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Accounting Standards and Global Convergence Revisited: Social Norms and Economic Concepts

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  • Shizuki Saito

    (The Faculty of Economics, Meiji Gakuin University, Japan)

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    Abstract

    The leitmotifs underlying accounting standards setting have undergone changes over time, from best practices to a normative approach and then to global convergence. In the process, accounting standards have gradually lost their character as a set of informal social norms based on market practices. This trend, combined with the pursuit of a formal framework not amenable to adjustment through feedback from market tests, has unavoidably brought about a top-down approach. Under this approach, the uniformity of standards from the viewpoint of regulators has been given priority over the usefulness of income information for users of financial statements. Consequently income information, which plays an essential role in the valuation of companies in capital markets, has been aff ected by a mechanical application of the asset-liability approach and fair value measurement with scant attention to a marked diff erence in business transactions. Because investors today almost disregard national borders, the homogenization of accounting information is certainly an important goal. To achieve this goal, however, it is necessary to facilitate the spontaneous homogenization of norms based on an evolutionary market process which enables standards setters to incorporate vox populi into accounting standards themselves rather than decide on the direction and degree of convergence on an a priori basis.

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    Bibliographic Info

    Article provided by Research Institute for Economics & Business Administration, Kobe University in its journal The Japanese Accounting Review.

    Volume (Year): 1 (2011)
    Issue (Month): (December)
    Pages: 105-117

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    Handle: RePEc:kob:tjrevi:dec2011:v:1:p:105-117

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    Keywords: Accounting Standards; Convergence; Social Norms; Income Concepts; Asset-Liability Approach; Fair Value Measurement;

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    1. Shyam NMI Sunder & Ronald A. Dye, 2001. "Why Not Allow the FASB and IASB Standards to Compete in the U.S.?," Yale School of Management Working Papers ysm192, Yale School of Management.
    2. Shyam Sunder & Journal Accounting, 2002. "Regulatory Competition Among Accounting Standards Within and Across International Boundaries," Yale School of Management Working Papers ysm317, Yale School of Management, revised 01 Feb 2003.
    3. Posner, Richard A, 1997. "Social Norms and the Law: An Economic Approach," American Economic Review, American Economic Association, vol. 87(2), pages 365-69, May.
    4. Shyam Sunder, 2005. "Social Norms versus Standards of Accounting," Yale School of Management Working Papers amz2525, Yale School of Management, revised 01 Sep 2005.
    5. Michael Bromwich & Richard Macve & Shyam Sunder, 2010. "Hicksian Income in the Conceptual Framework," Abacus, Accounting Foundation, University of Sydney, vol. 46(3), pages 348-376.
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