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...