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A unified approach to the measurement of international accounting harmony

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  • Ross Taplin

Abstract

Many indices, including the Herfindahl H index, the C index, the I index, and variants of these, have been proposed to measure the level of harmony of accounting practices. These indices can be viewed as having different properties based on several criteria and in practice choosing an index because it has a desirable property by one criterion can require accepting an undesirable property by another criterion. This paper provides a unified treatment of possible indices, which includes the commonly used indices. This clarifies the relationship between the previously proposed indices by placing them in a unified framework and provides new indices that are superior to existing ones for some situations. It also allows the user to choose an index with the desired properties based on several criteria without sacrificing one desirable property in order to achieve another desirable property. It also shows how the generalisations of the I index for more than two countries are flawed and suggests an alternative index from within this unified framework. The main criteria used to arrive at a particular index within this unified framework are (1) the weighting given to companies/countries, (2) international focus (within country, between country, or overall), (3) the treatment of multiple accounting policies, and (4) the treatment of non-disclosure. Specifying the desired properties under these criteria provides more flexibility by allowing an index to be tailored to a particular problem and more clearly articulates the consequences of using a particular index. These consequences are discussed with the assistance of an example for the accounting policy choice for goodwill.

Suggested Citation

  • Ross Taplin, 2004. "A unified approach to the measurement of international accounting harmony," Accounting and Business Research, Taylor & Francis Journals, vol. 34(1), pages 57-73.
    • Handle: RePEc:taf:acctbr:v:34:y:2004:i:1:p:57-73
    DOI: 10.1080/00014788.2004.9729951
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    Citations

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    Cited by:

    1. Marcus L. Caylor & Dennis J. Chambers & Sunay Mutlu, 2022. "Financial reporting uniformity: Its relation to comparability and its impact on financial statement users," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(9-10), pages 1457-1488, October.
    2. Ross H. Taplin, 2017. "Measuring the Comparability of Company Accounts Conditionally: A Research Note," Abacus, Accounting Foundation, University of Sydney, vol. 53(4), pages 527-542, December.
    3. Cairns, David & Massoudi, Dianne & Taplin, Ross & Tarca, Ann, 2011. "IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia," The British Accounting Review, Elsevier, vol. 43(1), pages 1-21.
    4. Federica Doni & Ross Taplin & Roberto Verona, 2016. "Comparability of Company Accounts Using IFRS and US GAAP: Empirical Evidence of European and US Financial Statements," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(12), pages 1-54, November.
    5. Cristina Silvia Nistor & Cristina Alexandrina Stefanescu, 2012. "Public vs. Banking Sector Accounting - How Far Is Romania from International Referential?," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 3(3), pages 86-100, June.
    6. Qu, Xiaohui & Zhang, Guohua, 2010. "Measuring the convergence of national accounting standards with international financial reporting standards: The application of fuzzy clustering analysis," The International Journal of Accounting, Elsevier, vol. 45(3), pages 334-355, September.
    7. Riccardo Macchioni & Alessandra Allini & Martina Prisco, 2022. "The role of the Big Four audit firms and the legal system in non-GAAP comparability," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2022(1), pages 79-116.

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