An examination of the history of attempts by regulators, practitioners and scholars from the mid nineteenth century to 2005 to establish an appropriate accounting measurement basis for financial ...reporting here leads to an evaluation of the likelihood of fair value accounting (FVA) practices becoming fully institutionalised. Using concepts drawn from theories of legitimation, it is shown here that historic cost accounting (HCA) only enjoyed an episodic legitimacy in the 1940s–70s and that prior and after this period mixed measurement incorporating market values is routinised. Although principles of FVA have been legitimised to an extent, it is argued here that this has resulted in the practice of mixed measurement bases being taken for granted.
How to account for goodwill arising from business combinations has proven to be one the most controversial topics for the standardisation, preparation, and audit of financial reports. Given its ...contested nature, and recent debates about improper goodwill accounting by failing companies, standard setters are currently reconsidering existing recognition, measurement, and disclosure requirements. In this study, we explore the views of a relatively neglected group of stakeholders in the financial reporting policy-making arena – financial statement users. We draw on empirical evidence from interviews with financial analysts and from responses by analysts to IASB and EFRAG consultations. We mobilise framing theory as used in public policy studies to analyse how users make sense of goodwill accounting information as compared to standard setters. Our key finding is the plurality of colliding frames between users and standard setters that remain intractable. Our analysis reveals that users’ interest in management’s accountability on acquisitions cannot fit easily into the financial reporting frame. Not only are claims by standard setters about the value relevance of goodwill impairments found not to be experienced in practice, but also we discover that users question the benefits of standard setters working in this area, while they take recourse to ‘street numbers’ for their analysis. We interpret the intractability we discover as putting into question public policy claims that accounting policies are developed with a commitment to serve the public interest.
This paper critically examines the rationale that drives the acceptance of International Financial Reporting Standards (IFRS) at the level of professional practice in an unfavourable local context. ...Drawing on Gramsci’s work on hegemony and interviews with local practitioners in Greece, we explore the role of Gramscian “common sense” in bolstering consent about the superiority of IFRS over local standards. We find that local practitioner understandings of the operation of the standards are fragmented and contradictory; notions of the common sense behind the high quality of IFRS are in conflict with the reality of collective practical experience—or “good sense”, in Gramsci’s terms—where the standards fail at specific levels to provide conclusive benefits. However, local practitioners appear to organise their overall consensus on the appropriateness of IFRS, drawing on justifications closely linked to espoused and hegemonic aspects of the common sense of neoliberalism, including the tropes of Europeanisation and modernisation. Therefore, despite the contradictions identified in the operation of IFRS and the inability of the standards to fulfil their objectives, the conflict between common-sense and good-sense understandings has led—at least temporarily—to the wide endorsement of IFRS by practitioners. The evidence challenges economic justifications of the functional utility of IFRS at the level of reported practical experience. That viewpoints about IFRS are found to be so contradictory and fragmented also challenges conceptions in existing literature about the coherence of the IFRS project.
In its recently revised conceptual framework, the IASB re-affirms decision-usefulness as the objective of financial reporting, disregarding claims about its lack of coherence. In this paper, we ...examine how this notion of decision-usefulness works in practice by focusing on the case of fair value measurement. In particular, we explore how decision-usefulness is perceived and experienced by financial analysts when using fair values in their work. We use the frame of 'problematisation', which involves challenging assumptions in existing literature, to formulate our research question and to interpret our findings. Empirical evidence, drawn from interviews with UK financial analysts and comment letters analysts wrote to the IASB, puts into question three key assumptions inherent in the revised conceptual framework. First, fair values are not considered to be unquestionably useful to decision-making; second, this usefulness is found to be contingent on the context of the decision being made; and third, the qualitative characteristics required to achieve decision-usefulness are challenged for their lack of meaning. Analysts' testimonies also challenge taken-for-granted assumptions implicit in academic studies. Assumptions that the decision-usefulness of fair values can be established prior to practice are re-evaluated. We also reflect on the premise that the decision-usefulness of fair values can be challenged on its underlying market-based economic rationales. Overall, our findings contribute to thinking problematically about decision-usefulness which appears to be contingent rather than given by some predetermined ideals as envisaged in accounting conceptual frameworks.
Neither empirical nor normative research on fair value accounting (FVA) provide rich insights into the usefulness of FVA for investment and credit decisions. Little is also known about what the use ...of FVA implies to financial statement users' perceptions and practice. Added to these empirical gaps, very few studies have explored FV A, and more generally aspects of financial reporting, within an interpretive theoretical framework. My purpose here is to contribute to sociological understandings of the use of financial reporting information. I thus examine UK investors' and analysts' perceptions of, and reactions to, the usefulness and implications of FVA for financial analysis. I analyse empirical information collected by interviewing 28 investors and analysts in London, observing International Accounting Standards Board-Analyst Representative Group (IASB-ARG) meetings and analysing investors' and analysts' comment letters to IASB's discussion papers and exposure drafts. In exploring why investors and analysts hold such perceptions of FVA, and react in such ways to the use of fair values in financial reports, I draw on Max Weber's types of rationality; namely, theoretical, practical, formal and substantive rationalities that coalesce and compete with each other guiding individuals' perceptions and actions. I also draw on tenets from neoinstitutionalism which allow the study of the symbolic qualities of FVA in addition to its rationalising ones. The concept of the user of financial reports as a neutral technician that has no free will but is able to make rational economic decisions is problematised here. Findings reveal that investors' and analysts' acceptance of, and resistance to, the use of fair values in financial reports are embedded in a social web of beliefs, interests and values. Implications from the analysis for our understandings of accounting standard-setting and for future research endeavours are also discussed.
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