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Stress Testing International Financial Reporting Standards (IFRS): Accounting for Stability and the Public Good in a Financialized World

Author

Listed:
  • Haslam Colin
  • Tsitsianis Nick
  • Hoinaru Razvan

    (Department of Business and Management, Queen Mary University of London, London, UK)

  • Andersson Tord
  • Katechos George

    (Business School, University of Hertfordshire, Hatfield, Hertfordshire, UK)

Abstract

The recent Maystadt report (2013) challenged the European Parliament to modify governance arrangements surrounding the design and endorsement of international financial reporting standards (IFRS) issued by the International Accounting Standards Board (IASB). In addition the Maystadt report constructs an argument that accounting information has the capacity to also modify behaviour and that this might not be conducive for the European public good, financial stability and economic development. In this paper we argue that IFRS need to be stress tested for their impact on firm-level financial stability in a financialized world. The financialized firm can revalue a range of assets to their market value crystalizing future earnings into current values but these valuations can become impaired. Asset value impairments will be charged to shareholder equity but this is being hollowed out because a higher proportion of earnings are being distributed to shareholders. Accounting disclosures are not only an information feed to users they inform the stewardship and control of a firm’s resources and in the financialized firm the potential for financial instability is heightened and this can translate into a moral hazard for society.

Suggested Citation

  • Haslam Colin & Tsitsianis Nick & Hoinaru Razvan & Andersson Tord & Katechos George, 2016. "Stress Testing International Financial Reporting Standards (IFRS): Accounting for Stability and the Public Good in a Financialized World," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 6(2), pages 93-118, July.
    • Handle: RePEc:bpj:aelcon:v:6:y:2016:i:2:p:93-118:n:2
    DOI: 10.1515/ael-2015-0006
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    References listed on IDEAS

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    7. Yuri Biondi & Pierpaolo Giannoccolo, 2015. "Share price formation, market exuberance and financial stability under alternative accounting regimes," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(2), pages 333-362, October.
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    Cited by:

    1. Razvan HOINARU & Daniel BUDA & Jonel SUBIC & Adela JANSEN, 2023. "Financial and Non-Financial Disclosures for Agriculture: is there any Connection in between GRI 13 and IAS 41?," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 24(2), pages 158-172, May.
    2. Haslam Colin, 2017. "International Financial Reporting Standards (IFRS): Stress Testing in Financialized Reporting Entities," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 7(2), pages 105-108, July.

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    More about this item

    Keywords

    International Financial Reporting Standards; accounting conceptual framework; financialization; stress testing financial standards;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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