How do private firms time their adoption of new accounting rules? This was the question asked by professors Sylvain Durocher of the Telfer School and Anne Fortin of the École des sciences de la gestion at Université de Québec à Montréal (ESG UQAM) in a recent study published in the Australian Accounting Review. They surveyed Canadian CFOs and found that economic cost-benefit considerations explain adoption timing decisions only in part.

Background of the study

“What leads private firms to opt for early adoption or to wait until the latest date possible is an interesting question, because many countries around the world are considering adopting a new accounting framework for private firms,” notes Durocher, a member of the accounting group at the Telfer School. Little is known about how private firms arrive at their policy decisions, let alone how they time their adoption of new accounting rules. “The Canadian experience provides an example for study: A new set of accounting standards for private enterprises (ASPE) took effect here in 2011, with early adoption being allowed starting in 2009.” 

Durocher said financial statement users (primarily lenders and venture capitalists in the case of private enterprises) have to grapple with non-comparable financial information during transition periods. They would therefore benefit from data on the behaviour of adopters, as would private enterprise managers and accounting standard setters.

Expedite or defer?

The study found that it isn’t only cost-benefit considerations such as expected impacts on earnings and leverage that shape CFOs’ attitudes towards their adoption timing decisions. Issues of “perceived behavioural control” also play a role. For example, managers with good knowledge of ASPE seem to opt for late adoption. But when their companies are early adopters of newly promulgated standards generally, managers prefer early adoption. Managers with longer tenure and the existence of firm working groups to discuss changes in accounting rules are also factors that bode well for early adoption. Conversely, managers appear to defer adoption when they intend to apply the fair value exemption to capital assets or work for larger firms.

The results also provide evidence that managers rely on the external professional accountant’s advice on ASPE adoption. Discussions in professional business networks and industry and banker perceptions are also important factors. The presence of significant foreign transactions is a consideration associated with managers’ decisions to defer adoption.

Practical implications are offered. Accounting standard setters could strive to conduct field tests with private businesses to help prospective adopters assess the impact of proposed standards. Private enterprise managers could develop systems for gathering information on newly promulgated standards (including costs and benefits to the firm).

“Another important takeaway for lenders and venture capitalists is that early adoption is associated with a perceived positive impact on financial statements. This positive assessment by managers might be factored into users’ investment decisions.” 

A paper authored by Professor Umar Ruhi and Dina Al-Mohsen (M.Sc.) won a best paper award at the 24^th IBIMA (International Business Information Management Association) Conference in Milan, Italy. The paper was titled “Enterprise 2.0 Technologies for Knowledge Management: Exploring Cultural, Organizational & Technological Factors.” 

Research by Wojtek Michalowski demonstrates the potential for using advanced decision-support tools for managing patients with multiple illnesses. It comes at a time of great discussion in the healthcare field around the themes of technology-assisted decision-making and use of disease-specific guidelines in complex patient cases.

“From a medical perspective, it’s a super important issue,” says Michalowski, professor of health informatics at the Telfer School. “There’s strong evidence that use of guidelines improves patient care. But for patients with comorbid conditions which have multiple diseases, these guidelines cannot be used directly. Concurrent use of multiple guidelines poses a risk of undesired health effects, including adverse drug-drug or drug-disease interactions.”

So Michalowski and his team are collaborating with hospital physicians to develop algorithms that will allow for the automatic execution of multiple guidelines; “along with automatic mitigation when there are adverse interactions.”

The ultimate goal of this research, which is funded by the Natural Sciences and Engineering Research Council of Canada (NSERC), can be illustrated by the following simple scenario. A complex patient with three comorbid diseases is being managed in a medical ward. The clinical practice guidelines (CPGs) for these diseases are automatically retrieved; patient data recorded in the Electronic Health Record is consulted; and the algorithms developed by Michalowski and his team automatically revise the CPGs into a patient-specific and fully customized guideline – enabling the physician to arrive at a consistent therapy for the patient.

Some studies show that individuals who have two or more comorbid conditions represent more than half the population 65 years or older. “For these patients, a lack of methods to facilitate the concurrent application of the guidelines severely limits their use in clinical practice,” says Michalowski. “How to fix this is one of the grand challenges of clinical decision support.”

Professor Michalowski will present this research at the prestigious American Medical Informatics Association (AMIA) Annual Symposium in Washington, D.C., Nov. 15-19.  He and his colleagues were nominated by the Scientific Committee of AMIA 2014 for a Distinguished Paper Award, one of only 15 out of 249 accepted papers to receive this honor.  

Professor Ivy Lynn Bourgeault of the Telfer School will be a Visiting Scholar at the University of Sydney Business School over the next three weeks. On November 6, she delivers the keynote address at the Global Health Migration Symposium organized by the Managing Global Migration Research Group, University of Sydney. Her presentation is titled, “Contrasting ‘Source’ and ‘Destination’ Country Perspectives on the Migration of Health Workers.”  On November 11, professor Bourgeault will present her recent research on the optimization of scopes of practice in healthcare at University of Newcastle in New South Wales. She is the keynote speaker at the “Symposium on Collaborations in Healthcare” sponsored by Newcastle Business School.