How Arbitrary are International Accounting Classifications? Lessons from Centuries of Classifying in Many Disciplines, and Experiments with IFRS Data

65 Pages Posted: 16 Oct 2013 Last revised: 28 Jan 2014

See all articles by Christopher William Nobes

Christopher William Nobes

University of London - Royal Holloway College

Christian Stadler

University of London - Royal Holloway College

Date Written: August 24, 2013

Abstract

The process of classification is central to the daily task of doctors and librarians; and it is the foundation of study and research in chemistry and biology. Double-entry bookkeeping and the preparation of financial statements are classification activities of accounting practice. Classifying national accounting systems has long been an aspect of accounting research. This paper seeks to extract lessons for accounting researchers from anthropology, biology, chemistry, cosmology and medicine. In particular, we examine how the classifiers themselves and the characteristics that they choose can affect classification. We observe that objectivity is neither possible nor desirable in classification. Despite the arbitrariness, some classifications can be more reasonable or more useful than others. For previous accounting classifications, we analyze the classifiers, the scope, the characteristics used, the data and the classification techniques. We report various problems. We then empirically investigate the sensitivity of classifications to such issues as the characteristics chosen, and the countries and sectors included. For this, we hand pick data on the practices of large listed companies from 12 jurisdictions relating to 14 accounting topics under International Financial Reporting Standards. We show how different researchers could produce different classifications, particularly depending on which accounting topics are used to represent the countries.

Keywords: classification, international accounting, meta-analysis, accounting choice, IFRS, sensitivity

Suggested Citation

Nobes, Christopher William and Stadler, Christian, How Arbitrary are International Accounting Classifications? Lessons from Centuries of Classifying in Many Disciplines, and Experiments with IFRS Data (August 24, 2013). Accounting, Organizations and Society, 38(8), 2013, 573-595, Available at SSRN: https://ssrn.com/abstract=2340419

Christopher William Nobes (Contact Author)

University of London - Royal Holloway College ( email )

School of Management
Royal Holloway
Egham, TW20 0EX
United Kingdom

Christian Stadler

University of London - Royal Holloway College ( email )

Egham
Surrey, Egham TW20 0EX
United Kingdom

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