The Political Nature of Accounting Standard Setting

Only available on StudyMode
  • Download(s): 331
  • Published: July 12, 2011
Read full document
Text Preview
The political process of the adoption of IAS’s and harmonising these standards with the AAS’s has had far reaching impacts. This may be due to the influences of the government, boards, corporations and regulatory bodies involved in dominating the process, which can be seen through a brief look at the history of the actions taken by each of these parties to change the accounting world. There are visible benefits to the parties who influenced the changes in both economical and social ways. Along with benefits for some parties comes disadvantages to those who lost their influential power. The make up of the Boards gives rise to questions as to what the goals of the boards are both in the near future as well as in the long run. The timeliness of going from harmonisation to standardisation and what the consequences were are also noteworthy as are the objectives of those involved.

INTRODUCTION
A look into the development of the current accounting standards opens the eyes to the seemingly invisible forces behind them and the impacts this has had on all stakeholders. There are always winners and losers in a battle for power and self-interests and we will look at what the outcomes for these are. We will also look at the goals of the IASB, AASB and FRC as we untangle the web of financial influences over non-financial prey as well as the positive impacts the changes have brought with them. In summary, the political nature of setting accounting standards has had many influences and impacts depending on the stakeholders involved. THE BODY

History proves standard-setting to be a political process
1946 – ‘Recommendations of Accounting Principles’ first issued. (Walker 1987 pp. 269) 1970’s – Statement of accounting standards issued
1977 – Accounting Standards Review Committee appointed. (Walker 1987 pp. 272) 1978 – Amalgamation of ASCPA and ICAA becoming AcSB
1980’s – Accounting bodies seek the support from the Federal government to enforce the accounting standards. 1984 – ASRB established and companies legally required to comply with accounting standards as it was then “legally binding….to report under the Act (Corporations)..and prepare their financial report” accordingly (Lucy & Macek 2004) 1988 – AcSB dissolved. ASRB becomes sole board and the PSASB put in charge of developing and maintaining Australian Accounting Standards (Stoddart 2000 pp 718). 1990/1991 – AASB established and operational in 1991

1993 – Labor Government instigates the Corporate Law Reform Simplification Program 1995 – Urgent Issues Group (UIG) established
1995/1996 – Liberal party comes into power. ASX promises to fund $1 million to assist in the International Harmonisation program and Liberal government supports the program by putting the Treasury in control of it as well as everything to do with “Corporations Law and securities regulation”(Stoddart 2000 pp. 719) 1997 – Liberal Party under pressure due to upcoming election and so announces CLERP, dissolution of “Simplification Task Force and its consultative group” and creation of BRAG. (Stoddart 2000 pp 720). Proposal to adopt IAS’s in 1999. 1998 – Liberals win election

1999 – IAS’s cut down to fit Australia’s goals. Companies realise disadvantages of changes, IFSA gets involved. 2005 – Official adoption of much diminished IAS.
As a tactic to gain votes for the election, the Liberal Government realised it needed to be seen as actively assisting businesses to maintain efficiency in accounting processes. To accomplish this it gave the Treasury the power to control the changes which meant other politically influential groups also benefited. The ASX supported the Government in adopting international standards as its “strong political affinity” with the Liberal Party gave the ASX more influence too (Stoddart 2000 pp. 725). This close relationship gave the ASX the ability to become the main market place for companies to trade on and hugely influence what the proposals contained. The ASX wanted to have...
tracking img