In recent years major efforts have been made to standardize accounting practices

ID: 3129540 • Letter: I

Question

In recent years major efforts have been made to standardize accounting practices in different countries; this is called harmonization. In an article in Accounting and Business Research, Emmanuel N. Emenyonu and Sidney J. Gray studied the extent to which accounting practices in France, Germany, and the UK are harmonized.

Depreciation method is one of the accounting practices studied by Emenyonu and Gray. Three methods were considered—the straight-line method (S), the declining balance method (D), and a combination of D & S (sometimes European firms start with the declining balance method and then switch over to the straight-line method when the figure derived from straight line exceeds that from declining balance). The data in the table (below) summarize the depreciation methods used by a sample of 78 French, German, and U.K. firms.

Use these data and the results of the chi-square analysis in the table (above) to test the hypothesis that depreciation method is independent of a firm's location (country) at the .05 level of significance. (Round your answer to 3 decimal places.)

(a)

Explanation / Answer

From the above table, it is given that Chi-square statistics is 50.894 and the corresponding p-value is 0.0000.

Degrees of freedom = (3-1)*(3-1) = 4

Since p-value is less than the given level of significance, we reject the null hypothesis.

Conclusion : Depreciation method is not independent of a firm's location (country) at the .05 level of significance

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In recent years major efforts have been made to standardize accounting practices

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In recent years major efforts have been made to standardize accounting practices

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