Profit measurement and UK accounting standards: a case of increasing disharmony in relation to US GAAP and IASs

Pauline Weetman, E. A E Jones, C. A. Adams, S. J. Gray

    Research output: Contribution to journalArticle

    42 Citations (Scopus)

    Abstract

    UK accounting practice differs from International Accounting Standards (IASs) particularly with regard to amortisation of goodwill, provision for deferred taxation and the accounting treatment of pension costs. Under the core standards programme of the IASC the IASs have emerged closer to US practice. This paper evaluates the profit of those UK companies reporting to the Securities and Exchange Commission (SEC) in 1988 and 1994, spanning a period which saw the establishment of the ASB and the implementation of the IASC s comparability project An increasing gap was found between the reported profit under UK accounting principles and that restated under US GAAP. The difference lay most frequently in accounting for goodwill, provision for deferred tax, and the accounting treatment of pension costs, with accounting for goodwill showing a particularly significant impact in 1994 Notwithstanding the introduction of FRS 10, an overall impression of increasing disharmony could continue to cause reconciliations to be required of UK companies seeking full listing on a US stock exchange, with consequent disadvantage relative to companies in other European countries seeking international capital in the US.

    Original languageEnglish
    Pages (from-to)189-208
    Number of pages20
    JournalAccounting and Business Research
    Volume28
    Issue number3
    DOIs
    Publication statusPublished - Sep 1998

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