IDEAS home Printed from https://ideas.repec.org/a/eee/aosoci/v34y2009i6-7p770-786.html
   My bibliography  Save this article

Making imaginary worlds real: The case of expensing employee stock options

Author

Listed:
  • Ravenscroft, Sue
  • Williams, Paul F.

Abstract

West [West, B. (2003). Professionalism and accounting rules. London: Routledge] and Chambers [Chambers, R. J. (1966). Accounting evaluation and economic behavior. Houston: Scholars Book Company] have provocatively argued that financial reporting has reached a state of near-total incoherence. In this paper, we argue that a source of this incoherence is the transformation of the US accounting academy into a sub-discipline of financial economics, a transformation in which accounting became a servant of the imaginary world of neoclassical economics. After noting the unusually prominent role of rules within the accounting profession, we describe the displacement of accounting's centuries-old root metaphor of accountability by the metaphor of information usefulness, and situate that displacement within neoliberalism, a broader political movement that arose after World War II. Finally, we use SFAS 123R, the recently issued stock option standard, as a case study of the incoherence that West and Chambers assert. Through various issues - such as reflexivity, theory paradox, and unexplained questions of responsibility - we demonstrate the logical inconsistencies involved in SFAS 123F. The incoherence of stock option reporting rules raises serious questions about the information metaphor as a foundation for either individual rules or the standard setting process. The Financial Accounting Standards Board's (FASB) attempts to make the imaginary world of neoclassical economics real have resulted in rules which are not defensible.

Suggested Citation

  • Ravenscroft, Sue & Williams, Paul F., 2009. "Making imaginary worlds real: The case of expensing employee stock options," Accounting, Organizations and Society, Elsevier, vol. 34(6-7), pages 770-786, August.
  • Handle: RePEc:eee:aosoci:v:34:y:2009:i:6-7:p:770-786
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0361-3682(08)00108-6
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sue Llewellyn & Markus J. Milne, 2007. "Accounting as codified discourse," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 20(6), pages 805-824, October.
    2. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
    3. Whitley, Richard, 1986. "The transformation of business finance into financial economics: The roles of academic expansion and changes in U.S. capital markets," Accounting, Organizations and Society, Elsevier, vol. 11(2), pages 171-192, March.
    4. Macintosh, Norman B. & Shearer, Teri & Thornton, Daniel B. & Welker, Michael, 2000. "Accounting as simulacrum and hyperreality: perspectives on income and capital," Accounting, Organizations and Society, Elsevier, vol. 25(1), pages 13-50, January.
    5. repec:bla:joares:v:27:y:1989:i::p:202-217 is not listed on IDEAS
    6. Hayek, F. A., 2007. "The Road to Serfdom," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226320540 edited by Caldwell, Bruce.
    7. Ijiri, Yuji, 2005. "US accounting standards and their environment: A dualistic study of their 75-years of transition," Journal of Accounting and Public Policy, Elsevier, vol. 24(4), pages 255-279.
    8. Sue Ravenscroft & Paul Williams, 2005. "Rules, rogues, and risk assessors: Academic responses to Enron and other accounting scandals," European Accounting Review, Taylor & Francis Journals, vol. 14(2), pages 363-372.
    9. repec:eee:crpeac:v:19:y:2008:i:5:p:805-833 is not listed on IDEAS
    10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    11. Williams, Paul F., 1989. "The logic of positive accounting research," Accounting, Organizations and Society, Elsevier, vol. 14(5-6), pages 455-468, October.
    12. Michael C. Jensen & William H. Meckling, 1994. "The Nature Of Man," Journal of Applied Corporate Finance, Morgan Stanley, vol. 7(2), pages 4-19.
    13. Gintis, Herbert, 2000. "Beyond Homo economicus: evidence from experimental economics," Ecological Economics, Elsevier, vol. 35(3), pages 311-322, December.
    14. Fama, Eugene F & Laffer, Arthur B, 1971. "Information and Capital Markets," The Journal of Business, University of Chicago Press, vol. 44(3), pages 289-298, July.
    15. Chick, Victoria & Dow, Sheila C, 2001. "Formalism, Logic and Reality: A Keynesian Analysis," Cambridge Journal of Economics, Oxford University Press, vol. 25(6), pages 705-721, November.
    16. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    17. Bonner, Sarah E. & Hesford, James W. & Van der Stede, Wim A. & Young, S. Mark, 2006. "The most influential journals in academic accounting," Accounting, Organizations and Society, Elsevier, vol. 31(7), pages 663-685, October.
    18. Young, Joni J., 2006. "Making up users," Accounting, Organizations and Society, Elsevier, vol. 31(6), pages 579-600, August.
    19. Tinker, Anthony M. & Merino, Barbara D. & Neimark, Marilyn Dale, 1982. "The normative origins of positive theories: Ideology and accounting thought," Accounting, Organizations and Society, Elsevier, vol. 7(2), pages 167-200, April.
    20. Brown, Lawrence D., 1996. "Influential accounting articles, individuals, Ph.D. granting institutions and faculties: A citational analysis," Accounting, Organizations and Society, Elsevier, vol. 21(7-8), pages 723-754.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jane Broadbent & Jeffrey Unerman, 2011. "Developing the relevance of the accounting academy: The importance of drawing from the diversity of research approaches," Meditari Accountancy Research, Emerald Group Publishing, vol. 19(1), pages 7-21, October.
    2. Barker, Richard & Schulte, Sebastian, 2017. "Representing the market perspective: Fair value measurement for non-financial assets," Accounting, Organizations and Society, Elsevier, vol. 56(C), pages 55-67.
    3. repec:eee:crpeac:v:21:y:2010:i:6:p:509-521 is not listed on IDEAS
    4. repec:eee:crpeac:v:44:y:2017:i:c:p:1-29 is not listed on IDEAS
    5. Murphy, Tim & O’Connell, Vincent & Ó hÓgartaigh, Ciarán, 2013. "Discourses surrounding the evolution of the IASB/FASB Conceptual Framework: What they reveal about the “living law” of accounting," Accounting, Organizations and Society, Elsevier, vol. 38(1), pages 72-91.
    6. Lambert Jerman, 2013. "La Juste Valeur : Une Comptabilite Actuarielle Pour Les Marches ... Ou Les Comptables ?," Post-Print hal-00991877, HAL.
    7. Garry D. Carnegie & Christopher J. Napier, 2012. "Accounting's past, present and future: the unifying power of history," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 25(2), pages 328-369, February.
    8. repec:eee:crpeac:v:26:y:2015:i:c:p:23-36 is not listed on IDEAS
    9. repec:dau:papers:123456789/13577 is not listed on IDEAS
    10. repec:eee:crpeac:v:49:y:2017:i:c:p:76-85 is not listed on IDEAS
    11. repec:dau:papers:123456789/13729 is not listed on IDEAS
    12. repec:eee:crpeac:v:30:y:2015:i:c:p:63-82 is not listed on IDEAS
    13. Williams Paul F., 2012. "An Argument on Behalf of Pakaluk and Cheffers' Contention," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 2(1), pages 1-4, March.
    14. Lambert Jerman, 2015. "Les Enjeux De L'Application Des Normes Ias-Ifrs : L'Etude Des Preparateurs Des Comptes, Une Perspective De Recherche Encore Inexploree," Post-Print hal-01188736, HAL.
    15. Edwards, John Richard & Dean, Graeme & Clarke, Frank & Wolnizer, Peter, 2013. "Accounting academic elites: The tale of ARIA," Accounting, Organizations and Society, Elsevier, vol. 38(5), pages 365-381.
    16. repec:eee:spacre:v:19:y:2016:i:2:p:239-251 is not listed on IDEAS
    17. repec:eee:crpeac:v:44:y:2017:i:c:p:42-58 is not listed on IDEAS
    18. Erb, Carsten & Pelger, Christoph, 2015. "“Twisting words”? A study of the construction and reconstruction of reliability in financial reporting standard-setting," Accounting, Organizations and Society, Elsevier, vol. 40(C), pages 13-40.
    19. repec:eee:crpeac:v:22:y:2011:i:4:p:434-450 is not listed on IDEAS

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:aosoci:v:34:y:2009:i:6-7:p:770-786. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/aos .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.