Over the last twenty years, accounting diversity between countries has been an important issue in international accounting research. A driving force has been the growth of multinational companies across borders. The development has created new challenges in consolidating financial statements across borders to a common group accounting report. The actual behaviour at the headquarter levels and in the subsidiaries abroad when consolidating vertically to a group report has not been empirically examined. 

The main research question in the study is if Swedish multinational enterprises make the accounting adjustments that would be necessary to comply with the Swedish accounting standards in their group reports. The vertical adjustments can take place either at the parent company (group level) or at subsidiary levels. The empirical investigations were conducted as three survey investigations of companies on the Stockholm Stock Exchange (1990, 1992 and 1999) and case studies in twelve Swedish groups and their subsidiaries in Denmark, the US, and Brazil (1991-1992). The objective of the empirical study was to investigate how Swedish multinational groups listed on the Stockholm Stock Exchange deal with accounting diversity among foreign subsidiaries in the consolidation processes.

The study focused on accounting method choices in the adjustment process from local subsidiary reports to the group accounts as well as the issue in which currency the adjustments were made. The effects of currency translation methods can have a material impact on reported profits. Factors that were related to the frequency of adjustments were: the number of stock exchanges the Swedish groups were listed on, proportion of foreign activity in the group, inflation rate in the subsidiary countries, accounting diversity the group faced, main industry of the group, size of the group and income smoothing behaviour especially on subsidiary levels.

An unexpected result was that some of the groups declared in their annual reports that they had followed actual Swedish accounting standards even if they made accounting method choices that did not comply with Swedish standards.