Corporate responses to the introduction of the Australian consolidation standard: a test of disclosure cost explanations

Abstract

AASB 1024 was introduced to mandate consolidation of controlled associates, and hence disclosure of debt issued by these associates. Firms with debt-laden controlled associates faced significant disclosure costs, so therefore had an incentive to avoid consolidation. Disclosure cost arguments are used to generate hypotheses in relation to pre- and post-adoption investment structures. Corporate sell-offs and straight non-disclosure of controlled associates are found to have been significant mechanisms for reducing the impact of the disclosure provisions of AASB 1024.