RESEARCH FINDINGS
6.7 Comparisons to previous studies
6.7.4 The Holmes et al study (Australia)
6.7.4.4 Content
The Holmes et al study analysed practising accountants' perceptions of the applicability of twenty-three Australian accounting standards to six hypothetical entities varied by size and legal structure. A summary of the practising accountants' responses by Australian accounting standards is presented in table 6-17.
This study analysed RA&As' perceptions of the applicability of fifteen statements of SA GAAP to twelve hypothetical entities varied by size, legal structure and financial statement user base.
A summary of the RA&As' responses by statement of SA GAAP is presented in table 6-10.
As the level of detail in this study exceeded that of the Holmes et al study, some of the categories of this study (refer to table 6-10) were combined for purposes of overall comparison with the Holmes et al study (refer to table 6-18). These combinations were necessary, as Holmes et al did not differentiate securities exchange listed public companies from unlisted public companies. In addition, Holmes et al did not differentiate private companies whose financial statements have a wide financial statement user base from those with a narrow financial statement user base. As comparable information was not collected for close corporations in the Holmes et al study and for sole traders in this study, these entity types are excluded from the comparison presented in table 6-18.
The mean appropriateness ratings across all accounting standards tested for and the rankings thereof (refer to table 6-18) of this study are consistent with those of the Holmes et al study.
This indicates overall consistency in the findings of the two studies. To ascertain if the consistencies extend to particular accounting issues, a comparison of the acceptability ratings for individual accounting standards was made in respect of big private companies (refer to table 6-19) and small private companies (refer to table 6-20). Comparison of the findings of the two studies in respect individual accounting standards must be interpreted with caution as: (i) there is a substantial time gap between the two studies; (ii) accounting standards have evolved rapidly in the intervening period; and (iii) differences in the national GAAP of the two jurisdictions exist.
Table 6-17 Standards appropriate
Standard
AAS 1 - Profit and loss AAS 2 - Inventories AAS 3 - Taxation AAS 4 - Depreciation AAS 5 - Materiality
AAS 6 - Accounting policies AAS 7 - Extractive industries AAS 8 - Events after balance sheet date
AAS 9 - Expenditure carried forward
AAS 10 - Revaluation of non- current assets
AAS 11 - Construction contracts AAS 12 - Sources and applications of funds
AAS 13 - Research & development AAS 14 - Equity method
AAS 15 - Disclosure of operating revenue
AAS 16 - Financial reporting by segment
AAS 17-Leases AAS 18-Goodwill AAS 19 - Joint ventures AAS 20 - Foreign currency translation
AAS 21 - The acquisition of assets AAS 22 - Related party disclosures AAS 23 - Set-off & extinguishment of debt
Mean Rank
Public Company Small
A
% 96 90 93 93 92 93 87
93
93
90 92
89 87 92
81
88 87 88 89
89 89 81
76 89 2 Source: Derived from Holmes et al (1991:129)
Big B
% 96 92 93 93 92 93 88
91
93
91 93
89 90 92
82
91 88 89 90
89 91 87
79 90 1
Private Company Small
C
% 85 77 75 67 50 58 50
50
50
46 47
48 39 44
40
42 35 35 31
36 30 18
13 46 4
Big D
% 92 80 86 82 74 80 63
76
68
70 70
65 64 68
58
67 62 56 58
59 55 50
37 67 3
Sole Trader Small
E
% 68 66 63 50 35 30 29
28
26
24 24
24 22 21
19
17 17 15 14
10 5 4
1 27 6
Big F
% 70 69 66 56 39 35 29
30
30
26 26
25 23 23
22
21 18 17 20
11 5 8
1 29 5
Table 6-18 Comparison of mean scores of the t Mean of acceptability ratings of Accounting Standards
Big JSE listed company*
Small JSE listed company*
Big public company*
Small public company*
Big private company with a narrow user base*
Big private company with a wide user base*
Small private company with a narrow user base*
Small private company with a wide user base*
Total
Mean this study Rank
Mean Holmes et al study*
Rank
# from table 6-10
* from table 6-17
ippropriateness of standards Public Company
Large
% 95
92
187 94 1
90 1
Small
%
94
87
181 91 2
89 2
Private
Large
%
56 73
129 65 3
67 3
Company
Small
%
32 47 79 40 4
46 4
An examination of the responses (refer to table 6-10 for this study and table 6-17 for the Holmes et al study) indicates that significantly more accountants support all the individual statements of GAAP for public companies.
Holmes et al found that, except for AAS 16 - Financial reporting by segment and AAS 14 - Equity method of accounting, all Australian standards were considered appropriate for big private companies (refer to table 6-19). This study, which excluded the South African statement governing segmental reporting, found that RA&As considered each statement of SA GAAP tested for, to be appropriate for big private companies with a wide financial statement user base (refer to table 6-19). However, where the financial statement user base of a big private company was narrow, six statements of SA GAAP were considered inappropriate (refer to table 6-19).
Only for AC 128 - Impairment of assets (SAICA, 1999e) was this inappropriateness limited to the presentation and disclosure requirements. For the other five statements of GAAP, both the presentation and disclosure requirements and the recognition and measurement requirements of the standards were perceived to be inappropriate.
Like Holmes et al (1991:130) this study found that many of the statements of GAAP are perceived to be inappropriate to small private companies. Table 6-20 presents those statements of GAAP that were perceived to be appropriate for small private companies. The acceptability of the statement of GAAP on inventory and the depreciation aspects of the statement of GAAP on property, plant and equipment are common to both studies.
The most important finding of this study in respect of the possible content of differential corporate reporting, is that RA&As perceive the need for differential corporate requirements equally in respect of the recognition and measurement requirements and the presentation and disclosure requirements of SA GAAP. As Holmes et al did not collect perceptions about the applicability of the presentation and disclosure separately from recognition and measurement, a comparison to that study on this issue cannot be made.
123 Table 6-19 Comparison of statements of GAAP inappropriate to big private companies This study Wide user base Narrow user Standard found to be inappropriate P&D R&M Whole P&D AC 116 - Employee benefits V AC 126 - Related party disclosures AC 125 & AC 133 - Financial instruments V AC 128 - Impairment of assets V AC 132 - Consolidated financial statements AC 137-Agriculture V A AS 14 - Equity method of accounting A AS 16 - Financial reporting by segment* V = Inappropriate * Holmes et al (1991:130)
R&M
V V V
base Whole
V V V V V
Holmes et al study* Whole
V V
Comments At the time of the Holmes et al study no equivalen Australian standard existed. Holmes et al (1991:129) found the equivalen Australian standard (AAS 22) appropriate. At the time of the Holmes et al study no equivalen Australian standard existed. At the time of the Holmes et al study no equivalen Australian standard existed. At the time of the Holmes et al study no equivalen Australian standard existed. At the time of the Holmes et al study no equivalen Australian standard existed. The SA GAAP equivalent was not tested for. The SA GAAP equivalent was not tested for a applies only to listed entities.
124 Table 6-20 Comparison of statements of GAAP appropriate to small private companies Appropriate Standards AC 102 - Income taxes AC 105 - Leases AC 108/AAS 2 - Inventories AC 123 - Property, plant and equipment AAS 4 - Depreciation of non-current assets AC 130 - Provisions and contingencies AC 118-Cash flow statement AC 132 - Consolidated financial statements AAS 1 - Profit and loss AAS 5 - Materiality AAS 8 - Events occurring after balance sheet date V = appropriate
Wide user P&D