The legitimacy of global accounting rules: a note on the challenges from path-dependence theory
- PDF / 685,797 Bytes
- 18 Pages / 439.37 x 666.142 pts Page_size
- 34 Downloads / 184 Views
The legitimacy of global accounting rules: a note on the challenges from path‑dependence theory Esther Pittroff1 Accepted: 5 November 2020 © The Author(s) 2020
Abstract This paper discusses the legitimacy of the convergence of accounting regulation from the view of path-dependence theory. It is argued here that legitimacy of converged accounting rules is almost impossible to achieve because of the path-dependent development of corporate governance systems, which depends on the prevailing norms and beliefs of society. The different elements of corporate governance systems have to be consistent with these values in order to achieve the real convergence of accounting standards. The paper analyses the development of accounting convergence and discusses different convergence strategies from the view of legitimacy theory and path-dependence theory. Finally, the paper presents a hypothetical solution under which real convergence of accounting standards seems possible. The results of the paper are relevant for accounting research, and important to regulators as well, because, by analysing the factors that influence convergence, the paper is able to help us to understand why real convergence of accounting regulation may be difficult to achieve. Keywords Accounting regulation · Path-dependence theory · Legitimacy · Corporate governance systems · Convergence · Standard-setting · IFRS JEL Classification K22 · M41 · M48
1 Introduction Financial reporting has faced many changes over the years, some of these reflecting the tendency towards more global activities by reporting entities. Consistent with this, the international comparability of accounting reports arose as a regulatory aspiration, which has led to the formation of the International Accounting Standards * Esther Pittroff [email protected]‑leipzig.de 1
Institute of Accounting, Finance and Taxation, University of Leipzig, Grimmaische Str. 12, 04109 Leipzig, Germany
13
Vol.:(0123456789)
E. Pittroff
Board (IASB)1 as a standard setter that was established with the goal of introducing the worldwide acceptance of financial reporting standards. The IASB is a transnational standard-setter without any principal to whom it is accountable (Pelger and Spieß 2017). For this reason, the IASB put much effort into constructing its legitimacy in order to be accepted as the global accounting standard setter. The global spread of IFRS—144 countries require IFRS for all or most companies2—supports the assumption that the work of the IASB has been successful, and that the international standard setter has indeed gained much legitimacy because considerable convergence of accounting rules has occurred. Nevertheless, the IASB has to maintain—and increase its legitimacy. Recent examples have shown that the IASB still has to actively manage its legitimacy. For example, the European Union (EU) threatened to stop funding the IASB if they were not willing to reintroduce prudence into the conceptual framework (Pelger and Spieß 2017).3 This challenges any jurisdiction that has moved mor
Data Loading...
