The role of a crisis in reshaping the role of accounting

Prior to 2001, international accounting standards (IAS) were insufficiently attractive to gain the support of US regulators. The potential role of IAS in the US gained prominence during a period of extreme financial reporting instability in 2001-2002. Emerging opinion increasingly upheld principles-based rather than rules-based accounting standards in the face of the financial reporting crisis. But to promote any active shift in the US position, an institutionally legitimate infrastructure for the international accounting standards setter had to be created. As this was taking shape, the globalisation of business activities grew with inter-organizational linkages and cross-national financial inter-dependencies and flows becoming increasingly complex. Given the extensively uncertain, uneven and constantly evolving nature of global business changes, the aptness of applying judgment in assessing financial performance and position rather than relying on the application of pre-defined rules continued to achieve wider acceptance. The argument is made in the paper that international financial reporting standards are today seen to fulfil a global risk mitigating role founded on a logic that had to first gain political and institutional legitimacy and that also had to be viewed as being responsive to perceived market imperatives.

[1]  Joseph D. Piotroski,et al.  Financial Reporting Incentives for Conservative Accounting: The Influence of Legal and Political Institutions , 2005 .

[2]  Rick Stephan Hayes,et al.  Reflecting form over substance: the case of Enron Corp. , 2004 .

[3]  Jonathan E. Duchac.  The dilemma of bright line accounting rules and professional judgment: Insights from special purpose entity consolidation rules , 2004 .

[4]  R. Robertson.  Globalization: Social Theory and Global Culture , 1992 .

[5]  Gili S. Drori,et al.  Globalization and Organization: World Society and Organizational Change , 2006 .

[6]  Andrea Mennicken.  Connecting worlds: The translation of international auditing standards into post-Soviet audit practice , 2008 .

[7]  R. Litan,et al.  Worldwide Financial Reporting: The Development and Future of Accounting Standards , 2006 .

[8]  Sarah Eaton.  Crisis and the Consolidation of International Accounting Standards: Enron, The IASB, and America , 2005, Business and Politics.

[9]  Rudolph A. Jacob,et al.  An empirical investigation of multinational firms' compliance with International Accounting Standards , 1999 .

[10]  Sigrid Quack,et al.  Contested rules and shifting boundaries: International standard setting in accounting , 2005 .

[11]  A. Gaeremynck,et al.  The Impact of Legal and Voluntary Investor Protection on the Early Adoption of IFRS , 2005 .

[12]  D. Damant.  Discussion of ‘International Financial Reporting Standards (IFRS): pros and cons for investors’ , 2006 .

[13]  George J. Benston,et al.  Enron: what happened and what we can learn from it , 2002 .

[14]  Mark Lang,et al.  Earnings Management and Cross Listing: Are Reconciled Earnings Comparable to Us Earnings? , 2005 .

[15]  M. Leonardo.  Strategic Experts and Improvising Regulators: Explaining the IASC's Rise to Global Influence, 1973-2001 , 2005 .

[16]  L. Revsine,et al.  Enron: sad but inevitable , 2002 .

[17]  Ashok Robin,et al.  Incentives Versus Standards: Properties of Accounting Income in Four East Asian Countries, and Implications for Acceptance of IAS , 2000 .

[18]  S. Sunder.  Regulatory Competition for Low Cost-of-capital Accounting Rules , 2002 .

[19]  B. Simmons,et al.  The International Politics of Harmonization: The Case of Capital Market Regulation , 2001, International Organization.

[20]  Incentives Versus Standards: Properties of Accounting Income in Four East Asian Countries, and Implications for Acceptance of IAS , 2000 .

[21]  Alan M. Taylor,et al.  Global Capital Markets: Integration, Crisis, and Growth , 2004 .

[22]  C. Leuz.  IAS versus US GAAP: Information Asymmetry-Based Evidence from Germany's New Market , 2002 .

[23]  Pascal Dumontier,et al.  Why Firms Comply Voluntarily with IAS: an Empirical Analysis with Swiss Data , 1998 .

[24]  Martin Glaum,et al.  Compliance with the Disclosure Requirements of Germany's New Market: IAS Versus Us Gaap , 2003 .

[25]  Lars Engwall,et al.  Carriers, Flows and Sources of Management Knowledge , 2002 .

[26]  E. Prasad,et al.  Patterns of international capital flows and their implications for economic development , 2006 .

[27]  Fariborz Moshirian.  Globalisation, Growth and Institutions , 2008 .

[28]  Marie-Laure Djelic,et al.  Transnational Governance: Institutional Dynamics of Regulation , 2008 .

[29]  Earnings Management and Investor Protection: An International Comparison , 2002 .

[30]  Nils Brunsson,et al.  Organizations, Markets, and Standardization , 2002 .

[31]  Kenneth S. Rogoff,et al.  Effects of Financial Globalization on Developing Countries: Some Empirical Evidence , 2003 .

[32]  Mingyi Hung,et al.  ACCOUNTING STANDARDS AND VALUE RELEVANCE OF FINANCIAL STATEMENTS: AN INTERNATIONAL ANALYSIS , 2000 .

[33]  Country-Specific Factors Related to Financial Reporting and the Value Relevance of Accounting Data , 1999 .

[34]  Marlene Plumlee,et al.  International Financial Reporting Standards , 2009 .

[35]  C. Napier,et al.  Traditional Accountants and Business Professionals: Portraying the Accounting Profession after Enron , 2009 .

[36]  S. Zeff.  International accounting standards: survey 2000: By David Cairns, International Financial Reporting (www.cairns.co.uk), Henley-on-Thames, Oxfordshire, UK, 2001, xii+371 pp. ([UK pound]250/US$370/[ccirf]420) , 2001 .

[37]  A. Hopwood.  Some reflections on 'The harmonization of accounting within the EU' , 1994 .

[38]  C. Leuz.  Cross listing, bonding and firms' reporting incentives: A discussion of Lang, Raedy and Wilson (2006) , 2006 .

[39]  Karl V. Lins,et al.  Adrs, Analysts, and Accuracy: Does Cross Listing in the U.S. Improve a Firm's Information Environment and Increase Market Value? , 2002 .

[40]  Nils Brunsson,et al.  A World of Standards , 2000 .