Public Policy and Accounting Research: What Is to Be Done?

Abstract

Singleton-Green [2010. The communication gap: Why doesn't accounting research make a greater contribution to debates on accounting policy? Accounting in Europe, 7(2), 129–145] argues that a communication gap between researchers and those involved in public debates on accounting problems significantly reduces the impact of accounting research. A new ICAEW report, The Effects of Mandatory IFRS Adoption in the EU: a Review of Empirical Research, tries to bridge the communication gap on the subject that it covers. The report found not only a significant amount of relevant research, but also that its usefulness was limited in various ways. The paper makes a number of recommendations to researchers: they should point out any biases in the data they use, address some issues through field work, not assume that surrounding institutions are unchanged, be careful to understand the specific features of the countries they cover, investigate differences in previous research, and state the economic significance of their findings. The paper also makes recommendations for non-academic participants in public policy debates, including: they should actively promote relevant research, help researchers get access to information, and help ensure that researchers have the incentives to do what is needed to benefit public policy.

Keywords:

• IFRS
• accounting research
• public policy

Acknowledgements

I am grateful to the following for helpful comments on draft versions of this paper: Paul André, the Editor of Accounting in Europe, Philip Brown, Kees Camfferman, Annita Florou, Robert Hodgkinson, Christopher Nobes, Thorsten Sellhorn, Ann Tarca, Martin Walker and Stephen Zeff.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 It should perhaps be noted that research does not show whether the comparability effects that followed IFRS adoption could have been achieved by adopting a different set of common standards, e.g. US GAAP, and that comparability benefits are not in themselves evidence of the quality of a set of accounting standards.

2 In relation to mandatory IFRS adoption in the EU, Hoogendoorn (2006), Glaum, Street, and Vogel (2007), and Beattie, Fearnley, and Hines (2011) all comment on additional complexity; Albu and Albu (2012) draw attention to additional preparation costs but do not quantify them; Fox, Hannah, Helliar, and Veneziani (2013) cite interviewees’ estimates of initial implementation costs but not recurring costs; Kim, Liu, and Zheng (2012) give evidence of additional recurring audit costs; and Vulcheva (2011) and Hitz and Müller-Bloch (2014) find evidence suggesting that for some firms the incremental costs of preparation and compliance outweigh the benefits of IFRS adoption. On all these, see ICAEW (2015), Chapter 10, which also looks at other costs of IFRS adoption. Jermakowicz (2004) gives questionnaire evidence on the costs (unquantified) of voluntary IFRS adoption. Eierle and Haller (2009) and Litjens, Bissessur, Langendijk, and Vergoossen (2012) give questionnaire evidence on the expected costs (unquantified) of adopting the IFRS for SMEs. Other papers give evidence on the costs of IFRS adoption outside the EU.

3 Some years ago, Granof and Zeff (2008) argued for the range of ‘appropriate’ accounting research methods to be expanded to include ‘historical and field studies, policy analysis, surveys, and international comparisons’. Dyckman and Zeff (2014) make a similar plea for journals to ‘open themselves to research of high quality regardless of the methods employed’.

4 Research on the effects of mandatory IFRS adoption in the EU is about listed companies, but the institutional environment for private companies also changes of course. Nobes (2010) points out that this creates opportunities for research.

5 Beattie, Fearnley, and Brandt (2001) is an example of the rewards that can come with success in this endeavour.

6 Dyckman and Zeff (2014) comment that:

so much … empirical research … often seems to be tests of hypotheses that happen to accommodate conveniently available databases, rather than tests of hypotheses that are designed to provide insight into the capital market response to accounting measurements and disclosures.