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, Emmanual N. Emenyonu and Sidney J. Gray (1992) studied the extent to which accounting practices in France, Germany, and the United Kingdom are harmonized. a. 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 Table 12.5 summarize the depreciation methods used by a sample of 78 French, German, and U.K. firms. Use these data and the MegaStat output to test the hypothesis that depreciation method is independent of a firm’s location (country) at the .05 level of significance. TABLE 12.5 Depreciation Methods France Germany UK Total Straight Line (S) 15 0 25 40 Declining Bal (D) 1 1 1 3 (D & S) 10 25 0 35 Total Companies 26 26 26 78 Chi-Square Test for Independence France Germany UK Total Straight Line (S) 15 0 25 40 Declining Bal (D) 1 1 1 3 (D & S) 10 25 0 35 Total Companies 26 26 26 78 50.89 chi square 4df 2.35E-10 p-value