A conceptual framework of accounting policy choice under SSAP 20

Purpose - To provide a framework of accounting policy choice associated with the timing of adoption of the UK Statement of Standard Accounting Practice (SSAP) No. 20, "Foreign Currency Translation". The conceptual framework describes the accounting policy choices that firms face in a setting that is influenced by: their financial characteristics; the flexible foreign exchange rates; and the stock market response to accounting decisions. Design/methodology/approach - Following the positive accounting theory context, this paper puts into a framework the motives and choices of UK firms with regard to the adoption or deferment of the adoption of SSAP 20. The paper utilises the theoretical and empirical findings of previous studies to form and substantiate the conceptual framework. Given the UK foreign exchange setting, the framework identifies the initial stage: lack of regulation and flexibility in financial reporting; the intermediate stage: accounting policy choice; and the final stage: accounting choice and policy review. Findings - There are situations where accounting regulation contrasts with the needs and business objectives of firms and vice-versa. Thus, firms may delay the adoption up to the point where the increase in political costs can just be tolerated. Overall, the study infers that firms might have chosen to defer the adoption of SSAP 20 until they reach a certain corporate goal, or the adverse impact (if any) of the accounting change on firms' financial numbers is minimal. Thus, the determination of the timing of the adoption is a matter which is subject to the objectives of the managers in association with the market and economic conditions. The paper suggests that the flexibility in financial reporting, which may enhance the scope for income-smoothing, can be mitigated by the appropriate standardisation of accounting practice. Research limitations/implications - First, the study encompassed a period when firms and investors were less sophisticated users of financial information. Second, it is difficult to ascertain the decisions that firms would have taken, had the pound appreciated over the period of adoption and had the firms incurred translation losses rather than translation gains. Originality/value - This paper is useful to accounting standards setters, professional accountants, academics and investors. The study can give the accounting standard-setting bodies useful information when they prepare a change in the accounting regulation or set an appropriate date for the implementation of an accounting standard. The paper provides significant insight about the behaviour of firms and the associated impacts of financial markets and regulation on the decision-making process of firms. The framework aims to assist the market and other authorities to reduce information asymmetry and to reinforce the efficiency of the market. © Emerald Group Publishing Limited.

Food colours:a study of the effects of regulation

In the 1960s the benefits of government regulation of technology were believed to outweigh any costs. But recent studies have claimed that regulation has negative effects on innovation, health and consumer choice. This case study on food colours examines such claims. EFFECTS ON HEALTH were measured by allocating a hazard rating to each colour. The negative list of 1925 removed three harmful colours which were rapidly replaced, so the benefits were short-lived. Had a proposed ban been adopted in the 1860s it would have prevented many years exposure to hazardous mineral colours. The positive list of 1957 reduced the proportion of harmful coal tar dyes from 54% of the total to 20%. Regulations brought a greater reduction in hazard levels than voluntary trade action. Delays in the introduction of a positive list created a significant hazard burden. EFFECTS ON INNOVATION were assessed from patents and discovery dates. Until the 1950s food colours were adopted from textile colours. The major period of innovation for coal tar colours was between 1856 and 1910, finishing well before regulations were made in 1957, so regulations cannot be blamed for the decline. Regulations appear to have spurred the development of at least one new coal tar dye, and many new plant colours, creating a new sector of the dye industry. EFFECTS ON CONSUMER CHOICE were assessed by case studies. Coloured milk, for example, was banned despite its popularity. Regulations have restricted choice, but have removed from the market foods that were nutritionally impoverished and poor value for money. Compositional regulations provided health protection because they reduced total exposure to colours from certain staple foods. Restricting colours to a smaller range of foods would be an effective way of coping with problems of quality and imperfect toxicological knowledge today.

Retail competition and consumer choice:contextualising the “food deserts” debate

The “food deserts” debate can be enriched by setting the particular circumstances of food deserts – areas of very limited consumer choice – within a wider context of changing retail provision in other areas. This paper’s combined focus on retail competition and consumer choice shifts the emphasis from changing patterns of retail provision towards a more qualitative understanding of how “choice” is actually experienced by consumers at the local level “on the ground”. This argument has critical implications for current policy debates where the emphasis on monopolies and mergers at the national level needs to be brought together with the planning and regulation of retail provision at the local, neighbourhood level.