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Revitalising Group Accounting: Improving Accountability
Author(s) -
Clarke Frank,
Dean Graeme,
Houghton Erne
Publication year - 2002
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.1835-2561.2003.tb00212.x
Subject(s) - accounting , accountability , consolidation (business) , corporate governance , business , accounting information system , economics , finance , political science , law
This article questions conventional consolidation accounting's effectiveness as a governance mechanism. Disclosure of the aggregate financial outcomes of a set of related business entities is of commercial importance. Currently that information is disseminated through financial statements underpinned by assumptions contradicting fundamental principles of corporate law and contestable propositions of commercial fact. Corporate accountability could be improved if the traditional approach to consolidation accounting were supplanted by reporting on an individual company basis, with assets marked to market, augmented with a statistical annexure of assets and liabilities of all related entities and a related companies' cross‐claims matrix. Recent revelations related to Enron's collapse reinforce the need for improved corporate group accountability mechanisms.