Harmonisation of accounting standards: disclosure policies and practices of european commercial banks

International Accounting and Finance

Master Thesis No 2001:11

Harmonization of Accounting Standards

-Disclosure Policies and

Practices of European Commercial Banks-

Fossung Michael Forzeh & Rexon Tayong Nting

Graduate Business School

School Of Economics And Commercial Law

Göteborg University

Issn 1403-851x

Printed By Elanders Novum AB

ABSTRACT

This research has been carried out to review the effectiveness of the European Commission (EC) Directive on regulating financial reporting policies and practices of companies in the EU member countries. This has been achieved through a comparative analysis of financial reporting practices of some key European banks. A sample has been drawn from two banks each in the United Kingdom, Sweden and Germany - countries perceived to be a representative of three different financial reporting cultures within the European Union.

Focusing on measurement and valuation methods, consolidation practice, and how financial information is presented, we found that comparable financial reporting exists among banks in the same country more than among banks in different European countries. Any divergence in reporting practice could be explained by the individual banks reporting needs and culture, which are shaped by many factors including the security market^1(*) requirements and the institutional environments of different member countries. The influence of individual company needs explains why most German banks use the International Accounting Standards, and the influence of different institutional environments explains why most Swedish banks use national standards. The effort of the European Commission has to some extent increased harmonization but not standardization.

Key words: financial reporting, policies and practices, European banks

* ¹ Stock markets in which the bank is listed or where the bank seeks listing.