shaped
accounting education and research in
East Germany, accounting research
lost its dominant position in West German business administration research.
Erich Gutenberg (1897-1984) detached
business administration from the accounting predominance. He tried to
develop a comprehensive model of
firm processes by bridging the gap
between business administration and
neoclassical microeconomic theory. In
contrast to the fragmented, often pragmatic and qualitative works before, he
introduced a consistent, mathematicalquantitative approach. Moreover, in
contrast to Schmalenbach and the
practical normative tradition of the
discipline so far, Gutenberg proposed a
positive descriptive approach to business economics. The old methodological and epistemological dispute
(Methodenstreit) blazed up again, this
time in particular between Gutenberg
and Konrad Mellerowicz (1891-1984).
The thoughts of early academic generations around Schmalenbach and Gutenberg still affect cost and management accounting theory even today.
However, considerable progress on
various fields occurred in the second
half of the 20th century. The 1960s
were characterized by a lively discussion concerning the methods of direct
and marginal costing, particularly the
different systems of standard marginal
costing which were developed, partly
based on Gutenberg's concepts, into
applicable procedures. Contributing
pioneers include especially Gutenberg’s former research assistant Wolfgang Kilger (1927-1986) and HansGeorg Plaut (1918-1992) with their
publications about marginal cost accounting (Grenzplankostenrechnung).
Worth mentioning is also Paul Riebel
(1918-2001) and his insights into relative direct costing (Relative Einzel-
47
kostenrechnung). The U.S. based concept of activity based costing was
modified in the 1980s especially by
Péter Horváth (born 1937) to a process
-based
approach
(Prozesskostenrechnung) although basic elements
were already described by Schmalenbach and, later, Kilger. However, at
the same time, a noticeable gap between academic theory and practice
developed. The full cost methods,
which had been developed, standardized and applied in Germany during
the 1930s, dominated corporate practice for a long time.
A more current topic in German management accounting research focuses
on convergence and integration of
accounting systems. On the one hand
there have been endeavors to integrate
accounting information into capital
budgeting and strategic business planning activities. On the other hand, the
traditional German separation between
management and financial accounting
has eroded since the early 1990s. Also,
there has been an increasing demand
for a modification of traditional cost
accounting techniques into management-oriented instruments. Against
this background, the rise of
“controlling” started in Germany in the
1970s when Horváth accepted a newly
created chair of controlling at Darmstadt Technical University (later
Stuttgart). Only some decades later,
controlling is not only widely accepted
as part of corporate organization but
also established academic discipline at
Universities in the German language
area. In contrast to the terminological
roots in the English language and the
Anglo-American controller tradition,
the notion of controlling specifies a
unique German language area approach to management accounting and
beyond. However, there is still no
common understanding. Major protagonists of controlling thought such as
Horváth, Hans-Ulrich Küpper (born
1945) and Jürgen Weber (born 1953)
are linked with different concepts.
Page 15
Closely connected to measurement
theories of financial accounting, an
accounting-based literature on firm
valuation developed in the 1950s and
1960s. Compared to the U.S. valuation
literature, the German literature is less
capital-market based and focuses more
on acquirer-specific valuation approaches, also incorporating tax effects
in substantial detail. This different
focus seems understandable, given the
market share of German private firms.
The development of this literature is
especially connected to the University
of Cologne (Kölner Schule) and researchers such as Hans Münstermann
(1899-1986), Walther Busse von Colbe (born 1928), Günter Sieben (born
1933) and Manfred J. Matschke (born
1943). This specialized strand of literature is still active today and continues
to have a focus on specific German
aspects, for example the effect of different legal forms and tax considerations (see especially the relevant publications of Adolf Moxter (born 1929),
Jochen Drukarczyk (born 1938), Lutz
Kruschwitz (born 1943) and Wolfgang
Ballwieser (born 1948)).
Link Between Accounting and Law
Financial Accounting thought in Germany after the World War II was
closely related to legalistic thought.
Ulrich Leffson (1911-1989) and, later,
Jörg Baetge (born 1937) advanced the
understanding of the basic principles
of financial accounting (GoB). Moreover, legal and business scholars such
as Georg Döllerer (1921-1993), Heinrich Beisse (born 1927) and especially
Adolf Moxter (born 1929) turned away
from the classical prewar accounting
theories and the pure business economic tradition of accounting. They
developed the legal doctrine of accounting (Bilanz im Rechtssinne). Due
to the close link between financial and
tax accounting in Germany, supreme
tax court (Bundesfinanzhof, BFH) decisions were analysed in order to es-
tablish a positive and jurisprudential
grounded accounting theory. Academic researchers use stated accounting
objectives and their strong institutional
expertise to answer open accounting
questions. Doing so, accounting academics have influenced and continue
to influence legal thought as documented by significant contributions to
influential legal commentaries.
It is an open question why the legalistic, often legalistic-deductive research
tradition has been dominant in Germany compared to, e.g., empirical research approaches. Several explanations seem possible: The code law
tradition in Continental Europe and the
principles-based regulation as well as
the fact that legal consequences such
as taxation, profit distribution and
insolvency have been directly linked to
financial accounting. Moreover, data
availability was limited, also because
of the relative small numbers of publicly-listed firms in Germany. Especially the latter may justify the rise of
empirical capital market oriented research when international accounting
has been introduced in Germany in the
1990s. The characteristics of the German university system, for example
the non-existing or, at the most, weak
department structures, the typical career path of German doctoral accounting students, many of them choose
careers outside academia, and the
(resulting) lack of standardized doctoral education might be additional issues. All these factors may motivate to
realize synergies between research and
rules-oriented teaching and may explain a certain distance to econometrical methods, to higher specialization
and to the “publish or perish“ game.
Accounting and Economics
A major strand of current German
accounting literature uses the microeconomic toolbox to analyze research
questions in the area of accounting.
Although German accounting theory
was right from the beginning embedded into economic thought (see esp.
48
Fritz Schmidt), this development was
also inspired by the US driven idea of
“economic analysis of law” and the
rise of neoinstitutional microeconomics since the 1970s and 1980s. The
analytical formalization is especially
connected to the works of Ralf Ewert
(born 1957) and Alfred Wagenhofer
(born 1959) and their respective research (see their two major books
about management and financial accounting as distinct examples). Currently, researchers from German
speaking countries play a significant
role in the international domain of
analytical accounting research.
Internationalization and rise of empirical research
Driven by the internationalization of
accounting practice at the beginning of
the 1990s, the first academic chairs of
international accounting were founded
at the universities in Frankfurt (Dieter
Ordelheide, 1939-2000) and in Münster (Bernhard Pellens, born 1955,
later Bochum). This first generation of
scholars introduced US-GAAP and
IAS/IFRS to both, German academics
and practitioners. The PhD thesis of
Axel Haller (born 1961) about USGAAP in 1988 is a well-known example. Driven by the traditional deductive
orientation of German research the
frameworks and basic principles were
also intensively analyzed and, quite
frequently, inconsistencies between
rules and principles were identified.
Even the traditional German concept
of commentaries – huge and detailed
interpretations which are necessary in
a principles-based system – has been
applied in the context of IFRS.
In the beginning, the U.S. driven positive-empirical turn in research methodology in the 1960s and 1970s had only
a modest impact on the research agenda in Germany. However, the importance of positive empirical research
has increased substantially over time.
Page 16
Early empirical studies addressed accounting-based prediction models, the
value relevance of alternative financial
reporting regimes and, of course, the
effects of IFRS adoption. The longtime dominance of non-empirical research methods also applies to management accounting. Normative, conceptual and analytical methods have
dominated the relevant publications
whereas empirical research account for
only a minor portion – however with
upward trend. Most of the empirical
research comprise here case and field
studies. Large-sample and archival
studies have been scarcely conducted.
Current Situation
The process of internationalization has
continued. While internationalization
in German codification and accounting
practice was and still is restricted to
the group accounts, single financial
statements remained unaffected due to
their material legal consequences.
Therefore, the German financial accounting world has separated into two
subsets: Capital market oriented accounting at group level, especially for
publicly traded companies based on
IFRS, and the more contracting, i.e.
tax, dividend distribution and debt
covenants oriented HGB accounting
on the legal entity level. This distinction also affects the research community which increasingly disaggregates
due to the necessary specialization in
both areas.
which might yield publications in renowned international journals. Journal
rankings, like the one published by the
German association of business professors (VHB) or by a German leading
business newspaper (Handelsblatt),
consistently rank even mid-tier international journals higher than top German research journals. As a result,
German accounting scholars and their
research have become more visible
internationally (see for example the
increasing German attendance at EAA
annual congresses in the last years). In
addition, doctoral education in Germany is becoming more structured and
methodologically oriented.
Although the focused interest on publishing results in internationally renowned journals has led to an increase
of "international mainstream" research,
there is an observable interest in other,
internationally approved research
fields and methods aside the mainstream. As an example, German language scholars get more visible in
areas like behavioural accounting,
critical and epistemological approaches and accounting history. The hope is
that the specific German accounting
research tradition with its prescriptive
roots will survive on an internationally
competitive level, contributing to our
understanding of complex accounting
phenomena and keeping in mind that
accounting research is an applied science and not an end in itself.
In recent years, the German university
system is undergoing substantial
changes with respect to funding and
incentivation. Research output is being
evaluated on an international level and
countable success is the key to prestigious positions, funds and other resources. Therefore, especially younger
accounting scholars are forced into the
“publish or perish“ game. Accepting
this change of rules, they focus on
research questions and methodologies
49
Reading list (in-depth overviews about
the German accounting tradition):
Ballwieser, W. (2010) Germany, in
Previts, G. J. et al. (eds.) A Global
History of Accounting, Financial Reporting and Public Policy: Europe,
Bingley: Emerald.
Busse von Colbe, W. and Fülbier, R.
U. (2012) Accounting and the business
economic tradition in Germany, in
Biondi, Y. et al. (eds.): Accounting
and Business Economics: Insights
from National Traditions, London:
Routledge (forthcoming).
Küpper, H.-U. and Mattessich, R.
(2005) Twentieth century accounting
research in the German language area,
Accounting, Business & Financial
History, 15: 345-410.
Schneider, D. (2001) Betriebswirtschaftslehre, Vol. 4: Geschichte
und Methoden der Wirtschaftswissenschaft, München/Wien: Oldenbourg.
Rolf Uwe Fülbier is Professor at the
University of Bayreuth
Joachim Gassen is Professor at the
Humboldt University, Berlin
Page 22
Ireland’s blend of academic and professional accounting
Ail e en P i e r c e
Public Accountants in Ireland, was
established in 1943 and has a current
membership of just below 4,000. In
addition to these ‘local’ bodies, substantial numbers of Irish professional
accountants1 are members of the major
UK bodies, particularly ACCA and
CIMA. Table 1 provides an analysis of
professional accountants located in
Ireland over the nine professional accountancy bodies ‘prescribed’ under
IAASA legislation2.
Ireland is a small island (84,400 square
kilometers) lying to the extreme northwest of Europe. The island is divided
into 32 counties, with 26 of these making up the Republic of Ireland, and the
six most north-eastern counties making
up Northern Ireland. Northern Ireland
is part of the United Kingdom (UK).
The political division took place in
1922 and the Republic of Ireland is
now 90 years a sovereign, independent
state. The population of the Republic
in 2011 was just over 4.5 million people, having grown by almost 1 million
in the previous 15 years. Ireland’s
growth in population since 1961 is
joint highest (along with Luxembourg)
in the 27 countries of the European
Union.
Ireland’s political, economic and historical links with the UK have had a
profound effect on the development,
organisation and regulation of accounting in Ireland. Chartered Accountants
Ireland – CAI (formally The Institute
of Chartered Accountants in Ireland) is
the oldest and largest indigenous professional accountancy body. It was
established in 1888 and currently has
almost 21,000 members. CAI is a 32county body (i.e., its jurisdiction covers the island of Ireland) and so it
operates within both the Republic of
Ireland (ROI) and the UK legislative
systems. A smaller indigenous professional body, the Institute of Certified
Because of the close ties between Ireland and the UK, national regulation of
accounting, audit and financial reporting is, for all intents and purposes, the
same in the two jurisdictions. It has
followed the same development processes in each although legislation
governing business, accounting and
auditing has been generally introduced
later in Ireland than the UK equivalent.
Moreover, because of the 32-county
remit of CAI and the traditional
strength of both ACCA and CIMA in
Ireland, accountancy in Ireland is typically considered within an island of
Ireland context rather than from a Republic of Ireland perspective alone.
Academic accounting in Ireland was
relatively slow to develop. Although
there was a strong professional accounting tradition from the late 19th
century, accountants were typically
trained through professional practice
and it was only in the mid-20th century
that accounting became an established
university subject. As explained in
Pierce,
Warnock
and
Pierce
(forthcoming):
Zeff (1997, p. 6) acknowledges that
‘the earliest full-time chair in a UK
university with Accountancy or Accounting in its title’ was filled in
1914 with the appointment of Bernard Francis Shields as Professor of
Commerce and Accountancy at University College Galway (UCG) (now
National University of Ireland, Galway). Professor Shields later moved
to University College Dublin (UCD)
as Professor of Commerce. However,
neither he nor his successor in Galway ‘was a qualified accountant, and
neither published any works on accountancy’ (Zeff, 1997, p. 6).
Table 1: Number of qualified accountants located in the Republic of Ireland
analysed by major accountancy bodies - 2011
No.
%
Association of Chartered Certified Accountants (ACCA)
Institute of Chartered Accountants in England and Wales
(ICAEW)
Institute of Chartered Accountants in Ireland (CAI)
Institute of Chartered Accountants of Scotland (ICAS)
Institute of Certified Public Accountants in Ireland (ICPAI)
Institute of Incorporated Public Accountants (IIPA)
Association of International Accountants (AIA)
Chartered Institute of Management Accountants (CIMA)
Chartered Institute of Public Finance and Accountancy
(CIPFA)
Source: IAASA (2012: 73)
50
8,444
27.3
444
13,908
69
3,548
207
125
4,080
1.4
45.0
0.2
11.5
0.7
0.4
13.2
65
0.2
30,890
100.0
Page 23
Accounting tradition in Ireland (cont’d)
The first full-time lecturer in accountancy in any Irish university was appointed by UCD in 1965 and the first
full-time Chair in accountancy was
filled (also by UCD) in 1971. Additional full-time accountancy positions
were created in the 1970s and 80s to
make UCD, with six full-time academics, the largest accountancy department in Ireland at the time. The number of accounting academics in other
Irish institutions in the early 1980s is
summarised in Pierce, Warnock and
Pierce (forthcoming) as follows:
The appointment... in 1980 brought
the number of full-time accounting
academics in UCG to three. There
were at that time departments of
similarly limited size in Trinity College Dublin (TCD), University College Cork (UCC), the National Institutes of Higher Education in Dublin
(NIHED) (now Dublin City University) and in Limerick (now the University of Limerick). In Northern
Ireland’s two main third level institutions, the number of full-time academic accountants in Queen’s University Belfast (QUB) was also similar, while the larger number in the
Ulster Polytechnic (later, the University of Ulster at Jordanstown (UUJ))
was explained by its provision of a
significant number of professional
accounting programmes.
The public third level education system in Ireland is comprised of seven
universities in the Republic of Ireland3
(ROI), two universities in Northern
Ireland4 (NI) and 14 Institutes of Technology5 (ITs). The ITs also contributed
to the growth in numbers of accounting academics in Ireland from their
foundation in the early 1970s. All of
these institutions include accounting
among their course offerings in programmes that range from specialist
accounting and finance degrees to
general business degrees to management programmes for particular sectors from the arts to agriculture. Moreover, there is a strong tradition of de-
livering graduate programmes in accounting that are accredited by professional bodies.
In the middle of the 20th century, accountancy was included as a core subject in general business degree programmes in the three established universities in ROI (UCC, UCD and
UCG). It was taught by professional
accountants who were recruited to
permanent positions by the universities
and they focused on the practice of
accounting, tax and law. However,
staff imbued with an interest in theoretical and conceptual aspects of accounting returned from PhD programmes in the UK, US and Australia
in the early 1970s and they began to
broaden the horizons of students so
that the emphasis in accounting courses expanded to include both ‘how to’
account and ‘thinking about’ accounting. These pioneering Irish academics
included the late Edward Cahill of
Trinity College Dublin (and subsequently UCC), Pearse Colbert of UCD
and Seamus Collins of UCD (and subsequently UCG/NUIG).
Around this time, Regional Technical
Colleges (now Institutes of Technology) were established in many parts of
Ireland with a particular mission to
deliver a well-trained and educated
workforce in support of government
policies of industrial development. The
RTCs included business and accounting programmes from the beginning
and they recruited lecturers from
among the many professional accountants with a strong interest in education.
Very quickly these institutions forged
strong linkages with professional accounting bodies whereby they offered
courses and programmes specifically
geared towards the requirements of
professional bodies.
In the late 1970s, UCD introduced the
first postgraduate programme specifically tailored for accelerated entry to
professional qualification. Although
the majority of graduates of the Diploma in Professional Accounting
(subsequently the Master of Account-
51
ing programme) undertook chartered
accountancy traineeships with large
accountancy firms, a small minority
used the Diploma qualification to gain
substantial exemptions from ACCA
and CIMA examinations. In the early
1980s Dublin City University introduced a postgraduate diploma in accounting programme for ‘nonaccounting’ graduates. In the thirty
years since, other Masters and Diploma programmes have been introduced
in most of Ireland’s universities and in
some ITs to satisfy the demand for
professionally-focused graduate degrees. Five of the seven ROI universities, one of two NI universities and
four ITs offer one-year full-time postgraduate qualifications in accounting,
the successful completion of which
leads to significant exemptions from
professional qualification exams.
By the mid-1980s, the number of accounting academics in Irish third-level
institutions reached a level where it
was feasible to form an academic accounting association. The Irish Accounting Association (which became
the Irish Accounting and Finance Association in 1991) was established to
promote research activity in Irish accounting departments throughout the
island of Ireland and to support the
development of the indigenous research community. This coincided
with a significant change in the focus
of academic endeavour in Irish universities and third-level colleges. Research assumed an increasingly high
profile, academic staff without PhD
qualifications were encouraged, and
then required, to pursue PhDs and to
publish in quality peer-reviewed journals. In the 1980s and 1990s, most
Irish accounting PhDs were completed
under the supervision of UK researchers, often on a part-time basis, and
conferred by UK institutions.
Page 24
Figure 1
Over the past 10-15 years, research
expertise of the required quality exists
in Irish institutions and is proactively
delivering on the university missions
of
creating
and
disseminating
knowledge through doctoral and postdoctoral research. Many full-time academics in Irish institutions, most of
whom already have professional accountancy qualifications, now complete PhD qualifications on a part-time
basis in other Irish institutions in addition to those continuing the traditional
route of part-time PhD studies outside
of Ireland.
In tandem with developing and expanding the Irish academic profession
in recent decades, the Irish academic
community has been strongly committed to internationalisation in multiple
guises. International student and faculty recruitment is increasingly the
norm, international exchange programmes for students and staff are
supported, and participation in international activities and networks is
strongly encouraged by university and
business school leaders.
Irish accounting academics are also
very committed to delivering high
quality teaching and learning support
for students. The proportion of young
people in Ireland’s population is high
and accounting and business programmes attract high numbers. The
accountancy profession in Ireland continues to be a significant employer of
business and accounting graduates.
Figure 1 demonstrates the relatively
high proportion of new recruits into
the largest Irish professional body
from ‘relevant’ and post-graduate degrees. Students interested in accountancy as a career are very focused on
securing employment prior to completing bachelor degrees and on maximising exemptions from professional examinations through accreditation of
their third-level accounting education.
Source: Key Facts and Trends in the Accountancy Profession (FRC, 2012: 33)
Given that the majority of Irish accounting academics have professional
accounting backgrounds, relationships
between the academic and practising
professions are strong and nurtured.
Many Irish accounting academics contribute to student education and examination programmes for professional
bodies and they volunteer for committees in support of their professional
body. Indeed, it can be a source of
tension for some accounting academics
that the Irish academic environment is
increasingly governed by almost exclusive reference to the traditional
sciences model of evaluation, promotion and quality control. Maintaining
connections and engagement with
one’s professional community is a
challenge in that context but it is an
involvement that continues to be important for many Irish accounting academics.
52
Moreover, accounting firms are significant and enthusiastic employers of a
substantial proportion of our graduates, affording accountancy a positive
reputation among students and parents
in the current difficult economic environment. A focus on practice and its
relevance for both research and teaching continues to be important for the
Irish academic accounting community.
Maintaining relevance for the professional practice of accounting is likely
to continue to be a priority well into
the future as is the further development
of a vigorous research culture within
that community.
Page 25
Footnotes:
References and bibliography:
1
By ‘Irish professional accountants’ I
mean Irish nationals and graduates of
Irish universities and colleges who complete professional training (Initial Professional Development) through one of the
9 professional bodies recognised by The
Irish Auditing & Accounting Supervisory Authority (IAASA).
Financial Reporting Council (FRC).
2012. Key facts and Trends in the Accountancy Profession, Professional
Oversight Board, London.
2
IAASA was established under specific
2003 legislation with a remit to supervise
how professional accountancy bodies
regulate and monitor their members, to
monitor compliance of financial statements with regulatory requirements and
to promote adherence to high professional standards in auditing and accounting
in Ireland. Six of the nine Prescribed
Accountancy Bodies (PABs) are also
Recognised
Accountancy
Bodies
(RABs). An RAB is a body that has been
recognised for the purposes of the statutory Audit Directive Regulations and
Companies Acts. RABs are permitted to
register or license their members/
member firms to practice as auditors.
The six RABs are the ACCA, ICAEW,
CAI, ICAS, ICPAI and the IIPA (Table 1
elaborates on these abbreviations). The
three non-RABs included in PABs are
CIMA, AIA and CIPFA.
3
Universities in Cork, Dublin (3), Galway, Limerick, and Maynooth.
Irish Auditing & Accounting Supervisory Authority (IAASA). 2012. Annual
Report 2011. IAASA, Kildare, Ireland.
Irish Times, 2012, “A population explosion in all but name”. Friday March
30th.
Accessed
from
http://
www.irishtimes.com/newspaper/ireland/2012/0330/1224314100909_pf.ht
ml
Pierce A and Brennan N. 2003. European Accounting Guide, 5th Ed. Alexander D. and Archer S. (eds), Republic
of Ireland chapter. Aspen publishers,
New York.
Pierce B, Warnock K and Pierce A.
Forthcoming. “A history of the Irish
Accounting and Finance Association:
1987 – 2012”, The Irish Accounting
Review.
Zeff, S.A. 1997. “The Early Years of
the Association of University Teachers
of Accounting: 1947–1959”, The British Accounting Review, Vol. 29, Special Issue, pp. 3–39.
4
Queen’s University Belfast and the
University of Ulster.
5
Athlone, Blanchardstown, Carlow,
Cork, Dundalk, Dun Laoghaire (Institute
of Art, Design and Technology), Letterkenny, Limerick, Galway-Mayo, Sligo, Tallaght, Tralee, and Waterford in
addition to the older and substantially
larger institution, The Dublin Institute of
Technology.
Aileen Pierce is a past President of the
EAA and a Professor of Accounting at
University College Dublin, Ireland.
53
Page 21
The Netherlands – accoun ting in the po lde r
K ee s C a mf f e r man
pragmatism, a willingness to set aside
differences in order to get things done,
an eye for the common good, consultation and consensus are important
values. This Dutch ‘polder model’
acquired something of an international
reputation in 1997, when it was explained by Prime Minister Wim Kok in
a speech at the G7 summit in Denver,
and held up by US President Bill Clinton to the rest of the world as a model
of socio-economic policy making.
A general consensus tradition?
All countries have stories that play a
role in defining national identity, and
the Netherlands is no exception. One
story goes something like this: a large
part of the country is below sea level,
and has from the Middle Ages onwards been reclaimed from sea,
swamp and lake in a long, gradual
process. Bit by bit, small areas were
parcelled off by means of dykes, and
drained.
Such areas, known as
‘polders’, could not be left to themselves. The whole system of dykes,
pumps, sluices, canals and other infrastructure required to keep the water out
needed, and still needs, constant
maintenance. Already at a very early
stage, these tasks exceeded the resources of individual landowners and
a tradition of cooperation emerged.
Everybody who, or every body which,
owned land in a polder, whether
farmer, villager, municipal corporation, monastery, or nobleman, had to
work together and share in the expenses of the upkeep of the polders. And
everybody who paid his share, had a
say.
The result was the early emergence of
characteristic institutional structures,
and a deeply ingrained general culture
of politics and governance in which
So much for the story. Of course,
social scientists and historians have
done their best to unpick it, pointing
out, for instance, that the phrase
‘polder model’ and the related verb
‘polderen’ (i.e. to sit down with all
parties concerned in a problem and
work out a consensus solution) really
acquired currency only during the
1990s. More seriously, they would
point out that important elements of
the ‘polder model’, such as institutional cooperation of employers and labour
unions, emerged in the period of reconstruction after the Second World
War rather than in pre-modern times.
And one does not need to know much
about the Netherlands or its history to
notice a good deal of conflict, selfinterest, partisanship and ideology.
These days, ‘polderen’ is also used
pejoratively, to indicate all the drawbacks of a consensus approach, including indecisiveness, inefficiency, or
mediocrity. And yet, many Dutch will
agree there is something to the polder
story. They find it helpful to understand something of the country they
live in, and see it as part of the country
they would like to live in.
Origins of accounting standard setting
So what about accounting? Is there
something about Dutch accounting in
which the polder approach can be recognized? In my view, the answer is
yes, in particular with respect to setting standards for financial reporting,
54
where there is a noticeable tradition of
relying on an institutionalized consensus approach. But again, one does not
need to go all the way back to the Middle Ages to find its roots. It is probably fair to say that before the Second
World War there was not a strongly
developed view that financial accounting in the Netherlands should be fundamentally different from accounting
elsewhere. The prevailing view was
that accounting was a private affair,
the modalities of which had always
been arranged by and among the parties directly concerned. This was
probably the prevailing view in Europe
as a whole in the nineteenth century,
and, to varying degrees, well into the
twentieth century.
There was some awareness in the
Netherlands that in other countries the
state, by means of legislation, was
beginning to play a regulating role in
the area, but there was no great pressure to follow down this path (this
touches, in fact, upon another national
identity story: the idea that the Netherlands became a great power in the
seventeenth century as a mercantile
republic, when it gave free rein to enterprising spirits). Legal requirements
with respect to financial reporting remained extremely limited until 1970.
A requirement to publish annual financial statements for what might be
called ‘public interest entities’, mainly
listed companies, was introduced in
the 1920s, but without significant rules
concerning the contents of these financial statements.
Page 22
Accounting tradition in The Netherlands (cont’d)
The period following the Second
World War was a period of fundamental debate about the nature of enterprise and its role in society. To some
extent, this reflected the fact that the
labour party established itself for the
first time as a key governing party.
But even among those who did not
vote for labour, the experience of the
economic crisis of the 1930s and the
subsequent war persuaded many that a
modified social order, with a greater
emphasis on collectivism, was called
for. The result was the emergence of
the idea of the ‘socialization’ of the
enterprise: the idea that the larger enterprises, while remaining privately
owned, should acknowledge their responsibility as major social institutions. The lengths to which this should
be taken became a matter of political
debate, for instance on the question of
whether employees should have the
right to appoint representatives in the
managing or supervisory boards of
companies.
Not surprisingly, the organizations of
employers took position on the more
conservative side of this debate, but
they did recognize that they could not
just defend the status quo. One card
they played was modernization of financial reporting. In 1955 and 1962,
the joint employers federations issued
booklets with important recommendations on financial reporting. With these
publications, the employers explicitly
indicated that they were willing to
acknowledge a greater obligation than
heretofore with respect to public information provision and accountability to
interested parties, including employees. More implicitly, it was clear that
that was also where they wished to
draw the line, and not go further in the
direction of co-determination rights of
employees.
Even though these publications were,
in the overall scheme of things, perhaps a little reactionary, they were
undeniably progressive when viewed
simply in terms of financial reporting.
It was widely acknowledged that the
employers’ organizations were really
assuming leadership in this area by
recommending a degree of disclosure
and transparency (for instance by their
criticism of secret reserves) that went
well beyond common practice.
Against this background, it is understandable that the government, when
introducing revised legal financial
reporting requirements in 1970, limited itself to specifying some general
principles of recognition and measurement, as well as minimum disclosures,
and expressed the expectation that the
relevant parties, in particular the employers’ organizations and the accounting profession, would provide
more elaborate guidance. The accountancy profession and the employers’
organizations took up the challenge.
Shortly afterwards, the labour unions
were invited to join as well, in a body
that was known since 1971 as the
‘tripartite consultative group’. It was
agreed that this group would, on a
consensus basis, issue statements that
were modestly called ‘reflections’, or
‘considered views’, but that were rather like the accounting standards that
began to appear in the Englishspeaking world around the same time.
The direct participation of the labour
unions in accounting standard setting,
on a footing of equality with the employers, was probably a unique feature
of the Dutch approach to accounting
regulation. And while it might seem
natural from a Dutch perspective, since
institutionalized employer-employee
cooperation had made its appearance
in many areas since the Second World
War, it did turn out that the rest of the
world probably had taken a more realistic view on this point, at least with
respect to accounting standards. During the 1970s, the participation of the
unions in the work of the tripartite
group rested more on the initiative of a
few capable individuals than on a deep
interest in technical accounting issues
among the leadership or membership
of the unions. As the unions found it
hard to sustain their cooperation at a
55
technical level, they were willing to
see their delegation transformed into a
more general delegation of ‘users’ of
financial statements, while remaining
involved with the tripartite group at a
more general level.
Around 1980, there were some other
changes to the tripartite group as well.
It was legally incorporated, it assumed
a new name as ‘Council on Annual
Reporting’
(Raad
voor
de
Jaarverslaggeving or RJ), and its
‘considered views’ were rewritten as
‘guidelines’. In other words, it assumed more of the trappings of a
standard setter, but in a fundamental
sense its procedures were unchanged.
Its guidelines still required consensus
among the three delegations of employers, users, and auditors. This is
how the RJ has continued to function
until today, presenting itself internationally as the ‘Dutch Accounting
Standards Board’. It is a private-sector
body, without formal authority. Despite repeated discussions, the government has never gone so far as to make
the guidelines mandatory. The assumption is that the consensus approach implies that the guidelines are
a proper reflection of what is considered acceptable in the relevant sections
of society, and that, for that reason,
they can normally be assumed to be an
authoritative interpretation of the legal
requirements. However, the possibility is always left open that a reporting
entity can see good reasons in its particular circumstances to depart from
the guidelines, and will have a reasonable chance to justify its choice if challenged in court.
Page 23
In line with what has been said above,
it is only since the 1990s that the RJ
has been described in the Netherlands
as a typical ‘polder model’ institution,
but well before that time, using different words, it was already recognized
that it reflected a somewhat different
approach to accounting standard setting than current in some other countries. Having attracted the ‘polder’
label, it is not surprising that the RJ
has also attracted some the criticism
that goes with it. It has been pointed
out that it has sometimes been slow to
act, that its guidelines contain too
many options, or avoid hard choices.
In short, the undeniable fact that they
are based on compromise makes it
easy to portray them as compromised.
Such criticism gained force as
knowledge of more rigorous standards,
in particular US GAAP, became more
widespread.
The international dimension
The question of how the Dutch approach could function in a world of
increasing internationalization was
first posed in 1973, when the main
Dutch accountancy body NIVRA was
invited to join the International Accounting Standards Committee (IASC)
as a founding member. While there
was no question that the NIVRA was
delighted with the invitation and very
keen to join, it was remarked at the
time that it was a little awkward that
the IASC was set up as an organization
of accountancy bodies only. From the
point of view of the NIVRA, it was not
proper for accountancy bodies to set
standards for financial reporting unilaterally.
The NIVRA was realistic
enough not to press this view on its
fellow founding members, but in subsequent years it showed itself very
supportive of initiatives which gradually opened the IASC Board to nonauditor delegations. In addition, the
NIVRA made sure to include an accountant in business in its initial IASC
delegation, even though it allowed this
policy to lapse before returning to it
consistently in the 1980s.
In the end, the consensus tradition was
also the main reason why the IASC’s
standards were never imposed mandatorily in the Netherlands. The NIVRA
did air a proposal around 1980 to require its members to report on compliance with International Accounting
Standards in their audit reports, but
this proposal was withdrawn in the
face of opposition. The official policy
remained that International Accounting Standards acquired status in the
Netherlands only to the extent that
they were incorporated in the consensus-based guidelines of the RJ. Towards the end of the1990s, this had
evolved to a policy of incorporating all
International Accounting Standards in
national standards, unless specific
national circumstances made this undesirable.
The future of consensus-based standard setting in the Netherlands acquired
some urgency in view of the mandatory application of International Financial Reporting Standards (IFRS) in the
European Union as of 2005. In general, it seems fair to say that the European Union’s policy, when it was announced, was received favourably, and
probably for two main reasons. One
was a recognition that, while a consensus-based approach might still work at
a national level, it was no longer producing appropriate standards for Dutch
companies active on international capital markets.
During the 1990s, exposure to and
knowledge of US standards and practices increased because of a significant
number of cross-listings, and it became
more and more understood that the
Netherlands up to a point simply
would have to accept financial reporting norms developed elsewhere. Consequently, as indicated above, a policy
had already been adopted that as a rule
all International Accounting Standards
would be incorporated in national
guidance. The second reason was that
56
by the end of the 1990s, the Netherlands on the whole was quite comfortable with the IASC and its standards as
they were then. One could always find
points to criticize, but generally speaking the IASC was seen as a body that
set its standards with a proper degree
of consultation, and that amalgamated
the views of its various constituents in
applicable standards of more than a
decent quality.
From 2001 onwards, when the IASC
was succeeded by an independent International Accounting Standards
Board (IASB), a degree of disenchantment has occasionally been palpable.
There has been disapproval of the
IASB when it is perceived to assert its
independence by issuing standards in
the face of known and strongly held
opposing views. The RJ has reviewed
its policy of adopting all IFRSs, and
now charts a more independent course
when setting its standards for nonlisted companies and a range of not-for
-profit organizations. It is acknowledged that the RJ’s style of decision
making cannot and probably should
not be replicated at the international
level. In the Netherlands, the RJ functions within a broader network of
‘polder’ organizations, committing the
parties to give-and-take. This keeps a
lid on potential problems of the consensus system, such as blatant obstructionism for self-interested reasons.
Such a context is lacking at the international level, so that it becomes more
vital to protect the independence of
standard setting. Even so, so the various moves made by the IASB during
the last decade to elaborate its due
process and allow more consultation
have not just been welcomed in the
Netherlands, but have been seen as
vital to the survival of the IASB. Hans
Hoogervorst, the current Dutch chairman of the IASB, is not regarded in
the country as a typical representative
of the ‘polder’ approach.
Page 24
Nonetheless, comments on his part on
the need for ‘exhaustive consultation’
by the IASB and for ‘a governance
structure that is more inclusive and in
which all jurisdictions using IFRS feel
adequately represented’ probably set
heads nodding among the dykes.
standards can be found in Kees Camfferman and Stephen A. Zeff, Financial Reporting and Global Capital
Markets: A History of the International Accounting Standards Committee,
1973-2000 (Oxford: Oxford University
Press, 2007).
Kees Camfferman is a Professor of
Financial Accounting at VU University
Amsterdam, The Netherlands.
Further reading:
A general discussion of the validity of
the ‘polder model’ notion can be found
in L. Delsen, Exit Polder Model? Socioeconomic Changes in the Netherlands
(Westport CT: Praeger, 2002). Much
of the historical ground covered in this
essay is dealt with in greater detail in
Stephen A. Zeff, Frans van der Wel
and Kees Camfferman, Company Financial Reporting: A Historical and
Comparative Study of the Dutch Regulatory Process (Amsterdam: NorthHolland, 1992).
A more recent review of modern
Dutch financial accounting history is
given in Kees Camfferman, ‘The Netherlands’, Gary J. Previts, Peter Walton
and Peter Wolnizer (editors), A Global
History of Accounting, Financial Reporting and Public Policy, Studies in
the Development of Accounting
Thought, volume 14A (Bingley: Emerald, 2010).
The English-language brochure The
Tripartite Accounting Standards Committee published by the NIVRA in
1980 (PILOT series, No. 10) still gives
an interesting insight into the views of
consensus-based accounting standard
setting of three leading participants
from the auditor, preparer, and user
delegation. More on the NIVRA’s
attitude towards the IASC and its
57

European traditions in Accounting

Transcription

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