The Politics of Accounting Regulation

The Politics of Accounting Regulation

Organizing Transnational Standard Setting in Financial Reporting

Sebastian Botzem

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.

Chapter 3: Historical Background: Competing Regulatory Initiatives

Sebastian Botzem

Subjects: economics and finance, financial economics and regulation, international accounting, politics and public policy, international politics, regulation and governance


Transnational standardization by the IASB was one of three initiatives launched to achieve a uniform set of international accounting standards. The other two major attempts at harmonizing financial accounting originated in the European Community and the United Nations. On one hand, they were competing initiatives since all three vied for a dominant position in cross-border regulation; on the other hand, they were linked to one another through the relationships among the various actors. The following account of the international standardization of financial accounting provided in this chapter intends to demonstrate that both the European Community’s initiative and the efforts of the United Nations pursued the goal of establishing a more demanding and mandatory form of regulation early on. It will also show that the IASB’s success had its root in the facts that the Board sought compulsory regulations to a lesser extent than the competing initiatives, and that the decisions defining those standards were initially made by an exclusive circle of accounting practitioners from firms and professional associations. This chapter underlines the significance of the actors involved in the various endeavors and how, in some cases, they played the projects off against each other. The rise of IASB was closely tied to the difficulties of the rival initiatives, which eventually were no longer in a position to successfully compete with the IASB. The following account traces the most significant events from the 1960s to the 1990s.1 The subsequent chapters focus on the years from 1997 to 2009. Today, the IASB...

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