Accounting information systems in a centrally planned economy : the case of the General Company for Pipelines (GCP)

The paper has a twofold purpose. First it highlights the importance of accounting information in the economic development of developing countries, with a particular focus on the nation of Libya. Secondly, using the case of Libya's General Company for Pipelines (GCP), it demonstrates that the use of accounting information to achieve economic development goals is determined to a large extent by the political/ideological setting in which it is generated. The study is based on a literature review and archival research, reinforced by a qualitative case study comprised of interviews, attendance at meetings and a study of internal documents. A study of The General Company for Pipelines (GCP) revealed that frequent politically driven changes in the structure and number of popular congresses and committees severely limited the use of accounting information, relegating it to a formal role. In consequence, accounting information had litle effect on stimulating economic development in Libya. This study focuses on one case study which does limit generalisability. However, it also suggests fruitful research areas considering the historic factors which have determined the accounting role in developing and planned economies. By providing insights about social factors which have determined the use of accounting in a planned economy, this study has implications for similar economies as they move towards a more globalised mode of operations which enhance the role of accounting in meeting economic development needs. If devleoping countries are to harness the potential of accounting aid in the achievement of their development plans, the social and political setting in which accounting has been conducted needs to be understood.

Compliance with international financial reporting standards (IFRS) and the value relevance of accounting information in emerging stock markets : evidence from Kuwait

Since the 1960s, the value relevance of accounting information has been an important topic in accounting research. The value relevance research provides evidence as to whether accounting numbers relate to corporate value in a predicted manner (Beaver, 2002). Such research is not only important for investors but also provides useful insights into accounting reporting effectiveness for standard setters and other users. Both the quality of accounting standards used and the effectiveness associated with implementing these standards are fundamental prerequisites for high value relevance (Hellstrom, 2006). However, while the literature comprehensively documents the value relevance of accounting information in developed markets, little attention has been given to emerging markets where the quality of accounting standards and their enforcement are questionable. Moreover, there is currently no known research that explores the association between level of compliance with International Financial Reporting Standards (IFRS) and the value relevance of accounting information. Motivated by the lack of research on the value relevance of accounting information in emerging markets and the unique institutional setting in Kuwait, this study has three objectives. First, it investigates the extent of compliance with IFRS with respect to firms listed on the Kuwait Stock Exchange (KSE). Second, it examines the value relevance of accounting information produced by KSE-listed firms over the 1995 to 2006 period. The third objective links the first two and explores the association between the level of compliance with IFRS and the value relevance of accounting information to market participants. Since it is among the first countries to adopt IFRS, Kuwait provides an ideal setting in which to explore these objectives. In addition, the Kuwaiti accounting environment provides an interesting regulatory context in which each KSE-listed firm is required to appoint at least two external auditors from separate auditing firms. Based on the research objectives, five research questions (RQs) are addressed. RQ1 and RQ2 aim to determine the extent to which KSE-listed firms comply with IFRS and factors contributing to variations in compliance levels. These factors include firm attributes (firm age, leverage, size, profitability, liquidity), the number of brand name (Big-4) auditing firms auditing a firm’s financial statements, and industry categorization. RQ3 and RQ4 address the value relevance of IFRS-based financial statements to investors. RQ5 addresses whether the level of compliance with IFRS contributes to the value relevance of accounting information provided to investors. Based on the potential improvement in value relevance from adopting and complying with IFRS, it is predicted that the higher the level of compliance with IFRS, the greater the value relevance of book values and earnings. The research design of the study consists of two parts. First, in accordance with prior disclosure research, the level of compliance with mandatory IFRS is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book value, is examined empirically using two valuation models: price and returns models. The combined empirical evidence that results from the application of both models provides comprehensive insights into value relevance of accounting information in an emerging market setting. Consistent with expectations, the results show the average level of compliance with IFRS mandatory disclosures for all KSE-listed firms in 2006 was 72.6 percent; thus, indicating KSE-listed firms generally did not fully comply with all requirements. Significant variations in the extent of compliance are observed among firms and across accounting standards. As predicted, older, highly leveraged, larger, and profitable KSE-listed firms are more likely to comply with IFRS required disclosures. Interestingly, significant differences in the level of compliance are observed across the three possible auditor combinations of two Big-4, two non-Big 4, and mixed audit firm types. The results for the price and returns models provide evidence that earnings and book values are significant factors in the valuation of KSE-listed firms during the 1995 to 2006 period. However, the results show that the value relevance of earnings and book values decreased significantly during that period, suggesting that investors rely less on financial statements, possibly due to the increase in the available non-financial statement sources. Notwithstanding this decline, a significant association is observed between the level of compliance with IFRS and the value relevance of earnings and book value to KSE investors. The findings make several important contributions. First, they raise concerns about the effectiveness of the regulatory body that oversees compliance with IFRS in Kuwait. Second, they challenge the effectiveness of the two-auditor requirement in promoting compliance with regulations as well as the associated cost-benefit of this requirement for firms. Third, they provide the first known empirical evidence linking the level of IFRS compliance with the value relevance of financial statement information. Finally, the findings are relevant for standard setters and for their current review of KSE regulations. In particular, they highlight the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. In addition, the finding that stricter compliance with IFRS improves the value relevance of accounting information highlights the importance of full compliance with IFRS and not just mere adoption.

The influence of family ownership on the quality of accounting information

This article explores the quality of accounting information in listed family firms. The authors exploit the features of the Italian equitymarket characterizd by high ownership concentration across all tpes of firms to disentangle the effects of family ownership from other major block holders on the quality of accounting information. The findings document that family firms convey financial information of higher quality compared to the nonfamily peers. Furthermore the authors provide evidence that the determinants of accounting quality differ across family and nonfamily firms.

United we stand, divided we fall: the failure of an accounting information system in a major radiology provider

This article explores the way in which a major Australian radiology organization implemented a complex accounting information system and how workers in the 72 radiology practises that had to use it resisted the change. The study reports on the issues that led to the circumvention of the system by individuals and, after only three years, complete withdrawal of the accounting information system by the parent organization. This article has implications for firms in the health care and other sectors considering implementing new accounting information systems. Organizations need to incorporate change management techniques and provide open communication to all stakeholders to minimize disruption and potential problems.

Valuation of family firms : the limitations of accounting information

This conceptual paper explores the extent to which reported accounting information captures unique family firm decision-making and intangible asset factors that impact financial value. We review the family firm valuation-relevant literature and identify that this body of research is predicated on the assumption that accounting information reflects the underlying reality of family firms. This research, however, fails to recognise that current accounting technology does not fully recognise the family firm factors in the book value of the firm or the implications for long run persistence of earnings. Thus, valuation models underpinning the extant empirical research, which are predicated on reported accounting information, may not fully reflect the intrinsic value of family firms. We present propositions on the interaction between accounting information, family factors and valuation as a road map for future empirical research with a discussion of appropriate methodologies.

On effective accounting information systems in a dynamic business environment : the role of complementing capabilities

The global business environment is witnessing tough times, and this situation has significant implications on how organizations manage their processes and resources. Accounting information system (AIS) plays a critical role in this situation to ensure appropriate processing of financial transactions and availability to relevant information for decision-making. We suggest the need for a dynamic AIS environment for today’s turbulent business environment. This environment is possible with a dynamic AIS, complementary business intelligence systems, and technical human capability. Data collected through a field survey suggests that the dynamic AIS environment contributes to an organization’s accounting functions of processing transactions, providing information for decision making, and ensuring an appropriate control environment. These accounting processes contribute to the firm-level performance of the organization. From these outcomes, one can infer that a dynamic AIS environment contributes to organizational performance in today’s challenging business environment.

Organizational competencies and dynamic Accounting Information System capability: Impact on AIS processes and firm performance

Accounting information systems (AIS) capture and process accounting data and provide valuable information for decision-makers. However, in a rapidly changing environment, continual management of the AIS is necessary for organizations to optimise performance outcomes. We suggest that building a dynamic AIS capability enables accounting process and organizational performance. Using the dynamic capabilities framework (Teece 2007) we propose that a dynamic AIS capability can be developed through the synergy of three competencies: a flexible AIS, having a complementary business intelligence system and accounting professionals with IT technical competency. Using survey data, we find evidence of a positive association between a dynamic AIS capability, accounting process performance, and overall firm performance. The results suggest that developing a dynamic AIS resource can add value to an organization. This study provides guidance for organizations looking to leverage the performance outcomes of their AIS environment.

Integration and Implementation of Accounting Information Systems in Global Companies Case: The UPM-Kymmene Group

Tämän tutkielman tavoitteena on perehtyä globaalin yrityksen laskentatoimen tietojärjestelmien yhtenäistämiseen ja käyttöönottoon esimerkkinä UPM-Kymmene konsernin projekti. Tutkielmassa sovelletaan hermeneuttista tutkimusotetta. Teoreettisesti aihetta tarkastellaan globalisoitumisen ja laskentatoimen tietojärjestelmille asetettavien vaatimusten pohjalta, sekä järjestelmän muutosprosessin eri vaiheissa huomioon otettavien muuttujien perusteella. Yhtenäisen laskentatoimen tietojärjestelmän tuomat edut globaalille yritykselle ovat ilmeisiä. Ennen yhtenäisen projektin kehittelyä on olennaista tutkia lähtökohdat projektin onnistumiselle ja suunnitella projektin eri vaiheet huolella. Tutkielmassa havaitaan myös, että globaalissa yrityksessä tulee huomioida eri yrityskulttuurit sekä tulosyksiköiden erilaiset toimintatavat. Johtopäätöksenä todetaan, että sekä yritysjohdon että tulosyksiköiden sitoutuneisuus projektiin ja yhtenäiset tavoitteet ovat oleellisia projektin onnistumisen kannalta.

Accounting information systems as institutional carriers: a case study of regulatory compliance in UK asset management houses

Previously, governments have responded to the impacts of economic failures and consequently have developed more regulations to protect employees, customers, shareholders and the economic wellbeing of the state. Our research addresses how Accounting Information Systems (AIS) may act as carriers for institutionalised practices associated with maintaining regulatory compliance within the context of UK Asset Management Houses. The AIS was found to be a strong conduit for institutionalized compliance related practices, utilising symbolic systems, relational systems, routines and artefacts to carry approaches relating to regulative, normative and cultural-cognitive strands of institutionalism. Thus, AIS are integral to the development and dissipation of best practice for the management of regulatory compliance. As institutional elements are clearly present we argue that AIS and regulatory compliance provide a rich context to further institutionalism. Since AIS may act as conduits for regulatory approaches, both systems adopters and clients may benefit from actively seeking to codify and abstract best practices into AIS. However, the application of generic institutionalized approaches, which may be applied across similar organizations, must be tempered with each firm’s business environment and associated regulatory exposure. A balance should be sought between approaches specific enough to be useful but generic enough to be universally applied.

Value relevance of accounting information in China pre- and post-2001 accounting reforms

Purpose – This paper aims to investigate whether the accounting reform in China has improved the relevance of China's accounting information. It seeks to investigate the association between earnings and book value of equity to share returns before and after the introduction of the Accounting System for Business Enterprises (ASBE) in 2001 for A- and A&B-share firms.

Design/methodology/approach – The paper employs the return regression model. The pre-ASBE period is designated as 1997 through to 2000, and the post-ASBE period is designated as 2002 through to 2004. All firms listed on the Chinese stock market during the investigation period constitute the sample.

Findings – It is found that accounting information better explains share returns for both A-share firms and A&B-share firms in the post-ASBE period. The paper also finds that the book value of equity for A&B-share firms is incrementally value relevant to that of A-share firms in the post-ASBE period.

Research limitations/implications – Further studies will contribute to understanding how governance mechanisms and liquidity influence the association between accounting information and share returns in the Chinese A-share market.

Practical implications – The findings provide empirical evidence regarding the relevance of accounting information in emerging markets.

Originality/value – The paper contributes to the extant value relevance literature by investigating time periods surrounding the issue of ASBE in 2001 in the Chinese stock market.

Style of information usage and use of accounting information : a Malaysian study

Purpose – Since the 1990s, there has been a growing interest in style of information usage. However, most studies on style of information usage are conducted in developed countries. There is limited research on style of information usage in developing countries. The purpose of this paper is to fill the gap in the existing literature by examining relationships between style of information usage and use of financial and non-financial information in Malaysia.

Design/methodology/approach – The authors adopted a survey method, for which a written questionnaire was prepared and mailed out to companies in Kuala Lumpur, Selangor, Terengganu and Pulau Pinang.

Findings – Findings of the study show that diagnostic style of information usage is positively associated with use of financial information, while interactive style of information usage is positively associated with use of non-financial information. Further analysis on types of non-financial information used by managers who adopt interactive style of information usage reveals that customer-related non-financial information such as quality, customer satisfaction and flexibility play a more important role in their decision-making processes.

Originality/value – The paper provides insights into relationships between style of information usage on and use of accounting information in developing countries. Findings of the study can be applied to assist management accountants in meeting managers’ information requirements.