Motivational Factors to Determine Accounting Choice: Unfolding company size as assumption

Abstract: Purpose: The purpose of this study is to investigate and unfold the criterion of company size as the underlining assumption of categorization in existing standard setting and financial research and is conducted in a Swedish context focusing on small- to medium sized real estate companies. Method: I use semi-structured interviews with ten business leaders and two accountants specialized in SME accounting and real estate accounting when gathering the material and from there analyze the material with the use of my prior knowledge combined with the theoretic frame presented in the study. Conclusion: I identify factors to help diversify the division of companies when determining whether they would benefit from a rules based or principles based accounting framework. In the Swedish setting I conclude that company size is a defining categorizing factor but that the current definition of size is limited to balance sheet aspects and would benefit from a wider definition where internal growth ambitions is one factor to include. Further research: This study noted a possible shift of power, a potential power struggle, between the accounting profession and the auditing profession. This potential power shift may result in inefficiencies in small companies and future research may be beneficial. I also touch upon a perceived problem where some managers feel compelled by their accountant or auditor to change accounting framework to a more complex one, not because it is better suited for their need but rather to enhance their dependency of the accountant or auditor. This phenomenon might be of interest to study further as this might represent a highly undesirable effect of recent changes in the Swedish accounting framework.