Academic research on group accounting over the past fifty years.

• Author: Muller, Victor O.
• Position: Report

1. INTRODUCTION

   Consolidation accounting (also known as group accounting) has been a major field of interest for the academic research community over the past 50 years. So far however, the academic literature in the field of consolidation accounting did not offer (according to our knowledge) comprehensive reviews of the researches published in this vast area. Academic papers, which focus on different themes within a subfield of this research domain (such as goodwill, scope of consolidation etc.) usually, present a literature review of only those researches which relate to those particular topics. Therefore, our endeavor to review the most relevant literature in the entire field of consolidation accounting has been both challenging and appealing.

   As it is practically unattainable to comprehend the whole scientific knowledge of a certain line of research, we focused our analysis on those academic journals, which have been published by renowned publishers of academic papers in the field of economics, in general, and in the field of accounting, in particular. Thus, we were able to identify over 140 research articles published between 1933 and 2009 that deal with issues related to group accounting. In this article we review the selected academic literature, aiming to underline the most relevant contributions of various researchers within previously delimited periods to the accounting research community.

   The remainder of this paper proceeds as follows. In Section 2 we present the research design used to undertake this review. In Sections 3 we recorded certain key features of selected academic literature, while Section 4 (being the most extended part) presents the most relevant contributions of various researchers within previously delimited periods. Finally, Section 5 summarizes and concludes the paper.

2. RESEARCH DESIGN

   In order to review the academic literature in the field of group accounting, in the beginning of this endeavor, it was necessary to narrow the scope of the research to certain academic journals. Without any pretence to have used the most relevant selection criteria, we limited this literature analysis to those scientific journals which are being published by renowned publishers of academic papers in the field of economics, in general, and in the field of accounting, in particular, respectively Reed Elsevier, Wiley-Blackwell, Springer, Taylor & Francis, Emerald, Inderscience, as well as American Accounting Association and The Institute of Chartered Accountants in England and Wales. As a result of this selection, a number of 141 scientific papers published within 39 academic journals have been identified; of which 30 are dedicated to accounting researches and 9 are specialized in management, economics and finance. Of the 141 articles, 96 have been published in ISI-Thomson indexed journals, which indicate an increased quality level of the selected articles.

   In a next phase, in order to split into periods the time frame of the analyzed group accounting literature, we identified three major landmark events in the field of consolidated financial accounting and reporting. The first one is the issue of ARB 51 "Consolidated financial statements"(1959)--the first regulation worldwide in this field. The second landmark refers to the issuing (1983) of the 7th European Directive regarding consolidated accounts and of IAS 22 "Business Combinations". Obviously, the third point of reference consists in the issue of EC Regulation 1606/2002 regarding mandatory adoption of IFRS (for consolidated financial reporting) by listed entities from 2005. Based on these three identified landmarks in the evolution of consolidated financial reporting regulation, and also taking into consideration the fact that financial accounting research, generally, has been strongly influenced by regulations, we considered as appropriate the following periodisation for the worldwide consolidation accounting research: before 1959, 1959-1982, 1983-2001 and 2002-2009. (2009 is the last year included in our analysis).

   In order to review the international accounting literature on group accounting, we firstly recorded the values for the following characteristics of the published articles: research topic/theme, research approach, research perspective and research methodology. This quantitative approach is then followed by a thorough qualitative analysis of the selected academic literature, which aims to acknowledge the most important contributions of various researches within each of the previously delimited periods.

3. CHARACTERISTICS OF SELECTED ACADEMIC LITERATURE ON GROUP ACCOUNTING

   As mentioned above, the qualitative literature review is preceded by a brief quantitative analysis of the selected articles on group accounting. This analysis focuses on the following features of the published papers: research topics, research approach, research perspective and research methodology. These characteristics have been recorded after a detailed process of reading and analyzing the content of the 141 selected articles. The recorded values resulted from the content analysis are summarized in the following table. The interpretation of these figures (especially their evolution) has to be performed with caution, as the time periods (previously determine) are not of equal length.

   Regarding the research themes, we were able to identify eight different topics related to consolidation accounting: scope of consolidation (including the concept of control), business combination methods (acquisition or pooling of interests method), proportionate consolidation and equity method (especially in relation to joint ventures consolidation), consolidation techniques (mostly regarding intra-group transactions), goodwill (recognition, initial and subsequent measurement), consolidated statements theories (including aspects related to minority interests), general aspects on consolidation (nature of group accounts, usefulness and informational content of group accounts, disclosure and presentation regarding group accounts, regulations in the field of consolidated reporting) and education in the field of consolidated financial statements.

   The absolute frequencies of the eight identified research topics (or research directions) regarding the field of consolidation accounting indicate from the very beginning a high interest for goodwill accounting, which can be explained, in our opinion, due to the fact that goodwill represents one of the most controversial concepts in consolidation accounting, especially because of its complex nature. Also observable is the high interest for aspects regarding the scope of consolidation and the concept of control (of an entity); both notions are strongly connected and play a capital role in consolidated financial reporting. Numerous articles deal also with different aspects concerning consolidated reporting in general, including topics related to the nature of group accounts, governing principles, usefulness and informational content (including value relevance) of group accounts, disclosure and presentation regarding group accounts, regulations in the field of consolidated reporting etc. Another high interest topic among researchers is related to the proportionate consolidation method (for Joint ventures) and the equity method.

   The quantitative analysis of researchers' interest for the eight research topics reveals an upward trend except for the topics Business combination methods and Consolidation technique. This can be explained, on the one hand, based on the fact that aspects related to the consolidation techniques are usually approached and (to a high degree) clarified in articles published in professional journals and technical manuals, and on the other hand as a consequence of the elimination of the pooling of interests method (SFAS 141 and IFRS 3 "Business combinations"). The rising interest for the goodwill topic can also be explained based on the evolution of accounting regulation, namely the transition from goodwill amortization (APB 16, IAS 22 and 7th EC Directive) to goodwill impairment testing (SFAS 141 and IFRS 3). The upward trend for researches related to the scope of consolidation and the concept of control could be interpreted as a result of the international extension of groups and their diversification, as well as a consequence of the controversies regarding the consolidation/ non-consolidation of special purpose entities (especially after the Enron collapse in 2001).

4. QUALITATIVE REVIEW OF SELECTED ACADEMIC LITERATURE ON GROUP ACCOUNTING

   The most extensive part of our research review on consolidation accounting consists in the qualitative analysis of the academic literature in the field of group accounting, which aims to underline the most important contributions of various researches within the previously delimited periods (1959-1982, 19832001 and 2002-2009). As regards the research activity before 1959, we identified a reduced number of articles (6), which focused on the consolidation technique (Dickerson and Jones, 1933; Kohler, 1938) or general aspects (principles, usefulness) of group accounts (Simons, 1953). Also worth mentioning are two papers regarding consolidated financial statements theories (Moonitz, 1942 and Husband, 1954), both authors advocating in favor of the entity theory.

   4.1. ACADEMIC RESEARCH IN THE FIELD OF CONSOLIDATION ACCOUNTING IN THE PERIOD 1959-1982

   The period 1959-1982, which is marked in its debut...