The Influence of U.S. GAAP on the Harmony of Accounting Measurement Policies of Large Companies in the U.K. and Australia

• Published in: Abacus (Sydney) Vol. 37; no. 3; pp. 297 - 328
• Main Authors: Parker, Robert H., Morris, Richard D.
• Format: Journal Article
• Language: English
• Published: Oxford, UK and Boston, USA Blackwell Publishers Ltd 01.10.2001; Accounting Foundation, University of Sydney; Blackwell Publishing Ltd
• Series: Abacus
• Subjects: Accounting; Accounting policies; Accounting standards; Auditing; Australia; Business studies; C index; Companies; Comparability; Comparative studies; Econometrics; Effects; Finance; Financial statements; GAAP; Generally accepted accounting principles; H index; Harmonization; Harmony; International accounting standards; International harmonisation; Large enterprises; Measurement; Standardization; Surveys; U.K; U.S.GAAP; U.S.GAAP,U.K.,Australia; United Kingdom; United States; United Kingdom > UK; Australia; United States > US
• DOI: 10.1111/1467-6281.00089
• ISSN: 0001-3072

U.S. GAAP has increasingly become an influence on accounting practices in other countries, even aside from those traditionally considered under direct U.S. influence. The change arises from the large number of U.S. accounting standards, non‐U.S. companies listing on U.S. stock exchanges, and the amount of U.S. direct investment abroad. As the impact of U.S. GAAP varies across countries, it may affect international accounting harmony. This idea is tested by examining the level of international harmony for eleven accounting measurement policies in matched pairs of large companies from Australia and the U.K., two countries with historically strong cultural and economic links. It is argued that, in recent decades, accounting practice in Australia, more so than in the U.K., has become increasingly U.S.‐oriented. The concepts of harmony of Tay and Parker (1990) and Archer et al. (1996) are employed. International harmony is measured by the between‐country C index and chi‐square test; national harmony by van der Tas’s (1988) H index. While considerable national harmony is found in the U.K. for seven and in Australia for five accounting policies, there is considerable or complete international harmony for only three policies. Evidence is presented of the influence of U.S. GAAP as one factor explaining the poor degree of U.K./Australia international harmony. Australian companies appear to follow U.S. GAAP to a greater extent than do U.K. companies. The state of partial harmony thus existing restricts international comparability of accounting reports and may cause problems for regulators.