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Accounting Regulation and Management Discretion in a British Building Society, Circa 1960

Bernardo Batiz-Lazo and Mark Billings

MPRA Paper from University Library of Munich, Germany

Abstract: This article explores the manipulation of published financial reports in order to counter the potentially unfavourable impact of newly introduced regulation. In this case the reported capital ratio of a major building society was enhanced using a sale and leaseback transaction with a related party and a change in depreciation policy, methods which reflected limited alternatives. Analysis of the case is set in the context of the mid-term performance of the building society sector and addresses the questions of whether the manipulations involved were within then-prevailing generally accepted accounting principles and why, despite disclosure in the society’s financial statements, these failed to attract public comment or concern, regulatory action or an audit qualification. In examining a major British mutual financial organisation we depart from traditional analyses of managerial discretion in accounting choices in manufacturing, mining and transport companies prior to the watershed Companies Act 1948.

Keywords: Accounting manipulation; Creative accounting; Sale and leaseback; Depreciation; Building societies; United Kingdom (search for similar items in EconPapers)
JEL-codes: N24 M42 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-his and nep-reg
Date: 2009-05
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