International accounting variations before and after the transposition of Directive 2013/34/EU

Abstract

PURPOSE: The purpose of this study is to assess the prevalence of international accounting variations on small undertakings following the transposition of Council Directive 2013/34/EU (EAD), eliciting whether the EAD options taken up by the member states result in similar accounting treatments as under the Fourth Directive. In this manner, the study also seeks to classify member states in accordance to the accounting treatments taken up, both prior and post to the transposition. DESIGN: The accounting choices taken up under both the Fourth Directive and the EAD by nine member states are collected through the use of a questionnaire. To achieve the research objectives, chi-square testing and two-step clustering are used to analyse the gathered data. FINDINGS: This study reports that the most influential variable on the country’s EAD option choices is its Fourth Directive option choices. When classifying countries accordingly, two different clusters emerged both under the Fourth Directive and the EAD. In turn, these results reveal that, based on the options chosen within this research, the EAD had a minimal effect in eliminating international accounting variations across member states. CONCLUSION: This study concludes that the large amount of options present under the EAD makes comparability difficult to achieve, even for small undertakings. If options will still feature in future accounting regulations and directives, it will be practically impossible to fully eliminate all international accounting variations. VALUE: The EAD transposition has become obligatory for entities to follow as of 1st January 2016. For this reason, this study is the first one to evaluate the prevalence of international accounting variations in a number of member states following the said transposition.