Why does affect matter in accounting: a review of experimental studies on the effect of affect

PurposeThe effect of affect in accounting contexts has recently attracted interest, but numerous questions still remain. Given that affect can significantly impact a variety of accounting judgments and decisions in theoretically different manners, the purpose of this synthesis is to understand the state of extant accounting literature in affect and identify directions for future research.Design/methodology/approachThis synthesis systematically reviews experimental accounting papers related to affect in both theoretical and functional respects. The authors first elaborate on the affect infusion theory as the theoretical foundation for the synthesis. The authors then present the sampling method. In Section 4, the authors conceptually and factually summarize affect accounting papers in terms of four major functional areas: auditing, managerial/corporate accounting, tax and financial accounting. The implications of moderators examined in some papers are also discussed. Finally, the authors conclude by revisiting the importance of affect in accounting contexts.FindingsThroughout the synthesis, the authors provide future research opportunities with respect to theories, each functional area and other gaps in the accounting literature.Originality/valueThis synthesis contributes to the accounting literature by providing a pathway to understand the development of accounting research on affect, integrating theoretical foundations and offering future research opportunities to advance the literature.

Adapting Russian Accounting to the International Standards: Models, Algorithms, and Amendments

The article deals with the impact of the Covid19 pandemic on accounting and financial reporting in terms of the presentation of certain items in the income statement, the assessment of accounting judgments, key sources of uncertainty, and business continuity assumptions. The research focuses on the features of amendments, algorithms, and principles for implementing the provisions of IFRS in 2020: IAS (1) The authors proposed an algorithm for transforming (adapting) financial statements from RAS to IFRS. The article, systematized the approaches representing the key areas in the adaptation of the relationships that create the accounting environment for the successful implementation of the objectives of the transition to IFRS. An integrated approach to the adaptation stages takes into account the external and internal environment of the elements of the transformation of financial statements. The stages interact and are set up for the result of a successful transition to the formation of financial statements in accordance with IFRS. The authors note that the factors affecting the efficiency, reliability and high operational effect of the stage depend on many variables. The authors have developed a model of procedures for accounting and control assessment of elements compatibility for the adapting, and unifying stage of transition from RAS to IFRS.

The impact of conservatism and secrecy on the IFRS interpretation: the case of Tunisia and Egypt

Purpose The effect of culture, through the accounting values of conservatism and secrecy, on accounting judgments is an area of research extensively studied in developed countries. However, little research has focused on this issue in developing countries, specifically Arab countries. Thus, this study aims to fill this gap by investigating the impact of the combined effect of the culture/accounting dimensions on the interpretation of the probability expressions used in the international accounting standards/international financial reporting standards (IFRSs) in two North African/Arab countries: Tunisia and Egypt. Design/methodology/approach In the first place, this study determines Hofstede’s cultural index scores for Tunisia, ignored in his original model and updates those related to Egypt, which provides a more relevant understanding of the cultural effect. Then, the study relies on the Hofstede/Gray cultural accounting model to examine the extent to which the accounting values of conservatism and secrecy may affect the recognition of the increase and the decrease of income and the disclosure of this information in the financial statements by postgraduate accounting student in both countries. Findings The results provide evidence of the generalizability of Gray’s conservatism hypothesis in the North African/Arab countries (i.e. Tunisia and Egypt), at least in the context of income recognition. Moreover, the findings demonstrate that culture, through its influence on the accounting value of secrecy, affects the interpretation of probability expressions used in the IFRSs to establish disclosures. Research limitations/implications This study calls for more attention from the standard setters to provide further guidance related to the consistent and accurate numerical value that needs to be assigned to the probability expressions to reduce the ambiguity related to their interpretation. The international accounting standards board (IASB) should pay greater attention to the use of vague probability expressions in developing the IFRSs to promote the true comparability of financial reporting worldwide. Like with any research, this study implies certain limitations specifically related to the sample selection, a sample size, which may affect the generalizability of the results. Thus, future research may rely on a larger sample combining and cover other cultural areas. Practical implications The results of this study may give insights into the practical issues faced by the accounting practitioners and which are related to the interpretation and the application of the IFRS including probability expressions. This may trigger their attention toward this issue to reduce the occurrence of these expressions in the revised and newly released standards to guarantee homogeneous financial reporting practices across countries and enhance the IASB’s objective of international accounting harmonization. Originality/value This study might be the first one that investigates the issue of the IFRS interpretation in two North African and Arab countries: Tunisia and Egypt. It also provides an original investigation of the cultural effect on accounting judgments based on the actualized Hofstede’s cultural indexes, especially for Tunisia which is ignored in the original country classification.

Roll the Dice—Let’s See If Differences Really Matter! Accounting Judgments and Sustainable Decisions in the Light of a Gender and Age Analysis

This research aims to investigate whether gender and age of Professional Accountants influence their opinion upon accounting judgments and sustainable decision-making. Through a questionnaire, accountants were interrogated about their education, professional profile, age, gender, personality traits, and their perception on accounting judgment and professional behavior. On one hand, results showed that women accountants are more inclined to comply with accounting regulations and more interested in following an ethical behavior. Moreover, women tend to be more interested in fulfilling managers’ expectations and more willing to collaborate. On the other hand, men accountants proved to be more independent in judgments and more skeptical. Furthermore, men have a greater propensity to make accurate, sustainable judgments, considering the evaluation of goodwill as more important than women. However, no correlations were found between age, gender and accountants’ perception on the theoretical framework of professional accounting judgment. As the age of accountants grows, the compliance degree to regulations increases. This study adds value to gender accounting literature by the way it examines accountants’ behavior and perception towards accounting judgments and sustainable decisions in correlation to gender diversity and age.

Research on the institutional design of accounting systems: Theoretical and methodological considerations

Subject. The article discusses rules, ethical principles for the emergence of institutional design of accounting systems and their distinctions. Objectives. The study identifies and evaluates how ethical principles will influence the institutional design of the national accounting system. We also provide hands-on advise on the use of its constituents. Methods. The study is based on general and special methods of research, such as theoretical principles of the institutional theory, dialectical method, methods of abstract research, logic method, systems analysis, generalization, classification, comparative analysis and synthesis of data. Results. I analyzed general methods of accountancy and sorted comparative characteristics inherent in the establishment of the accounting process given there is a limited number of accounting methods and accounting judgments, limited room for the artificial manipulation of data and transactions, prohibition to depart from effective rules for the institutional design of accounting systems that stemmed from the existing moral and ethical principles. I substantiated the content of moral and ethical principles in the concept of law and their use in accounting, considering that they unveil key dealing restrictions. The article sets forth the procedure for making them, determining how they can be practiced across jurisdictions in accordance with the existing macroeconomic development traits. Conclusions and Relevance. What really matters for the development of accounting is an opportunity for business to continue their usual working process during crises and under pressure of the external market. In such circumstances, it is crucial to exclude unreasonable expectations of accounting users in case of risk events which do not result from corporate operations. What else deserves further research is a variety of accounting models that exist worldwide, rather than characteristics of the accounting system that we spotlight. As the accounting system evolves and gets more refined as an inseparable part of a greater accounting system, cross-disciplinary approaches become more and more relevant, since they blend some scientific visions. The findings can be used in the theory of accounting development.

Comparative Characteristics of Professional Accounting Judgments Classification Features

The article is devoted to the problem of forming a unified conceptual model for the application of professional accounting judgment. The model takes into account not only the concept, but also the prerequisites, conditions of application and the process of judgment developing along with non-standard situations on which an accountant can express his competent opinion. The methodological framework of the study is based on the scientific developments of domestic and foreign scientists regarding the classification of professional accounting judgments and their comparative characteristics. The research methodology provides for the systematization of types of accounting judgments that affect the financial and economic activities of the organization. The result of the research is the development and justification of the author’s classification of accounting judgments singling out such classification features as organizational and legal form of a business, type and scope of economic activity, financial condition and accounting standards applied, which makes it possible to determine the purpose of professional judgment of an accountant. The further specification of classes and the development of classification features of professional accounting judgment will result in perceiving this category not only as a tool for solving applied accounting problems, but also as a conceptual platform built into the structure of accounting theory. The proposals based on the study are intended for effective use of accounting judgments as a comparatively new accounting and reporting tool to generate accounting and analytical information by the specialists of accounting departments of different organizations. The system of classification decisions will most fully define the role and designation of accounting judgments in accounting practice.

The Effects of Experience and Client-Preferred Outcomes on Accountants' Complex Loss Valuation Judgments

ABSTRACT Accounting regulators, practitioners, and academics have all expressed concern that client preferences unduly influence accountants' judgment. This study builds on Ponemon (1995) by investigating the effects of client outcome preferences and experience levels on practicing forensic accountants' and auditors' complex loss valuation accounting judgments. Based on studies in motivated reasoning and accounting experience, we predict and find that experienced accountants have the capacity to ignore client-preferred outcomes when evaluating evidence. Specifically, when acting as an expert witness in a lawsuit involving a loss valuation dispute, forensic accountants and auditors both provide higher estimates of the plaintiff's damages when assuming the role of an expert retained by the plaintiff versus the court, unless participants possessed high experience. In addition, we find no difference in loss valuation judgments for practicing forensic accountants and auditors when both have high experience.

Concepts-Based Education in a Rules-Based World: A Challenge for Accounting Educators

ABSTRACT In this paper we discuss the challenges of teaching U.S. GAAP and IFRS side by side. We then focus on one particular challenge of teaching both the more detailed U.S. standards and the less specific IFRS: the likelihood that students will “anchor” on the precise rules in U.S. GAAP when applying the less specific guidelines under IFRS. As a part of this discussion, we report on a classroom experiment designed to test for the presence of anchoring on U.S. GAAP rules when applying IFRS in a lease classification task. Our results indicate that students do anchor on the U.S. GAAP bright-line values for lease accounting when classifying leases under IFRS, primarily when U.S. GAAP rules provide an acceptable quantification of IFRS' less precise guidelines. We do not find that teaching order (i.e., teaching U.S. GAAP first versus IFRS first) directly affects anchoring or lease classification. However, a moderation analysis suggests the interaction between teaching order and anchoring may affect lease classification. Our results suggest that, where possible, instructors may wish to teach principles-based accounting prior to rules-based accounting to mitigate potential anchoring by students and its effect on their accounting judgments. Data Availability: Contact the authors.