Bernard Colasse

International Accounting Standardisation: Is Politics Back?

In the absence of political legitimacy, international accounting standardisation is founded on procedural and substantial legitimacies, which have been challenged by the current financial crisis. This paper represents a critique of this built up legitimacy. It demonstrates in particular that whilst due process is admittedly a transparent procedure, it is one in which only those players with major financial and intellectual resources can participate. It also highlights the weakness of the theoretical foundation, in particular agency theory and the theory of efficient markets, on which the conceptual framework of the IASB rests. This critical study of the foundations of the legitimacy of the IASC/IASB enables us to understand the extent of recent political intervention in a field that had previously been abandoned. Whilst international accounting standards did not trigger the crisis, some observers have said that they accelerated and even amplified it, mainly as a result of their pro-cyclical nature. This explains why, in October 2008, the international standard-setter was suddenly called to order by the European Union who requested it to urgently amend its Standards IAS 39 ‘Financial Instruments’ and IFRS 7 ‘Financial Instruments: Disclosures’. This intervention by a political organisation is all the more remarkable since international accounting standardisation seemed to have been definitively handed over to specialists from the IASC/IASB, a body which had declared itself to be the international standardiser. The crisis therefore strongly undermined the legitimacy of the international standardiser. This raises the question of whether we are about to witness the return of politics in a field, which is, in reality, highly political. This possible return is indicated not only by the pressures successfully exerted on the international standardisation body by the EU and the G8 but also the recommendations made to the IASC/IASB by the new G20 and the publication in France of reports of a political, highly critical nature, devoted to the recent evolution of accounting standardisation. In this paper, using a reflexive, critical approach, we question the legitimacy of the IASC/IASB with the aim of evaluating the extent of the political recommendations made to it. It is clear that the legitimacy of an accounting standardisation body is fundamental since it conditions the legitimacy of the standards it issues, accounting practice itself and in the end, the confidence of users in the financial statements of companies. But this legitimacy is not innate. It is not natural or pre-existing. As we shall see, it is constructed and managed. In the first section, we will examine, and try to specify, the foundations of the IASB. In the second section, we will demonstrate the fragility of these foundations, a fragility that existed before the crisis but which the latter exposed more clearly. Lastly, in the third section, we will attempt to see if recent interventions of political organisations in the international accounting standardisation process have challenged the international standardiser and if they herald the return of politics.

The Genesis of the 2007 Conseil National de la Comptabilité: A Case of Institutional Isomorphism?

This article puts forward an interpretation of the reform of the French accounting standard-setter initiated by Decree no. 20076629 of 27 April 2007 relating to the national accounting standards board, the Conseil National de la Comptabilité (CNC). This reform, if it goes to term, will give birth to a French accounting standards authority, the Autorité des Normes Comptables (ANC). The proposed interpretation fits within a neo-institutionalist framework. In particular, it uses the notions of path dependency and institutional mimetism. The new CNC is first put into context as an institution in relation to its predecessors. It is then compared with two institutions, the architecture of which may have inspired its conception, the Financial Accounting Standards Board (FASB) and the Autorité des Marchés Financiers (AMF). It would appear that the new CNC clearly departs from the historical path traced by French accounting regulation and tends to mimic French autorités administratives indépendantes (independent administrative authorities) of the AMF type. However, such ‘authorities’ are strongly inspired by the American Securities and Exchange Commission (SEC). So paradoxically, the model of the new French Accounting Standards Authority would be a SEC rather than an FASB.

Financial Accounting and Auditing

Taken together and in their complementary roles, financial accounting and audit, as pratices, are major elements of social regulation. Their social importance has made them the object of active research for social sciences, of interest in particular to historians, sociologists, and economists. This article examines research objectives and methodologies in these fields.