No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Recursivity in standard-setting processes: The measurement case of ‘fair value’ and ‘market value’
Abstract
Little is still known about how conceptual underpinnings of standards developed at the global level might impact on their potential implementation at the local level and vice-versa. Inspired by a normative approach to standard-setting, this paper draws on the framework of recursivity to explore the role of the measurement objective and bases, as identified in the Conceptual Framework, in standard-setting processes of the International Public Sector Accounting Standards Board (IPSASB).
The paper aims to contribute to the scarce literature on standard-setting processes in public sector accounting by drawing on the measurement issue of ‘fair value’ versus ‘market value’. The analysis highlights that uncertainty as to the meaning terms carry can lead to confusion at both the global and the local level, in particular, when the identification of measurement bases does not follow from the measurement objective. This is of practical relevance as it points to the importance of consistency in standard-setting to avoid conceptual mismatches between the global and the local, which may endanger the global standard-setter’s legitimacy.
... Además de esto, los organismos de regulacion contable a nivel internacional han buscado la recursividad en la denicion de lineamientos que simpliquen su tratamiento (Conrath et al., 2021). En este sentido, en las conclusiones del capítulo sobre medición de activos y pasivos en los estados nancieros del marco conceptual de las IPSAS (2020) se describe que en lugar de utilizar el valor razonable basado en valores de salida como base de medición, se aplicará el valor de mercado, puesto que se ha evidenciado que utilizar los dos conceptos en el mismo marco normativo podría confundir a los usuarios de los estados nancieros, teniendo en cuenta que el valor razonable reeja el resultado de una medición especíca (IFAC, 2020). ...
La investigación examina la aplicación del valor de mercado en las entidades de gobierno en Colombia y algunas problemáticas asociadas; para esto, se realizó un estudio de caso. En el presente documento se muestran los resultados de una revisión de la literatura relacionada con las críticas a las mediciones, utilizando el valor razonable y el valor de mercado en las entidades de gobierno. Posteriormente, se examinan los principales impactos financieros por la aplicación del valor de mercado como alternativa de medición en la entidad objeto de estudio, complementando con una entrevista semiestructurada a funcionarios involucrados en el proceso para establecer la percepción sobre el criterio de medición. Producto de lo anterior se evidencia que la medición a valor de mercado, en la entidad de estudio, puede resultar adecuado para obtener información actualizada y de utilidad, especialmente para el proceso de rendición de cuentas; sin embargo, podría ser riesgoso al tratar de vincular este criterio de valoración en contextos de no mercado, afectando la transparencia y confiabilidad de la información contable.
... The principle of prudence is an important concept in public sector accounting and its design comprises both financial position and financial performance. Conrath-Hargreaves et al. (2021) underlined that conceptual frameworks play a crucial role in the standard-setting process. However, it is clear from this article that the relevance and the role of the prudence principle in both the IPSASB's as well as the draft EPSAS CF requires further debate. ...
IMPACT
The principle of prudence plays a significant role in the design of the EPSAS. In Germany it has been argued that a lack of consideration of the principle of prudence in the IPSASB’s Conceptual Framework and in the IPSAS mean that IPSAS are not an ideal reference framework for the EPSAS. Based on a comparative analysis of the IPSAS principle of prudence and the principle of prudence as it is applied in the German Standards of Governmental Accrual Accounting the authors examine the role and the design of the principle of prudence within public sector accounting systems. The findings of this article will be of value to national and international public sector accounting standard-setters.
ABSTRACT
The draft EPSAS Conceptual Framework proposes the prudence principle as a qualitative characteristic of financial reporting. Limited academic debate has taken place on the role of the prudence principle in public sector accounting. This article critically discusses the principle of prudence with its antagonistic interpretations ‘cautious prudence’ and ‘asymmetric prudence’ and its role in the design of public sector accounting in the context of the emerging EPSAS.
... The complex nature of measurement in the public sector, and its consequences for standard setting and accounting practices, also set the scene for our second contribution by Conrath-Hargreaves et al. (2021). Analysing experiences of translation and application of IPSAS within specific national or supranational settings, and especially the EPSAS case, the authors discuss the risks of mismatches between global aspirations and concepts, and local expectations and experiences. ...
Purposes: The requirement for a transaction price measurement system that accurately reflects actual value is becoming increasingly urgent as firms expand globally. The argument over the applicability of fair value (FV) and arm's length principle (ALP) arose since both are applicable concurrently due to their broad confluence. This study analyzes and synthesizes the similarities and distinctions, as well as the impact of FV and ALP on tax purposes. Methods: The study is descriptive and qualitative in nature. We gathered data through document analysis and in-depth interviews. Five informants from academics, policymakers, and tax practitioners were involved in the study. Before the interview, we familiarized the outline to decrease the random error, and all informants gave verbatim consent. Findings: An outline of the relationship between FV and ALP and their origins is provided. The direction in which the two procedures are designated is crucial, even though they can be employed concurrently to accomplish the entity's objectives, one for financial reporting and the other for transfer pricing. The narrative describing the similarities and contrasts between the two methods also plays a role in the analysis. It discusses the significance of the long-established ALP regime to FV, which has recently gained much attention even though it appears to be new. Finally, prudence in taking policies related to the harmonization of FV and ALP is an emphasis on considering the consequences for tax purposes. ALP is more often acknowledged by tax administration than FV. Implementing FV for tax purposes is discussed, along with related considerations.
Novelty: The contribution of this work is a more brief and straightforward understanding of the business environment and the literature regarding FV and ALP. In contrast to the overarching goal of prior works, the current study analyzes the impact of FV and ALP adoption on taxation.
Cultural and creative industries generate $2250b in revenue and 29.5 million jobs worldwide. The Museum sector is highly relevant among them and generates social value for society, taken to be the value created for stakeholder groups. However, the system used to measure their value generation is limited to visitor volume and revenues. Policymakers then assume that the role of those organisations is to generate profit or attract visitors. They produce financial-economic statements and provide further information on visitors and their type and satisfaction, but undoubtedly, museums generate far more than those aspects reflected in financial-economic statements. We selected a key group of museums in order to demonstrate the other aspects positively valued by museums stakeholders. After analysing 104 stakeholder-dialogue interviews, the aspects evidenced were as follows: museums are responsible businesses, generate value for a group of stakeholders, have agreed to establish a common stakeholder map, and museums could work better when aligned.
In March 2018, the IASB published its revised conceptual framework including notable changes to the chapters on the objective of financial reporting and on qualitative characteristics. The IASB put more emphasis on stewardship as part of the decision usefulness objective, reintroduced prudence as an aspect of neutrality and introduced a tolerable level of measurement uncertainty (as a successor to reliability) as part of faithful representation. The present paper discusses the substance of and reasons for these changes in light of the history of the IASB’s work on conceptual frameworks. The paper also explores the possible impact of these changes on the IASB’s future standard-setting by looking at the other chapters of the IASB’s new framework. This paper finds that the more pronounced role of stewardship and the reintroduction of prudence do not seem to entail a revised conceptual thinking of the IASB in the other chapters, while the introduction of a tolerable level of measurement uncertainty provides the IASB with a conceptual tool with the potential to substantially affect future standard-setting debates. However, its positioning as part of faithful representation is questioned and an alternative arrangement of qualitative characteristics suggested.
I compare voting positions taken by Financial Accounting Standards Board (FASB) members on standards to positions taken by constituent sponsors in comment letters both before and after the emergence of the FASB’s conceptual framework. I find that, relative to the Pre-CF regime (1973–1986), FASB members in the CF regime (1987–2007) take positions that are (i) less like their constituent sponsors and (ii) more like one another. Both shifts are associated with standards increasing accounting relevance; in the CF regime, such standards are likely a product of the framework’s broad focus on decision usefulness. From 1996 to 2007, all but one dissenting vote on fair value standards explicitly argues for an even greater use of fair values, while none argue for less use. To the extent standard-setters’ idiosyncratic ideologies influence their voting positions, the evidence is consistent with a decline in the level of ideological diversity among FASB members.
We investigate one episode of the “financialization” of accounting: the debate over the “correct” method to discount defined benefit (DB) pension plan liabilities for US public sector financial reporting. We outline this issue from the pre-agenda, agenda-setting and alternatives selection phases of the standard setting process, through to the policy decision made by the Governmental Accounting Standards Board (GASB) in 2012. We find that one group of 15 individuals, which we propose acted as an epistemic community (EC) that was focused on financial economic theory, was disproportionally influential in all phases of the standard setting process, despite its small size. Ideas do not spontaneously travel from one jurisdiction (e.g., financial economics) to another (e.g., accounting) without agency. We thus add a focus on the carriers of ideas to the literature on accounting standard setting, which has so far predominantly examined this process from the standpoint of interests and institutions. We argue that framing theory helps to both empirically identify the hierarchies of the EC, but further helps to make visible the values and assumptions made by agents of financialization who push towards the adoption of financial computation techniques presented as axiologically neutral.
Link to final version: https://www.sciencedirect.com/science/article/pii/S0361368217301290
The Asian Financial Crisis dramatically illustrated the vulnerability of financial markets in emerging, transitional, and advanced economies. In response, international organizations insisted that legal reforms could help protect markets from financial breakdowns. Sitting at the nexus between the legal system and the market, corporate bankruptcy law ensures that the casualties of capitalism are treated in an orderly way. Halliday and Carruthers show how global actorsâincluding the IMF, World Bank, UN, and international professional associationsâdeveloped comprehensive norms for corporate bankruptcy laws and how national policymakers responded in turn. Drawing on extensive fieldwork in China, Indonesia and Korea, the authors reveal how national policymakers contested and negotiated domestic laws in the context of global pressures. The first study of its kind, this book offers a theory of legal change to explain why global/local tensions produce implementation gaps. Through its analysis of globalization, this book has lessons for international organizations and developing and transition economies the world over.
This study focuses on the Governmental Accounting Standards Board’s (GASB) Pension Project which, over 2009-2012, deliberated a highly contested issue over the “correct” discount rates to be used in the discounting of pension liabilities on government financial statements. We analyze the arguments used by participants to justify their preference and find that, despite the unprecedented economic consequences associated with changing the status quo discount rate, all groups of participants favor a deontological justification over a consequentialist or “mixed” line of reasoning. We use a mixed methods approach to determine the prevalence of particular argumentative styles, and to further examine the nature of the arguments made. This study increases our understanding of how “lay experts” – that is to say, citizens who have acquired knowledge in a particular technical domain, but who are not credentialized in the field – participate in policy making processes dominated by accredited “professional experts”. We argue that if lay citizens are absent from the debate and if lay-experts, far from playing a mediating role between lay citizens and professional experts, espouse or mimic the latter’s argumentative style, the benefit of widening participation in accounting standard setting processes – other than providing a thin layer of democratic legitimacy to the processes in question – is questionable.
(Article in Press)
UK public sector organizations, including NHS foundation trusts, have changed to International Financial Reporting Standards (IFRS). Treasury aims were ‘to bring benefits in consistency and comparability between financial reports in the global economy and to follow private sector best practice’. This comparative analysis of foundation trusts' financial statements under IFRS shows worse financial results and lower surpluses for the year, higher values of fixed (non-current) assets and more indebtedness than under UK GAAP. Implications of the new accounting regime on comparability and transparency of NHS organizations are discussed—some wine shows improvement, while other wine looks worse in the new bottles.
Purpose
– Despite the growing pressure to encourage new ways of thinking about research methodology, only recently have interview methodologists begun to realize that “we cannot lift the results of interviewing out of the contexts in which they were gathered and claim them as objective data with no strings attached”. The purpose of this paper is to provide additional insight based on a critical reflection of the interview as a research method drawing upon Alvesson's discussion from the neopositivist, romanticist and localist interview perspectives. Specifically, the authors focus on critical reflections of three broad categories of a continuum of interview methods: structured, semi‐structured and unstructured interviews.
Design/methodology/approach
– The authors adopt a critical and reflexive approach to understanding the literature on interviews to develop alternative insights about the use of interviews as a qualitative research method.
Findings
– After examining the neopositivist (interview as a “tool”) and romanticist (interview as “human encounter”) perspectives on the use of the research interview, the authors adopt a localist perspective towards interviews and argue that the localist approach opens up alternative understanding of the interview process and the accounts produced provide additional insights. The insights are used to outline the skills researchers need to develop in applying the localist perspective to interviews.
Originality/value
– The paper provides an alternative perspective on the practice of conducting interviews, recognizing interviews as complex social and organizational phenomena rather than just a research method.
Public sector or government accounting has been the subject of many research endeavors. However, scholars have repeatedly criticized the lack of a consistent and well-defined theoretical basis for international research. So far, most researchers have drawn from various streams of theoretical perspectives with often unsatisfactory results. The goal of this paper is to put forward the International Public Sector Accounting Standards Board’s (IPSASB) Conceptual Framework as a point of reference for establishing a better-fitting theoretical basis for public sector accrual accounting research.
Accounting standard-setting bodies employ mechanisms for stakeholder participation in the standard-setting process. While due process procedures of national and international accounting standards boards have been studied in various contexts, the International Public Sector Accounting Standards Board (IPSASB) is a unique organisational body warranting study at a fundamental level. IPSASB has celebrated 20 years of standard setting; however, as a transnational standard setter, the IPSASB lacks determinate authoritative status, and adoption of its standards is quite varied. Given such circumstances, what stakeholders participate in IPSASB’s due process procedures, and in what manner? This paper identifies the stakeholder type, the tone of response, and the geographical origin of respondents submitting comment letters to IPSASB due process documents. Although in principle the effort to develop European Public Sector Accounting Standards (EPSAS) is independent of International Public Sector Accounting Standards (IPSAS), IPSAS have been cited as ‘an indisputable reference’ for the development of EPSAS; thus stakeholder participation in the setting of IPSAS is also relevant to those interested in developing EPSAS.
This article is based on documentation from the UK Financial Reporting Advisory Board (FRAB) relating to the adoption of IFRS 13 Fair Value Measurement. It shows that the development of financial reporting in government involves continuous adaption to new and updated international standards and changing circumstances. Outcomes are influenced by path dependencies and the taking of particular conceptual positions.
This paper analyses the process that led the European Commission to the decision to develop European Public Sector Accounting Standards (EPSAS) for harmonizing public sector accounting practices within the European Union. The paper finds that there was limited scope in terms of stakeholder participation in the public consultation that served as a basis for the decision. In addition, the decision to adopt EPSAS for EU member states raises questions on the relationship between regional and global governance in the area of public sector accounting.
The conceptual underpinnings of accounting standards are potentially very important for the future of public sector accounting internationally. The authors explain why and comment on the implications for public sector accounting.
Recent changes in accounting directives for heritage assets held by government, local authorities and charities in the UK required their recognition in the financial statements and the measurement of their economic value. Subsequently, numerous sales of heritage assets by local authorities have occurred. We examine the intrusion of economic value into the realm of cultural assets and investigate two cases: the National Portrait Gallery and Tower Hamlets Council. The observation of economic and cultural value is considered. The National Portrait Gallery largely resisted the pressure to place economic values on its collections of portraiture and continues to increase its extensive collections. The London council in a deprived borough, Tower Hamlets, followed the Code of Practice on local authority accounting regarding recognition and valuation of assets and decided to sell its major heritage asset, a Henry Moore sculpture. We examine how measuring value can affect the observed reality: did the very act of measuring a heritage asset in financial terms change the situation? We develop a frame of analysis based on scientific observation theory applied within the socially constructed world of accounting. Accounting constructed a 'reality' (Hines, 1988) that included items of economic value that were primarily held for their cultural properties, but observing (measuring) their economic value may affect the perception of the cultural value of the item. Drawing on quantum physics we borrow from Schrödinger's thought experiment, commonly referred to as 'Schrödinger's cat', and from Heisenberg's uncertainty principle to suggest that though not killing the cat, observation of the economic value of an accounting element can lead to a change in the perceived cultural value. Thought experiments from quantum physics can provide new ways of exploring the measurement (observation) of different values. Precision in measuring one attribute can cause the perception of other attributes (values) to change. This is particularly important as accounting moves to reporting on an integrated value approach (International Integrated Reporting Council (IIRC), 2013).
In their revised conceptual frameworks, the IASB and FASB pronounce that in their view valuation usefulness is the single objective of financial reporting. The present paper addresses the question how this decision was made by the boards and why stewardship was not identified as a separate objective. Drawing on Flyvbjerg's work on rationality and power, the paper analyses the practices of standard-setting in the specific case of the framework revision. The qualitative empirical study is based on the material which is publicly available from the due process of the IASB and FASB and also builds on interviews with board members, staff members and constituents. This paper finds that the decision usefulness programme, developed in the US in the 1970s, was the body of knowledge which primarily shaped and limited the debates during the framework revision. While decision usefulness was taken for granted by all participants, even by those who were arguing for a separate stewardship objective, no alternative rationality or programme associated with stewardship was discussed in the standard-setting arena. The paper also shows that a “mundane” organisational structure put the staff in a crucial position to influence board debates and sheds light on how disciplinary and self-disciplinary techniques affected board members' decision-making in the framework project.
Do international accounting standards require conservative accounting? The IASB's conceptual framework suggests that they should not, while the research literature is largely silent on the matter, typically presuming conservatism to be an outcome of private contracting rather than standardized, public, general purpose financial reporting. In this paper, we analyze the actual requirements of IFRS. We find multiple examples of recognition requirements that lead to unconditional conservatism, measurement requirements that lead to conditional conservatism, and also presentation/disclosure requirements that further support a conservative reporting environment. These findings complement, support and deepen existing evidence in the empirical literature that accounting is in practice conservative. We show, however, that the requirements for conservatism in IFRS conflict with, first, the IASB's stated position in its conceptual framework that accounting should not be conservative and, second, the private contracting explanation for conservatism that is generally accepted in the literature. What is missing, and lies behind both conflicts, is an acknowledgement and understanding of the role of an agency/contracting perspective in enhancing the decision-usefulness of general purpose accounting standards, given the information/incentive asymmetry and uncertainty that characterizes the real-world context in which those standards operate. From a policy perspective, such an understanding would reconcile the IASB's conceptual framework with the actual requirements of IFRS. From a research literature perspective, such an understanding would re-position accounting standards as central to the practice of accounting conservatism, which would in turn require revision to the generally accepted theory of a private contracting explanation for the empirical evidence of conservative accounting practice.
We conduct a laboratory experiment to examine investors’ assessments of managers’ stewardship. We provide evidence that investors tend to attribute external (i.e., non-manager-related) causes of firm performance to managers’ performance. We predict and find that fair value information enables investors to overcome this tendency and make better stewardship decisions than investors with amortized cost information. We also find that investors presented with amortized-cost-based financial statements perform better to the extent they access fair-value-based footnote information, while investors presented with fair-value-based financial statements perform worse to the extent they access amortized-cost-based footnote information. Collectively, our results suggest that investors’ stewardship decisions are improved because fair value information more transparently provides the information required to properly consider the opportunity costs associated with managers’ actions and disentangle endogenous actions by managers from exogenous market forces that are outside of managers’ control.
Purpose - The last four decades have seen the rise of the International Accounting Standards Board (IASB) as the core locus of transnational accounting regulation. Initial steps of associational cooperation were superseded by establishing a standard setting organization that heavily draws on consultation procedures. The purpose of this paper is to focus on recent changes in governance and accountability of IASB in the aftermath of the financial crisis. Emphasis is given to the organizational configuration, the ambivalence of consultation procedures and reactions to mounting criticism after the crisis. The paper proposes that IASB is the heart of a new transnational regulatory constellation in accounting. Design/methodology/approach - The material and analysis presented in the paper derives from an extensive review of official reports, consultation documents and related responses and a range of additional information available on IASB's web page. Findings - The paper analyzes how IASB uses legitimation strategies to defend its position as a transnational standard setter. From analysis of recent changes, the paper reveals a growing reliance on - and domination through - consultation procedures. The paper also shows the IASB'S swift action to counter substantial criticism emerging with the financial crisis. Practical implications - By highlighting developments surrounding IASB, its governance structure and the emphasis on consultation, the paper establishes the importance for public policy of further study and debate the operation of IASB. It could also contribute to re-politicize accounting regulation at the transnational level. Originality/value - IASB is an integral player in global financial governance processes and is only recently receiving substantial academic accounting research. This paper seeks to provide an introduction and critical account of the organization's development.
Qualitative characteristics serve to operationalise the objective of financial reporting and aim at shaping accounting discourses of standard-setters and their constituents. In the recent revision of their conceptual frameworks, the IASB and FASB decided to replace “reliability”, arguably one of the most important properties of accounting, with “representational faithfulness”. The aim of the present paper is to shed light on the boards’ decision through a historical analysis of how reliability appeared in standard-setting and by tracing its abandonment in detail. Our study reveals that the standard-setters’ construction and reconstruction of reliability attempted to undermine traditional practitioner understandings along the lines of objectivity/verifiability in order to extend the boundaries of appropriate financial reporting in the direction of current/fair values. However, as the introduction of more abstract concepts raised difficulties in reconciling the new terminology with everyday accounting practice, this turn created confusion among constituents and board members. Our paper also contributes to further our understanding about decision-making processes in standard-setting. In particular, we show how a group of board and staff members was able to establish the replacement of reliability in spite of (and partly taking advantage of) constituents’ concerns and widespread confusion about the terms.
Part of the process of recent public sector reform has involved replacing traditional cashbased accounts with accrual-based financial statements, similar to those found in the private sector. This article examines the use of accrual-based accounting in the public sector and provides examples from the UK National Health Service of situations where the accruals system may be deemed inappropriate. It shows that one possible response is to withdraw from the accruals mode and revert to cash measures, deeming the accruals adjustments to be 'merely technical'. An alternative response is to change the mode of operating so that the cash impact of a transaction matches its accruals reporting impact. The conclusion is that there are modifications to public sector accounting practices away from those of the private sector that undermine the metaphor of running the public sector 'like a business'.
The U.S.-based Financial Accounting Standards Board (FASB) emphasizes that accounting standard-setting is not and should not be regarded as a “political process.” Employing the case of accounting for stock compensation, I examine a recent debate in which FASB appears to have successfully established and maintained a boundary between a technical accounting process and politics. This case is interesting because an earlier, failed effort to expense stock compensation was described as highly politicized. However, the boundary between technical and political processes was maintained in the more recent episode. I find that a focus on due process, characterizations of existing accounting requirements as anomalous and available measurement methods as reliable, and warnings about the dangers of injecting “politics” into standard-setting were important to this boundary work. I also find that the boundary work required considerable interpretive flexibility in selecting (or ignoring) the evidence to be used in justifying the standard-setting project and its conclusions. I conclude by suggesting that a different understanding of what it means to be involved in a “political process” might help all parties understand more fully what is taking place during the accounting standard-setting process. Attention could be turned to developing processes to facilitate debates over which values should guide decisions occurring throughout the standard-setting process. To this end, an enhanced standard-setting process might allow for increased participation in agenda setting, in framing and scoping standard-setting projects, and in providing opportunities for nonexperts to participate.
The global financial crisis underlines the relevance of accounting standards as much more than instrumental rules for corporate reporting. This important book details the accounting standards that embody societal and professional values and contribute to the distribution of financial benefits that put international harmonization of standards into the limelight. Sebastian Botzem reveals that international standards have emerged after decades of contest and political bargaining, which resulted in closely aligned standards, voluntary consultation procedures and a network structure comprising actors mainly stemming from global auditing firms, regulators and international organizations.
The paper examines the application of simulacra and simulation in fair value accounting for financial instruments in the U.S. As copies of copies, simulacra problematize the notion of an original and with it an imaginary of a single authentic reality. We examine simulacra as they have been applied in two interconnected fair value accounting arenas. Firstly, simulacra employed as a measurement basis for certain financial instruments. In this regard, we challenge the FASB's insistence that fair value accounting is an originary market based measurement system. Secondly, we examine the process of simulation as employed by the FASB in copying and amending FAS 157 in its subsequent modifications to the guidance provided to the preparers of financial statements. Our purpose here is to both reinforce the absence of a market reality and also to illustrate how the FASB's subsequent modifications to FAS 157 were shaped by political forces. We conclude with some suggestions as to how simulacra and a politicization process might be productively embraced in future fair value accounting endeavors.
According to most authors, a body of (formal) knowledge is the crucial trait of professions. It is the presumed existence of this knowledge which legitimises claims to expertise, professional powers, autonomy and control over work. The body of knowledge around which the financial accounting professionalisation project has taken place is described and it is shown that professionalisation took place around a variety of personal qualities, such as honesty, independence and respectability – skills not specific to “accountants”, such as penmanship, arithmetic, work and knowledge, which at the time were contestable as being the domain of the legal profession. It is suggested that (not unlike other professions), the knowledge foundations of the accounting profession are problematic and so in order to reproduce and advance the accounting profession, members must counteract threats to its legitimacy stemming from its underlying knowledge foundations. It is also suggested that the frequently repeated search for a conceptual framework represents a means of counteracting this threat to the social legitimacy of the accounting profession, and that conceptual framework projects are used as a political resource in the profession-alisation struggle during times of possible intervention by the state and at times of competition from other (including accounting) groups.
Purpose
– This paper seeks to reply/comment on the paper by Keith Hooper et al., titled “‘Knowing the price of everything and the value of nothing’: accounting for heritage assets”.
Design/methodology/approach
– This note uses the economic theory of public goods to complement the explanation and analysis of Hooper et al's article on accounting for public heritage assets by New Zealand museums.
Findings
– Using public goods theory from economics, the paper explains why the “sector neutral” approach, which underlies the application of commercial accounting standards to public heritage assets, is unsound; why “fair market prices” cannot be obtained for public heritage assets because of their being public goods; and why they should be accounted for outside the statement of financial position as assets held in trust by the custodial entities.
Originality/value
– The opposition of some of the museums to the accounting standards being imposed on them is soundly based in the economic theory of public goods.
This paper employs a Latourian framework to analyse the informal and formal lobbying of the Accounting Standards Board (ASB) over its flagship standard on cash flow statements. The purpose of the analysis is to reveal how the self-referential rhetoric of key lobbyists, such as companies and auditors, was used to enrol the ASB into amending its standard in line with the transformative practices of some large companies. The issue of whether net debt should be included on cash flow statements is analysed in detail, as it reveals how a small group of companies were able to enrol the ASB into accepting their translated definition of cash. The paper concludes that, given that the ASB essentially relies on voluntary compliance, it responded to the rhetoric of key allies in the standard-setting process in order to maintain its position as an obligatory passage point and so retain support for its project to reform accounting. Copyright 2000 Academic Press
This contribution to the symposium examines, initially, the appropriate capital maintenance concepts for accruals-based government accounts, attention then naturally turning to the principles on which assets and liabilities ought to be valued. The focus then moves to the extent of consolidation under RA, leading to rejections of the (different) departmental boundary as proposed in the Green and White Papers (Treasury 1994a, 1995a). Consideration is given to private sector experience concerning the specification of which organizations should be consolidated, to ensure that financial reporting is focused upon relevant economic entities. Next, the design of accounting regulation - notably, who sets accounting standards and monitors their enforcement - is shown to be fundamental to the acceptability of the Treasury's proposals. The concluding section draws the argument together.
Members of the Financial Accounting Standards Board (FASB) and its staff are continuously engaged in a variety of efforts to persuade individuals that the work of this entity is valuable, appropriate, useful and correct. In this paper, I focus upon the persuasive efforts that are employed in “official” accounting standards. These documents do more than simply detail new technical accounting requirements. The texts have been shaped to express a particular point of view about the significance of events and activities that occurred during the standard-setting process and contain numerous efforts to persuade readers to accept this perspective. In particular, I argue that the FASB employs rhetorical strategies in its accounting standards that construct (and attempt to persuade us) that a specific standard is “good”, that silence alternatives and possible criticisms of the standard and that construct the FASB as a “good” standard-setter. These strategies help to construct standards as technical products and thereby also work to maintain the myth of accounting objectivity.
Although financial accounting practices and disclosures are frequently altered, such changes appear to be constrained by “institutional thinking”. In this paper, I explore an instance of institutional thinking — the emergence and development of an FASB project on financial instruments. This study illustrates the programmed ways in which accounting problems are constructed and resolved, a process that shadows certain questions while emphasizing the traditional accounting concerns with disclosure, recognition and measurement.
West [West, B. (2003). Professionalism and accounting rules. London: Routledge] and Chambers [Chambers, R. J. (1966). Accounting evaluation and economic behavior. Houston: Scholars Book Company] have provocatively argued that financial reporting has reached a state of near-total incoherence. In this paper, we argue that a source of this incoherence is the transformation of the US accounting academy into a sub-discipline of financial economics, a transformation in which accounting became a servant of the imaginary world of neoclassical economics. After noting the unusually prominent role of rules within the accounting profession, we describe the displacement of accounting's centuries-old root metaphor of accountability by the metaphor of information usefulness, and situate that displacement within neoliberalism, a broader political movement that arose after World War II. Finally, we use SFAS 123R, the recently issued stock option standard, as a case study of the incoherence that West and Chambers assert. Through various issues - such as reflexivity, theory paradox, and unexplained questions of responsibility - we demonstrate the logical inconsistencies involved in SFAS 123F. The incoherence of stock option reporting rules raises serious questions about the information metaphor as a foundation for either individual rules or the standard setting process. The Financial Accounting Standards Board's (FASB) attempts to make the imaginary world of neoclassical economics real have resulted in rules which are not defensible.
Research examining the process of accounting change has focussed upon dramatic changes such as the rise of discounted cash flow analysis. However, much of accounting change centers around recognition issues and serves to expand and enhance the domain of accrual accounting. This paper employs three studies (accounting for loan fees, leases and nonprofit organizations) to examine the process of enacting change in accounting recognition practices. The paper follows the construction of accounting issues as accounting problems within a regulatory space, and the subsequent construction of these problems as appropriate for standard-setting action. The study employs a regulatory space metaphor and a “logic of appropriateness” to examine the complex processes through which accounting change occurs.
This paper analyses various controversial issues arising from the current project of the IASB and FASB to develop a joint conceptual framework for financial reporting standards. It discusses their possible implications for measurement and, in particular, for the use of fair value as the preferred measurement basis. Two competing world views are identified as underlying the debate: a Fair Value View, implicit in the IASB's public pronouncements, and an Alternative View implicit in publicly expressed criticisms of the IASB's pronouncements. The Fair Value View assumes that markets are relatively perfect and complete and that, in such a setting, financial reports should meet the needs of passive investors and creditors by reporting fair values derived from current market prices. The Alternative View assumes that markets are relatively imperfect and incomplete and that, in such a market setting, financial reports should also meet the monitoring requirements of current shareholders (stewardship) by reporting past transactions and events using entity-specific measurements that reflect the opportunities actually available to the reporting entity. The different implications of the two views are illustrated by reference to specific issues in recent accounting standards. Finally, the theoretical support for the two views is discussed. It is concluded that, in a realistic market setting, the search for a universal measurement method may be fruitless and a more appropriate approach to the measurement problem might be to define a clear measurement objective and to select the measurement method that best meets that objective in the particular circumstances that exist in relation to each item in the accounts. An example of such an approach is deprival value, which is not, at present, under consideration by the IASB.
Comment Letter to IPSASB CP Financial Reporting for Heritage in the Public Sector. International Federation of Accountants
- Natali Amafa Akwazulu
Amafa AkwaZulu Natali. (2017). Comment Letter to IPSASB CP Financial
Reporting for Heritage in the Public Sector. International Federation of
Accountants [IFAC].
Limited scope review of the conceptual framework
- Cag
CAG. (2019). Limited scope review of the conceptual
framework, 9 December, Abu Dhabi, United Arab Emirates.
https://www.ifac.org/system/files/meetings/files/6-Limit
ed-Scope-Review-of-Conceptual-Framework_Final.pdf.
Report from the Commission to the Council and the European Parliament: Towards implementing harmonised public sector accounting standards in Member States (COM(2013) 114 final)
European Commission (EC). (2013). Report from the Commission to the
Council and the European Parliament: Towards implementing harmonised
public sector accounting standards in Member States (COM(2013) 114 final).
Reporting on the Progress as Regards the European Public Sector Accounting Standards (EPSAS): Commission Staff Working Document (SWD(2019) 204 final)
- Ec
EC. (2019a). Reporting on the Progress as Regards the European Public
Sector Accounting Standards (EPSAS): Commission Staff Working
Document (SWD(2019) 204 final).
Comment letter on consultation paper measurement
- Ec
EC. (2019a). Comment letter on consultation paper
measurement. IFAC. https://www.ifac.org/system/files/
publications/exposure-drafts/comments/
CommentlettertoIPSASBCPMeasurement.pdf.
European public sector accounting standards-conceptual framework: Reflection paper
- Eurostat
Eurostat. (2018b). European public sector accounting
standards-conceptual framework: Reflection paper.
https://ec.europa.eu/eurostat/web/epsas/key-documents/
technical-developments.
EPSAS Cell on principles related to EPSAS standards: Note of the meeting-draft (EPSAS Cell STA 18/03)
- Eurostat
Eurostat. (2018a). EPSAS Cell on principles related to EPSAS
standards: Note of the meeting-draft (EPSAS Cell STA
18/03).
Role of the measurement basis in financial statements for decision-making and accountability: Item 4 of the agenda, EPSAS working group meeting
- Eurostat
Eurostat. (2019a, May 13-14). Role of the measurement basis
in financial statements for decision-making and
accountability: Item 4 of the agenda, EPSAS working group
meeting. Rome.
Measurement bases from a practical perspective: Item 4 of the agenda, EPSAS working group meeting
- Eurostat
Eurostat. (2019b, November 18-19). Measurement bases from a practical
perspective: Item 4 of the Agenda, EPSAS Working Group meeting.
Luxembourg, Luxembourg.
IFRS conceptual framework: Project summary
- Iasb
IASB. (2018). IFRS Conceptual Framework: Project Summary, March 2018.
IFRS Foundation.
Consultation paper conceptual framework for general purpose financial reporting by public sector entities: Measurement of assets and liabilities in financial statements
- Ipsasb
IPSASB. (2010). Consultation paper conceptual framework for
general purpose financial reporting by public sector
entities: Measurement of assets and liabilities in financial
statements.
https://www.ifac.org/system/files/publicat
ions/exposure-drafts/IPSASB-CP_Measurement-Phase_3.
pdf.
IPSASB. (2012). Exposure draft conceptual framework for
general purpose financial reporting by public sector
entities: Measurement of assets and liabilities in financial
statements, November 2012. IFAC.
Conceptual framework for general purpose financial reporting by public sector entities
- Ipsasb
IPSASB. (2014). Conceptual framework for general purpose
financial reporting by public sector entities. IFAC.