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Still Searching for Excellence? International Accounting and the World's Most Outstanding Companies
Author(s) -
Whittington Mark,
Steele Tony
Publication year - 1998
Publication title -
british journal of management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.407
H-Index - 108
eISSN - 1467-8551
pISSN - 1045-3172
DOI - 10.1111/1467-8551.00087
Subject(s) - accounting , depreciation (economics) , economics , context (archaeology) , multinational corporation , robustness (evolution) , valuation (finance) , national accounts , profit (economics) , capital formation , finance , microeconomics , geography , financial capital , biochemistry , chemistry , archaeology , gene
This paper measures the effect of accounting policy choices in the context of Davis, Flanders and Star's (DFS) (1991) league table of the world's most outstanding companies. Our study is an investigation of the robustness of the research underlying Kay (1993). The sensitivity of the rankings to the three major conventions that are used in calculating added value are examined: depreciation policy, the estimation of the cost of capital inputs and consistency of international generally accepted accounting principles. The key finding is that the degree of disruption caused by international accounting differences is likely to be the most material. It is equivalent, in this study, to a 60% increase in the cost of capital or an 80% change in the depreciation lives of fixed assets. After adjusting towards consistent international accounting, we now find that four Japanese companies appear in the top ten. Before adjustment there were none.