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Corporate Financial Reporting
Book reviews
449
Overall, this ACCA Research Report is a disciplined statistical study that is a useful model for those who wish to carry out similar research and, therefore, a valuable source for those interested in the use of IAS. However, the composition of the sample and the scope of the checklist are serious limitations and receive insufficient attention in the executive summary and conclusions. The growing use of IAS, in particular the publication of IAS consolidated financial statements by virtually all EU listed companies with effect from 2005, makes such studies increasingly important. It is important, however, that researchers explain any limitations in the sample and, even more importantly, use a more extensive IAS checklist. I am also skeptical about placing too much reliance on the statistics, as there are many factors that explain compliance and noncompliance. Street and Gray have provided some further explanations; I would like to see them dig a little deeper. David Cairns London School of Economics and Political Science, London, UK PII: S 0 0 2 0 - 7 0 6 3 ( 0 2 ) 0 0 1 8 9 - 9
Corporate Financial Reporting By Bhabatosh Banerjee and Arun Kumar Basu (Eds.), University of Calcutta, Calcutta, 2001, vi+275 pages The Universities Grants Commission, New Delhi, funded this publication through its special assistance program. The book adds to the sparse literature on financial reporting from an Indian perspective, and it consists of a collection of essays written by the academic staff of the University of Calcutta. The essays cover a wide range of topics: the conceptual framework of accounting, Indian company and accounting regulation, intangible assets, foreign currency translation, cash flow reporting, segment reporting, environmental accounting, economic value added, electronic reporting, and accounting standard-setting in India. There are 11 essays. Basu summarizes the concepts statements issued by the FASB and the IASC and makes some interesting observations about the notion of a ‘‘true and fair view.’’ Chaudhuri explains the legal aspects of financial reporting in India, including the contents of the balance sheet, the profit and loss account, the directors’ report, and the auditors’ report. The author suggests that companies provide useful voluntary disclosures but does not give any examples. Chakravorty discusses the regulation of accounting by multiple agencies, such as the accounting profession, the securities regulator, etc. This essay partly overlaps with a later one by Banerjee. Dandapat reviews the challenges in reporting intangible assets. Although practice in this area is still evolving, Dandapat suggests a separate balance sheet for intangibles as a form of supplementary information. Bhattacharyya discusses foreign currency accounting in India, the US, and the UK. The Indian accounting standard on the subject permits only the temporal method, and this has created problems for some banks that have independent overseas operations. Dhar reports on
450
Book reviews
a survey of cash flow reporting in India and finds that the practices for classifying items into the operating, investing, and financing categories vary across companies. Sen provides an overview of segment reporting and compares IASC, US, UK, and Indian standards in this area. Saha examines accounting for sustainable development but does not refer to any Indian reporting practices or examples. He does not consider issues such as: Has the Bhopal gas leak tragedy in 1984, which killed over 2000 people and maimed and disfigured many more, had any effect on reporting on the environmental impact of the activities of Indian business organizations? Dhar outlines the idea of economic value added and its impact on the thinking of Indian financial managers. Chatterjee discusses the implications of financial reporting via the Internet and other electronic means of communication. Banerjee compares the institutional mechanisms for establishing accounting standards in India with those in the UK and the US. The author suggests dividing the task of enforcing compliance with standards between two government departments and the securities regulator, according to the type of entity. This could, of course, result in differing levels of enforcement in a country where the standards of corporate reporting are already quite low. The essays are mostly descriptions and analyses of professional pronouncements and relevant research literature. There are gaps in the coverage, as the essays do not discuss the influences on the development of accounting in India that include the following: substantial ownership of business by families and government-owned financial institutions, a conservative social climate, an inward-looking model of economic development, and a low degree of globalization. Related to these are a number of special features of financial accounting and disclosure. These include the mandatory disclosure of manufacturing capacity and output, payments and earnings in foreign exchange, R&D activities, remuneration of highly paid employees, energy conservation efforts, directors’ remuneration, and payments to auditors for nonaudit services. Again, the law specifies the minimum rates of depreciation for the various types of assets. A book of this nature is invariably ambitious and raises readers’ expectations. The book attempts to give a flavor of the accounting systems in India as well as the quality of work being done by academics in India. More examples drawn from the large number of Indian financial reports would have made the book more lively and readable. Furthermore, there is no discussion of the impact of the ongoing economic liberalization on financial reporting. For example, several Indian companies have been listed overseas and many more are interested. The financial reports of these companies are generally more informative. India is a major emerging economy with great potential for economic growth. The book will be of interest to those seeking insights into the state of financial reporting in India and the scope for its improvement. Malcolm C. Miller The University of New South Wales, Sydney, Australia PII: S 0 0 2 0 - 7 0 6 3 ( 0 2 ) 0 0 1 9 5 - 4
449
Overall, this ACCA Research Report is a disciplined statistical study that is a useful model for those who wish to carry out similar research and, therefore, a valuable source for those interested in the use of IAS. However, the composition of the sample and the scope of the checklist are serious limitations and receive insufficient attention in the executive summary and conclusions. The growing use of IAS, in particular the publication of IAS consolidated financial statements by virtually all EU listed companies with effect from 2005, makes such studies increasingly important. It is important, however, that researchers explain any limitations in the sample and, even more importantly, use a more extensive IAS checklist. I am also skeptical about placing too much reliance on the statistics, as there are many factors that explain compliance and noncompliance. Street and Gray have provided some further explanations; I would like to see them dig a little deeper. David Cairns London School of Economics and Political Science, London, UK PII: S 0 0 2 0 - 7 0 6 3 ( 0 2 ) 0 0 1 8 9 - 9
Corporate Financial Reporting By Bhabatosh Banerjee and Arun Kumar Basu (Eds.), University of Calcutta, Calcutta, 2001, vi+275 pages The Universities Grants Commission, New Delhi, funded this publication through its special assistance program. The book adds to the sparse literature on financial reporting from an Indian perspective, and it consists of a collection of essays written by the academic staff of the University of Calcutta. The essays cover a wide range of topics: the conceptual framework of accounting, Indian company and accounting regulation, intangible assets, foreign currency translation, cash flow reporting, segment reporting, environmental accounting, economic value added, electronic reporting, and accounting standard-setting in India. There are 11 essays. Basu summarizes the concepts statements issued by the FASB and the IASC and makes some interesting observations about the notion of a ‘‘true and fair view.’’ Chaudhuri explains the legal aspects of financial reporting in India, including the contents of the balance sheet, the profit and loss account, the directors’ report, and the auditors’ report. The author suggests that companies provide useful voluntary disclosures but does not give any examples. Chakravorty discusses the regulation of accounting by multiple agencies, such as the accounting profession, the securities regulator, etc. This essay partly overlaps with a later one by Banerjee. Dandapat reviews the challenges in reporting intangible assets. Although practice in this area is still evolving, Dandapat suggests a separate balance sheet for intangibles as a form of supplementary information. Bhattacharyya discusses foreign currency accounting in India, the US, and the UK. The Indian accounting standard on the subject permits only the temporal method, and this has created problems for some banks that have independent overseas operations. Dhar reports on
450
Book reviews
a survey of cash flow reporting in India and finds that the practices for classifying items into the operating, investing, and financing categories vary across companies. Sen provides an overview of segment reporting and compares IASC, US, UK, and Indian standards in this area. Saha examines accounting for sustainable development but does not refer to any Indian reporting practices or examples. He does not consider issues such as: Has the Bhopal gas leak tragedy in 1984, which killed over 2000 people and maimed and disfigured many more, had any effect on reporting on the environmental impact of the activities of Indian business organizations? Dhar outlines the idea of economic value added and its impact on the thinking of Indian financial managers. Chatterjee discusses the implications of financial reporting via the Internet and other electronic means of communication. Banerjee compares the institutional mechanisms for establishing accounting standards in India with those in the UK and the US. The author suggests dividing the task of enforcing compliance with standards between two government departments and the securities regulator, according to the type of entity. This could, of course, result in differing levels of enforcement in a country where the standards of corporate reporting are already quite low. The essays are mostly descriptions and analyses of professional pronouncements and relevant research literature. There are gaps in the coverage, as the essays do not discuss the influences on the development of accounting in India that include the following: substantial ownership of business by families and government-owned financial institutions, a conservative social climate, an inward-looking model of economic development, and a low degree of globalization. Related to these are a number of special features of financial accounting and disclosure. These include the mandatory disclosure of manufacturing capacity and output, payments and earnings in foreign exchange, R&D activities, remuneration of highly paid employees, energy conservation efforts, directors’ remuneration, and payments to auditors for nonaudit services. Again, the law specifies the minimum rates of depreciation for the various types of assets. A book of this nature is invariably ambitious and raises readers’ expectations. The book attempts to give a flavor of the accounting systems in India as well as the quality of work being done by academics in India. More examples drawn from the large number of Indian financial reports would have made the book more lively and readable. Furthermore, there is no discussion of the impact of the ongoing economic liberalization on financial reporting. For example, several Indian companies have been listed overseas and many more are interested. The financial reports of these companies are generally more informative. India is a major emerging economy with great potential for economic growth. The book will be of interest to those seeking insights into the state of financial reporting in India and the scope for its improvement. Malcolm C. Miller The University of New South Wales, Sydney, Australia PII: S 0 0 2 0 - 7 0 6 3 ( 0 2 ) 0 0 1 9 5 - 4