|
An International Investigation of Conservative Bias and Accounting Practices
Joan Hollister, State University of New York at New Paltz
Victoria Shoaf, St. John's University
ABSTRACT. We investigate international variation in the conservatism of accrual accounting practices on the relationship between future profitability and both current profitability and the growth in net operating assets, as described by Feltham and Ohlson (1995). To evaluate conservatism, we construct an annual index for each of six countries—Canada, France, Germany, Japan, the UK and the US—based on the relationship of depreciation and amortization expense and research and development costs to the underlying long-term operating assets. We evaluate the Ohlson (1995) model for each country for two time periods, pre-2000 and post-2000. Based on our index, we observe some significant predicted differences between countries in the pre-2000 time period and within-country differences for the pre-2000 and post-2000 time periods. Our findings suggest that variation in the conservative bias in accounting practices affects the impact of the growth in short-term and long-term net operating assets.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|