Accounting Theories

Topics: International Accounting Standards Board, International Financial Reporting Standards, Financial Accounting Standards Board Pages: 7 (2543 words) Published: October 16, 2008
“The theories we use to help us understand standard-setting in national arenas (such as Australia) don't work so well at the international level where the . . . International Accounting Standard Board (IASB) is taking a leading role. We will have to modify them or expand our theoretical repertoire” Discuss the above statement, clearly indicating your agreement or otherwise about the basis for your views. Abstract:

The theories that are presented in this paper all assume the importance of a national framework/regulation. Thus this suggests that maybe the theories are not suitable at the international level and we will have to modify and expand our theoretical repertoire. Introduction:

This paper examines whether the theories used in standard setting in national arenas are still applicable at the international level. The theories that will be examine are public interest theory, the regulatory capture theory, the private interest theory and the market-state-community model under the context of Australia, while at the same time standard setting experience in Australia will also be compare to other national arenas such as Bangladesh (a weak non-Western nation) and USA (a similar but strong nation). Key players, the resources available to them and the relationship/dynamics between them within each theory will be analysed prior to the IASB-convergence era and the current IASB-convergence era. In that light, the paper attempts to explore whether the theories helps us to understand the international standard setting. Furthermore, if the theories is to guide the international accounting standard setting process, can the IASB realistically develop a workable conceptual framework (CF) that will be acceptable on a global level? And what will be the impediments and obstacles to the development of such a framework? Also, will the CF continue to serve the same standard setting objectives and priorities that it has traditionally performed in Australia? To address these issues, this paper will provide an analysis of the Australian standard setting arena before 2005 and after 2005. This will follow by a comparative analysis as to whether the theories that worked before (at a national level) still make sense if we try to apply them to standard setting at the international level. 1. Analysis of the Australian Standard-setting arena before 2005: The accounting standard setting process operated independently, despite its financial resources being funded by the two professional accounting bodies and the Federal Government. The fundamental objective of the standard setting regime was to maintain a broad public interest perspective and improve the quality of financial reporting in Australia from both the preparer's and from an end user's perspective (Lonergan, 2003). Standard setting is a political process because it significantly affects the wellbeing of a wide variety of interest group. These groups therefore attempt to influence the introduction of regulation. The theories were developed to explain why regulation was introduced. Some theories of regulation suggest that regulation was introduced in the public interest, while other theories suggest that regulation was introduced to benefit some people at the expense of others, that is, in self-interest. a) Application of Public interest theory to accounting standard setting Under the public interest theory, the Australian Government's intervention in the accounting standard settineg process by establishing the Accounting Standards Review Board (ASRB) in 1984 is seen as justified, as a result of failures in the market for accounting information. Failure is evidenced by the numerous number of corporate collapses in the 1990s and early 2000s, which lead to stricter calls for accounting standards and changes in standard setting processes. Therefore, the public interest theory framework presents the reason for government intervention in the accounting standard setting process in...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about accounting theory
  • 7101AFE Financial Accounting Theory And Practice Essay
  • Accounting as a Language Essay
  • Accounting Theory Research Paper
  • Essay on Bus310 Accounting Theory and Accountability
  • Positive Accounting Theory Essay
  • Essay about Questions and Answers on Accounting Theory
  • Accounting Theory and Research Essay

Become a StudyMode Member

Sign Up - It's Free