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.

Purpose: – The purpose of this paper is to investigate Indian companies’ compliance with the mandatory and voluntary corporate governance disclosure requirements of the Stock Exchange Board of India’s Clause 49.Design/methodology/approach: – The authors develop a corporate governance disclosure index and sub-indices based on Clause 49. Annual reports of listed Indian companies are scored according to their disclosures in two periods – pre and post amendments to Clause 49.Findings: – Indian companies are highly compliant with corporate governance disclosure requirements of Clause 49. Disclosure increases significantly after amendments to Clause 49 as the penalties for non-compliance increase in severity. Government controlled firms disclose significantly less than privately owned firms.Research limitations/implications: – The findings are consistent with bonding theory and the authors note that the presence of an independent regulator (with powers to take action against violators) provides corporate India with additional incentives to comply with corporate governance reform.Practical implications: – These findings have important implications for policy makers and regulators as they contribute to the debate on the choice between formal corporate governance regulation versus informal self-regulation. The study also has implications for understanding factors associated with the adoption of disclosure practices in general.Originality/value: – This is the first study to examine disclosure compliance in a major developing country pre and post amendments to mandatory corporate governance requirements. Prior evidence indicates a low level of disclosure in India but our results demonstrate an improvement in line with our theoretical predictions that suggests, India is converging towards an Anglo-Saxon model of corporate governance.

The European Commission has long been concerned over the extensive disclosures required by the Securities and Exchange Commission (SEC) in form 20-F. As the IASC moves towards completing its core standards programme to the satisfaction of IOSCO, the debate has centred around the likelihood of its acceptance by the SEC. This paper examines aspects of the reconciliations to US GAAP, provided by UK registrant companies, and proposes an approach of selective disclosure focusing on material items. We find that goodwill was the dominant adjustment prior to the implementation of FRS 10. When goodwill is excluded there were on average 4.9 adjustments to net income and 5.8 adjustments to shareholders' equity per company reporting. Defining materiality as 10% or more of the reported US net income or shareholders' equity and disregarding immaterial items reduces these to an average of only 1.6 adjustments to the income statement and 0.6 adjustments to shareholders' equity per company. We find that the majority of adjusting items in the reconciliations are not material, adding weight to arguments opposed to the reconciliation requirements. We consider the possibility of a more focused disclosure requirement for foreign companies reporting to the SEC.

Although the impact of growth opportunities on company value has been recognized since Miller and Modigliani (1961), relatively little empirical work has been undertaken to value growth opportunities. In this study the validity of the KBM model (Kester (1984) and Brealey and Myers (1981)) is tested on a sample of 278 large UK companies for 1987-1995. Applying standard assumptions, the value of growth opportunities is found to account for a larger proportion of market values than assets-in-place. However, tests of the KBM model cast doubt on the credibility of these results and the validity of the model. The KBM model is highly sensitive to the inclusion of inflation in the risk free interest rate, and with a real interest rate (which on theoretical grounds is preferable), the model ceases to provide credible results. The model also fails to provide results consistent with expectations derived from option pricing theory regarding the relationship between the value of growth opportunities and the value of assets-in-place. These limitations of the KBM model indicate a need for a reappraisal of the method of measuring the value of growth opportunities.

While numerous empirical studies include proxies for growth opportunities in their analyses, there is limited evidence as to the validity of the various growth proxies used. Based on a sample of 1942 firm-years for listed UK companies over the 1990–2004 period, we assess the performance of eight growth opportunities measures. Our results show that while all the growth measures show some ability to predict growth in company sales, total assets, or equity, there are substantial differences between the various models. In particular, Tobin's Q performs poorly while dividend-based measures generally perform best. However, none of the measures has any success in predicting earnings per share growth, even when controlling for mean reversion and other time-series patterns in earnings. We term this the ‘growth companies puzzle’. Growth companies do grow, but they do not grow in the key dimension (earnings) theory predicts. Whether the failure of ‘growth companies’ to deliver superior earnings growth is attributable to increased competition, poor investments, or behavioural biases, it is still a puzzle why growth companies on average fail to deliver superior earnings growth.