Accounting Regulation and Management Discretion - A Case Note

24 Pages Posted: 4 Sep 2012

See all articles by Bernardo Bátiz‐Lazo

Bernardo Bátiz‐Lazo

Bangor University - Bangor University

Mark Billings

University of Nottingham

Date Written: September 2012


This article explores the manipulation of published financial reports in order to counter the potentially unfavourable impact of newly introduced regulation. In this case the reported capital ratio of a major British building society was enhanced using a sale and leaseback transaction with a related party and a change in depreciation policy, methods which reflected limited alternatives. Analysis of the case is set in the context of the sector and addresses the questions of whether these manipulations were within then‐prevailing generally accepted accounting principles and why, despite disclosure in the society's financial statements, they failed to attract public comment or concern, regulatory action or an audit qualification. In examining a major British mutual financial organization we depart from traditional analyses of managerial discretion in accounting choices in British companies.

Keywords: Accounting manipulation, Building societies, Creative accounting, Depreciation, Sale and leaseback, United Kingdom

Suggested Citation

Bátiz‐Lazo, Bernardo and Billings, Mark, Accounting Regulation and Management Discretion - A Case Note (September 2012). Abacus, Vol. 48, Issue 3, pp. 414-437, 2012, Available at SSRN: or

Bernardo Bátiz‐Lazo

Bangor University - Bangor University ( email )

Bangor, Wales LL57 2DG
United Kingdom

Mark Billings (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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