The Politics of Accounting Regulation
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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.
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Chapter 4: Defining the Content of International Accounting Standards

Sebastian Botzem


Since the mid-1970s, the IASB has pushed for the international standardization of accounting. Initially, standards development proceeded in an incremental fashion. The early International Accounting Standards (IAS) were compiled and edited from existing national standards. As a result, for a long time IAS were not a set of precise rules but rather an edited collection of diverse national regulations (see Sahlin-Andersson, 1996). The pragmatic approach gradually covered the different areas of regulation but created standards plagued by a lack of precision. Revision of IAS began in the late 1980s by gradually reducing the variety of regulations and increasingly adjusting them to accommodate the information needs of capital market actors. This streamlining of standards was, above all, a prerequisite for the IASB to gain political recognition from state actors. The quest for recognition of IAS, renamed as International Financial Reporting Standards (IFRS) in 2001, has been a defining feature of standards development for more than 30 years. During this period, IAS/IFRS have been increasingly aligned with the fair value paradigm primarily championed by Anglo-American actors. The development of fair value accounting (FVA), in particular, evidences the priority given to the information needs of capital market actors. For most actors, above all those from continental Europe, FVA represents a paradigmatic shift: While in the past financial reporting took a number of different constituencies into consideration, today annual accounts are geared toward decision usefulness for financial market participants. FVA is a manifestation of an increased capital-market orientation, a development further fueled by IAS/IFRS....

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