Reviewed by Kathleen E. Sinning Western Michigan University
Although the Dutch have a keen awareness of developments in financial accounting outside their country, few non-Dutch accounting scholars know much about the evolution of Dutch financial reporting because little concerning it has been written in English. Company Financial Reporting: A Historical and Comparative Study of the Dutch Regulatory Process closes that gap. The authors have done a masterful job of analyzing the events leading to the current state of financial reporting in the Netherlands and providing the reader with a concise but thorough review of the economic, legal, political, and cultural environment in which the Dutch regulatory process has developed.
In the first chapter, the organizations, individuals, attitudes, and traditions that have shaped the Dutch regulatory process are introduced. The Dutch capital markets, the principal employer and employee federations, company law, and the evolution of the auditing profession are also examined.
Freedom in financial reporting has been a hallmark of Dutch accounting since the passage of the first company law. Over time, as changes occurred in the Dutch business climate, in the regulation of the Dutch auditing profession, and in the international accounting arena, attitudes toward financial reporting were modified. Chapters Two through Six of Company Financial Reporting analyze the events leading to the current state of financial reporting, in chronological order, beginning with the first attempts to regulate limited companies in the late nineteenth century. The chapters are organized around major initiatives to improve financial accounting.
Since there is very little literature on Dutch accounting his-tory, the authors relied extensively on original source material including parliamentary proceedings, court decisions, confiden-tial minutes of committee meetings, committee reports, com-ment letters to exposure drafts, newspaper and magazine articles and editorials, speeches, and 90 interviews with key people involved in the regulatory process. The chapters contain a wealth of detail including the names and backgrounds of committee members, contents of exposure drafts and final guidelines, and reactions by businesses, the financial press, and the auditing profession to proposals and reports. The result is a lively account that does not merely outline the events that occurred, but reflects on the personalities, motives, and power struggles behind the actions.
Despite more than a century of activity aimed at improving financial reporting, Dutch companies still enjoy great flexibility in accounting practice. Compliance with recommended stan-dards beyond the legal requirements is still not enforced. In Chapter Seven, the regulatory process in the Netherlands is compared with that in the United Kingdom and the United States. Differences in the legal systems, national cultures, and capital markets are examined to help explain the differences in the development of financial reporting requirements in each country.
The Netherlands is a country in which “progress is made through consensus and compromise” [p. 3]. The authors feel that an unfortunate consequence of the consensus approach in financial reporting regulation is that the guidance it produces is characterized by “ambivalence and the lack of clear direction” [p. 373]. In the final chapter of the book, they make specific recommendations for policy and procedural changes including strengthening the political process for promoting improvement in financial reporting and having the Dutch auditing profession and members of academe take a leadership role in setting norms of financial reporting.
Although Company Financial Reporting is a richly detailed study of the efforts to advance and reform financial reporting in the Netherlands, its analysis of the factors influencing the regulatory process makes it a valuable resource for any accounting scholar interested in financial accounting.
