AN EXPLORATORY AND HEURISTIC INVESTIGATION INTO THE IMPACT OF INCONSISTENT ACCOUNTING PRACTICES IN THE COAL EXTRACTION INDUSTRY -- A SURVEY APPROACH

A recent survey by the National Coal Association's Accounting Standards and Practices Subcommittee, Results of the 1980 Survey of Accounting Practices in the Coal Industry, documents that financial accounting practices are inconsistent in the coal extraction industry. The purpose of this study is to evaluate the impact of these inconsistent accounting practices and to consider the relative significance of the basic accounting conventions of matching and realization in producing the inconsistent accounting practices.;An overall response rate of 53 percent was obtained, including a 79 percent response from the national accounting firm personnel. The findings of the expert opinion survey support the conclusion that inconsistent accounting practices in the coal industry may seriously impair users' ability to compare financial results of coal producers. The findings support the need for authoritative or quasi authoritative accounting standards.;The experts' rating of the importance of individual accounting practices reveals three areas which they rate highest in causing material differences in financial statement numbers: (1) accruing reclamation and closing costs; (2) the capital expense decision in regard to development costs; and (3) accounting for employee benefits (black lung). A review of the matching and realization conventions in a coal production setting concludes that the matching convention is primarily responsible for the inconsistency of financial accounting in this industry.;This study has a heuristic nature. It is a beginning. Further study is needed to measure the materiality of the differences generated by accounting practices now in use in the coal industry and to determine if there are any systematic patterns involved in the accounting differences.;An expert opinion survey is employed as a measurement instrument. A purposive sampling plan is developed, using judgment to obtain a representative group of individuals who are expert in the financial accounting practices of coal extraction companies. This group consists of the chief financial officers of 183 coal-producing companies and 54 representatives of national accounting firms. Included in the group are representatives from the 99 largest coal-producing companies in the United States and 54 individuals in public accounting from each of the traditional "big eight" national accounting firms.