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Equity Accounting: Empirical Evidence and Lessons from the Past
Author(s) -
Vallely Mark,
Stokes Donald,
Liesch Peter
Publication year - 1997
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/j.1835-2561.1997.tb00031.x
Subject(s) - accounting , equity (law) , empirical evidence , interdependence , positive accounting , business , economics , empirical research , mark to market accounting , equity capital , accounting information system , financial accounting , initial public offering , political science , philosophy , epistemology , law
This paper analyses the recently issued accounting standard prAASB 1016 and its predecessor ED 71 in the light of the historical development of equity accounting in Australia and overseas. Empirical research shows that equity accounting was not universally adopted before being banned and that, given a voluntary choice of accounting method, firms are more likely to adopt equity accounting when they hold material investments in associated companies, when the investments in associates are unlisted and when there is a greater level of interdependency between the investor and investee, as evidenced by the existence of cross‐guarantees or the level of non‐capital transactions which take place. There is no empirical evidence supporting the degree of influence as an important consideration in the adoption decision.