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National Accounting Culture And The Recognition Of Provisions: An Application Of The Prudence Principle

Author

Listed:
  • Liliana Feleagă

    (A.S.E. - The Bucharest Academy of Economic Studies / Academia de Studii Economice din Bucureşti)

  • Voicu D. Dragomir

    (A.S.E. - The Bucharest Academy of Economic Studies / Academia de Studii Economice din Bucureşti)

  • Niculae Feleagă

    (A.S.E. - The Bucharest Academy of Economic Studies / Academia de Studii Economice din Bucureşti)

Abstract

Prudence in accounting is a corner-stone concept which has shaped accounting theory, as well as ordinary financial reporting. Thus, on the quantitative side of the study, we developed a proxy for accounting conservatism, namely the degree of uncertainty associated with the settling of a company's obligations. To this purpose, we hand-collected accounting data for 388 business groups from 17 European countries. For these companies we computed the provisions-to-liabilities ratio (PLR) and performed several group tests, according to the following original classification of national accounting cultures. The results indicate that companies incorporated in countries that are classified as ‘conservative' do assign a significantly higher degree of uncertainty to their total amount of liabilities.

Suggested Citation

  • Liliana Feleagă & Voicu D. Dragomir & Niculae Feleagă, 2010. "National Accounting Culture And The Recognition Of Provisions: An Application Of The Prudence Principle," Post-Print hal-00481581, HAL.
    • Handle: RePEc:hal:journl:hal-00481581
    Note: View the original document on HAL open archive server: https://hal.science/hal-00481581
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    References listed on IDEAS

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