Financial Reporting in European Shipping Industry
Comparability between companies is a desirable characteristic of accounting. All publicly listed companies in EU member countries are therefore required to report consolidated financial statements in accordance with IFRS.
However, the harmonization of accounting standards does not necessarily lead to harmonization of financial accounting practice. To examine the level of comparability in accounting practice, a study is carried out on the accounting for vessels in European shipping industry. This involves both measurement and disclosure practices. The focus in the study is on the firms' method of valuation, depreciation, impairment and leasing. All these areas require management's choice of method, estimate or judgment when financial statements are prepared.
There are differences in how vessels are accounted for in practice. Differences in depreciation can be explained by dividing the shipping companies into segments. The interpretation is that similar vessels are depreciated in the same way, which is necessary to achieve comparability. No other differences can be explained by the segment. According to the literature, management's incentives affect accounting choices. This may explain differences in accounting practices. The results also show that industry practices have evolved, and that some segments are more homogeneous than others.
There are also significant differences between countries with respect to how the vessels are accounted for. This means that previous accounting practices continue to exist, despite the introduction of IFRS. In this regard, the study shows the deficiencies in the consistent application of IFRS in Europe, which is necessary prerequisite for comparability.
These are the conclusions in Anna Karin Pettersson’s licentiate thesis. Data was collected from annual reports for the years 2007 and 2008.