The implementation of the K3 framework -A study of construction companies' application of K3

Abstract

Background and problem discussion: An increased globalization has led to a need for harmonization of the accounting regulations. The decision to implement IFRS for public companies in countries of the European Union inspired the Swedish Accounting Standards Board to develop new framework for non-public companies. One of these is K3, a principle-based framework released in 2012. K3 implies companies to do their own interpretations, and for companies in the construction industry with extensive projects and lease contracts, accounting decisions can have significant effects. Purpose of the study: The purpose of this study is to analyze how the K3 framework has been implemented in Swedish construction companies and how it differs between companies. The aim is also to compare how the annual reports have changed within each individual company, as a result of the new framework. Theoretical framework: The K-project is a result of a desire to harmonize the Swedish accounting standards, where K3 is considered as the main framework. This section focuses on concepts and principles of K3. Methodology: Since the research question is a “how” question, the appropriate design of the thesis is a case study. All collected data is based on annual reports of three companies in the construction industry. Analysis and conclusion: The annual reports, prepared according to K3, are analyzed and both similarities and differences are observed when comparing the companies with each other. Even more similarities are noticed when comparing annual reports of individual companies from the financial year when K3 was implemented and the year before. These similarities can be compared with the research of Pernilla Lundqvist (2014), who concludes that a company can precede the accounting regulations. For the capital market, the transition to K3 should not influence the assessments, whether to buy or sell, to a greater extent.