Sweden's first doctoral thesis in accounting law presented

December 06, 2010

Researcher Kjell Johansson at the University of Gothenburg, recently presented Sweden's first doctoral thesis in Accounting Law. The thesis deals with the principle 'substance over form' and fair presentation of economic reality in accounting, and his findings may benefit professionals, standard setters and academia alike. The investigation results in a descriptive model - the so-called circular flow model - and in a descriptive theory on economic reality.

The literature on Accounting Law is relatively limited, a fact that Kjell Johansson wants to change with his research. Johansson feels that the field is becoming increasingly important as our world is becoming more and more internationalised. The concept of substance over form is fundamental within international accounting and has Anglo-Saxon roots. Johansson says that, in a Swedish context, the concept constitutes a new approach to accounting.

'International accounting has clearly influenced Swedish practices in recent decades, and this has for example led to more rules. The external information that businesses are obliged to provide has therefore become regulated to a larger extent, which has changed the field of accounting,' says Johansson.

The study systematically explores accounting standards regarding inventories, property plant and equipment, investment property, intangible assets, construction contracts, finance and operating leases and a few other issues to assess whether these can express substance over form and reflect the economic reality of the company and/or the market. The investigation also identifies cases where the overriding rule concerning fair presentation might be applied. In order to illustrate and explain, Johansson utilises typical cases. Johansson believes that his thesis also can be read to understand how the principle-based norms are constructed and to gain arguments to design an accounting policy in connection with application.

The study results in a descriptive model to give a fair presentation of economic reality, the so-called circular flow model, and a descriptive theory on economic reality.

'The circular flow model describes the life cycle of an asset and a liability in a company and also eight components that form the starting-point of a descriptive theory on economic reality in Accounting Law: the life cycle theory. In addition, I present a normative theory: the dimension theory. The purpose of this theory is to supply tools both to improve existing accounting standards representing economic reality and to develop new ones,' says Johansson and continues: 'The life cycle theory and the dimension theory can be thought of as starting-points for further development of a theory within the field of Accounting Law. The thesis also presents a method to improve existing accounting rules or to develop new ones as well as a method that can be used to analyse accounting norms and that can be applied in legal argumentation.'
The thesis has been successfully defended.

University of Gothenburg
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