The valuation implications of international accounting diversity: An examination of the United Kingdom

The emergence of global competition has coincided with, and, to some extent, given rise to major changes in the financial environment. A distinct feature of the new international financial environment is the trend towards greater integration of the world's capital markets, which has presented market participants with a host of new problems. A commonly cited investor problem is the difficulty they face interpreting financial statements based on the diverse set of generally accepted accounting standards (GAAP) across countries. Naturally, differences in international accounting practices are "important," in the sense that one must know whether they are reading financial statements prepared according to Swiss, Japanese, or American accounting principles. However, the issue of whether the measurement differences in GAAP across countries are of practical significance (i.e., would make a difference in an investor's valuation decision) has remained relatively unexplored.;In this thesis, the issue of whether differences in generally accepted accounting principles across countries are of practical significance (i.e., would make a difference in an investor's valuation decision) is examined. Specifically, the valuation implications of three of the largest accounting practices that are followed in the United Kingdom but not in the United States are investigated, the valuation (and subsequent revaluation) of brand names and publishing titles, the partial-allocation method of accounting for deferred income taxes, and the separate disclosure of acquisition accounting components. The United Kingdom is the focus of this thesis due to its economic significance relative to other countries.;The findings in this thesis provide evidence that accounting differences across countries can be of practical significance, at least differences between the United Kingdom and the United States. In addition, the findings contribute to our understanding of the usefulness of accounting measurement practices currently being debated by international accounting policy makers.