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Accounting Quality in Private Firms During the Transition Towards International Standards

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  • Aljosa Valentincic
  • Ales Novak
  • Urska Kosi

Abstract

We study the historical development of Slovenian Accounting Standards (SAS) and their association with accounting quality (AQ). We focus on private firms where the financial reporting process is characterised by low demand for high-quality reporting. We investigate three distinct editions of SAS since 1994 and test how their development towards international standards is related to AQ. Aggregate earnings management measures indicate that the use of accounting discretion decreases with less earnings smoothing over time. The main features of AQ have been consistent throughout historical development. Asymmetric timeliness of earnings, the ability of earnings to predict future cash flows, and the ability of accruals to mitigate mismatching are all present throughout. We also document typical departures from properties of high AQ. For example, accruals do not (always) facilitate timely recognition of losses. However, these can be attributed to the overwhelming influence of reporting incentives (e.g. taxation, debt, size) rather than to the (lower) quality of accounting standards.

Suggested Citation

  • Aljosa Valentincic & Ales Novak & Urska Kosi, 2017. "Accounting Quality in Private Firms During the Transition Towards International Standards," Accounting in Europe, Taylor & Francis Journals, vol. 14(3), pages 358-387, September.
    • Handle: RePEc:taf:acceur:v:14:y:2017:i:3:p:358-387
    DOI: 10.1080/17449480.2017.1378821
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    References listed on IDEAS

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    1. Andreja Bohm & Joze P. Damijan & Boris Majcen & Marko Rems & Matija Rojec & Marko Simoneti, 2001. "Secondary Privatization in Slovenia: Evolution of Ownership Structure and Company Performance Following Mass Privatization," CASE Network Reports 0046, CASE-Center for Social and Economic Research.
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