The politics involved in Accounting Setting Standards

Table of Content

Although many stakeholders argued that the accounting criterions puting procedure should and must be separated from political relations. For illustration, IASB claimed itself to be: The International Accounting Standards Board is an independent, privately-funded accounting criterion compositor. But the fact is that the accounting criterions puting procedure is a politic procedure. From 1 January 2005i?? the Australia adopt international fiscal coverage criterions as domestic coverage criterions. From the proposal to following IFRS, all this procedure is to turn out the scene of accounting criterions is a political procedure. The constitution of accounting criterion is a consequence as the involvements of many different organic structures work together.


Although people thought accounting standard puting procedure should and must be insulated from political relations, many grounds proved the scene procedure is a political procedure. With the economic effects of accounting criterions, it affects the economic involvements of the relevant involvement groups. So the scene procedure would necessarily take to concerns and engagement by assorted involvement groups and engagement. Those involvement groups, particularly these may bear the inauspicious economic effects of accounting criterions, will surely seek to act upon the development or alteration of the guidelines ( Core, 200l ) . They will seek to coerce standard-setting organic structures to alter commissariats of the guidelines may be against them. In the procedure of accounting standard-setting, political behaviours are the assorted actions that the authorities, the accounting profession, corporate direction, investors, creditors and other stakeholders, based on their ain involvements, impact the accounting standard-setting organic structures to develop guidelines ( Brown, 2005 ) . This essay will foremost depict how the authoritiess impact the scene of accounting criterion. Then it will explicate that the CPA industry, investors and directors influence the accounting standard puting procedure. Following these, it will depict the impact the resulting criterions have on a broad assortment of involvement groups.

This essay could be plagiarized. Get your custom essay
“Dirty Pretty Things” Acts of Desperation: The State of Being Desperate
128 writers

ready to help you now

Get original paper

Without paying upfront

The authorities impacts the scene of accounting criterions

In the procedure of the introducing IFRS, the Australian Government has impacted the procedure and took a chief function in the scene of the accounting criterion. Since 1984, the authorities began to step in in the development and execution of accounting criterions, and provided legal protection, aid to better the deepness and breathe in the development and execution of accounting criterions. The authorities besides used the power of statute law to assist the execution of accounting criterion. As a consequence, the authorities ‘s intercession became bit by bit deep in the field of accounting and laid a foundation for presenting the international fiscal accounting criterions. Financial Reporting Council ( FRC ) and Australian Accounting Standards Board ( AASB ) are two parts of authorities bureaus. The cardinal maps of the FRC are to find strategic way of the AASB and propose appropriate guidelines to the federal authorities to advance the formation of high-quality accounting criterions, to keep investor assurance and contribute to the economic development of Australia. In 2001, Australian Securities and Investments Commission Act ( ASIC Act ) besides pointed out that FRC is responsible for supervising the development of international accounting criterions and the chief application of fiscal accounting criterions, every bit good as the farther development of the formation of a incorporate set of accounting criterions around the universe Visibly ( ASIC,2006 ) . Securities and Investment Commission Act basically gives the FRC statutory inadvertence authorization, therefore guaranting the execution of accounting internationalisation procedure, strong authorities support and implement the legal attempts. Apart from supervisingi??evaluating and printing the accounting criterions, AASB besides try to better the scene procedure of accounting criterions, and get down to develop AASB Guidelines controlled by the Company Law. With the belongingss of public goods and externalities the accounting criterions, it makes the development and execution of accounting criterions can non spontaneously achieve a balanced province by the market allotment of resources and consequence as the alleged market failure. Based on this, authorities intercession becomes inevitable and the authoritiess will stand for the chief involvements of the bulk in corporate pick. During International Financial Reporting Standards puting procedure, people do non cognize this procedure will convey what practical impact to them ; they tend to trust on authorities decision-making. Therefore, the Government will be obliged to bear the duty for progressing this procedure ( Wong,2004 ) .

The CPA industry, investors and directors impact the accounting criterion

Assorted involvement groups will vie based on their ain involvement ‘s standards for doing power. Even without the right to obtain standard-setting power, in the standard-setting procedure, they will besides buttonhole to the standard-setting organic structures in order to safeguard their ain involvements. CPA industry, investors, creditors and other accounting criterions are the stakeholders affected by the accounting criterion and they must besides be involved in the standard-setting procedure. From the position of historical development and the pattern of States, Association of Certified Public Accountants normally concern about the scene of accounting criterions largely. Many private standard-setting organic structures organized by the taking CPA profession, so most of them represent the involvements of the CPA profession. The new criterion can cut down the dealing costs of the CPA profession – the established accounting criterions influence CPA ‘s pattern efficient cost decrease, and can cut down hazard and supply legal protection for the industry itself. In this sense, the CPA will actively impact the professional organisations of civil establishments for higher supply of criterions. For the non-government organisations, the standard-setting powers means that the populace ‘s attending. Adequate support, high prestigiousness, which makes the non-government organisations have the urge to keep and develop the accounting criterion, therefore influence of puting accounting criterions ( Carroll, 2004 ) .

As patron of corporations, investors provide the footing for the operation of endeavor. Investors are non merely the rights holders of the company ‘s bing net assets, but besides the right holder companies added value assets. Investors to safeguard their belongings rights, they must guarantee the safety of their invested capital. So they argued the pick of accounting measurement methods should assist capital saving. In add-on, investors besides want to retain the returns as assets. Equally long as companies have net incomes, the relevant stakeholders should be involved in cleavage. The consequence is that it reduces the figure of bing endeavor assets ( Al-Shammarietal,2007 ) .

As concern operators, endeavor directors provide direction to guarantee the operation of the operations and go the cardinal to saving and grasp. Under the modern endeavor system, the separation of ownership and direction lead to possible struggle between the proprietor and directors. Coupled with uncomplete competition of the accounting information market, directors become existent accountant, who controls all concern activities the endeavor. They want to utilize accounting information revelation to set up a sound fiscal image. Then the endeavors can obtain the necessary financess from the capital markets at a lower cost. Therefore, endeavor directors frequently influence the scene of accounting criterion by the pick of accounting policies to demo concern, “ steadily ” image ( Gerhardy,2005 ) .

The impact the resulting criterions have on a broad assortment of involvement groups.

With the different of assorted involvements, attitude of IFRS is varied and can non be precisely the same. Many people believed that IFRS would convey many benefits to Australia. Wong ( 2004 ) , the former member of the International Federation of Accountants ( IFAC ) , argued that there are many benefits utilizing planetary fiscal coverage model, including more comparable fiscal information, better expected, lower cost of capital, more efficient allotment of resources and higher economic growing for international investors. However, before these benefits can be reflected, the demand is planetary convergence of accounting criterions. Carroll ( 2003 ) said that the benefits of utilizing IFRS are obvious. Alfredson ( 2003 ) viewed the current scene of planetary accounting criterions can bring forth high quality, transparent and comparable accounting information, so utilizing IFRS can better the efficiency of capital markets. Haswell and McKinnon ( 2003 ) besides agreed it assist to cut down the information costs within the world-wide capital flow ( Croft.B,2006 ) .

Knapp ( 2003 ) pointed out that the benefits of the execution of IFRS are contributing to cross-market, bettering the comparison of service studies, cut downing the cost of capital in Australia and bettering endeavors in Australia entree to foreign capital. Pound ( 2004 ) , the Chief Accountant of Australian Investment and Accounting Committee, thought that bring forthing consistent and comparable fiscal studies harmonizing to International Financial Reporting Standards is really of import to investors and the market for heightening the assurance. Gerhardy ( 2005 ) argued that IFRS is good for Australian concerns, the accounting profession and the Government and standard-setting cost nest eggs makes the Australian Government to concentrate on the operation of the Commission. Croft ( 2005 ) pointed out that this transmutation is far from an accounting job. The CFRS involves non merely concern, but besides the accounting profession and educational establishments responsible for instruction and calling development ( Bader,2007 ) .

Although many people hold a positive position the acceptance of IFRS, the IFRS besides might convey bad impaction to the Australia. Williamson ( 2003 ) viewed that such alteration requires “ a batch of clip and attempt, ” while Dodd and Sheehan ( 2004 ) pointed out that this “ aggregation of new, more informations ” demands to alter non merely on the external fiscal coverage system demands, but besides changed the internal direction of the budget and coverage demands, and it need extends to the new informations. Gerhardy besides argued that, for Australian companies, the cost of educating users or stockholders, the cost of seeking external adept support, and the revised guidelines on corporate effects ; for the accounting profession, the re-education, the weakening of bing criterions, AASB lower position, every bit good as the loss of the Australian accounting inventions, are the costs can non be overlooked ( Hope,2006 ) .


From the above analysisi??it can be seed that the puting procedure of accounting criterions are impacted by many involvement groups so it can non be divorced from political relations. Government, CPA industry, investors and directors will act upon the scene of accounting criterions. In the procedure of presenting international accounting criterions and make up one’s minding to follow IFRS, the Australian Government should be based on multiple considerations, such as capital market development, economic integrating with the universe, every bit good as the strong international duologue between economic agents. Therefore, the acceptance of IFRS is non a simple procedure of puting a criterion, from more macro degree, it is a political procedure.

Cite this page

The politics involved in Accounting Setting Standards. (2016, Nov 15). Retrieved from

Remember! This essay was written by a student

You can get a custom paper by one of our expert writers

Order custom paper Without paying upfront