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The Theries We Use to Help Us Understand Standard Setting in National Arenas Don’t Work So Well at the International Level Where the International Accounting Starndards Board Is Taking a Lead Role.We Will Have to Modify Them or Expand Our Theoretical Re

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Essay title: The Theries We Use to Help Us Understand Standard Setting in National Arenas Don’t Work So Well at the International Level Where the International Accounting Starndards Board Is Taking a Lead Role.We Will Have to Modify Them or Expand Our Theoretical Re

Abstract

This paper is devoted to investigate the recent development of Australian accounting standards-setting in the light of theories of economics and sociology particularly in respect of the events and controversies around convergence of international accounting standards. The purpose of this paper is to examine the strength and weakness of different theories in the analysis of standard-setting process and more importantly, seek to compare standard setting process and major players involved in national and international arenas. Accordingly through critical use of different theories, this essay suggests that although certain propositions or assumptions of different theories may remain applicable under different scenarios, however with regard to the theory as a whole, it may be argued that each individual theory examined in this essay are not sufficiently sophisticated or suitable in analysis of Australian accounting standard-setting in national and international arenas

Introduction:

Accounting standard setting has been controversial in terms of the institutional standard-setting arrangements in place, regulations introduced by the standard-setting bodies, intervention from the federal government on standard setting process and increasingly significant corporate lobbying on the setting process from different corporate sectors. The standard-setting process itself on both national and international arenas has become a highly politicalized issue that different parties in this power play game would maximize their own interests. Different theories would be applied to examine the standard setting process in different stages of the history with regard to different players.

Theories appied in national arena:

It is reasonable to say that the assumption of the public interest theory holds as it can be validated by what happened in the last two decades. Corporate failure was a commonplace after the Expansion & Acquisition Tide in the 1980s’and also was highlighted as, a major issue following the demises of HIH and One.Tel. Major corporate failures, particularly when several occur at the same time, inevitably lead to claims that failure was caused by, or exacerbated by, shortcomings in the financial reporting system. Frequently, this has resulted in legislation changing the financial reporting framework. Afterward the market has asked the government for intervention which is the establishment of Accounting Standards Review Board (ASRB). Therefore the right to set up standards has passed to the neutral party in order to achieve public interest. In 1991, the ASRB was replaced by the Australian Accounting Standards Board (AASB). It is established due to discontent of the cooperative arrangements. It was a more powerful statue body, and it is established according to the Peirson report (Loftus, 2006, 243). The authority of standard setting has move more forward to the government side. Since 1984 accounting professional body was funded by government and took its direction from and was accountable to the federal government. Furthermore, government tightened its grips on accounting professional bodies and the standard setting process after the crisis of HIH and One.Tel.

The essence of capture theory with regard to accounting standard-setting can be seen as, regulates seek to take charge the regulators so that the rules that are subsequently realized would be advantageous to the parties subject to requirements of the rules. In Australia the AASB or ASRB are reasonably to represent the neutral party. The controversy over conceptual framework SAC 4 can be regarded as a good case to illustrate the point. After harsh criticism and intensive lobbying from corporate sector especially G100, the release was postponed and its mandatory status was withdrawn by ASRB. Notwithstanding its applications to some scenarios in reality, there are limitations where it fails to capture the whole picture of accounting standard process with respect of all parties but only focus on regulators and regulatees, and also “flaws” in which government has a passive role that in fact, has its own interest to pursue and is turning increasingly active. The AASB has also captured by some corporations, for example the AASB 1033, Presentation and Disclosure of Financial Instruments, (Brown, 2001, 269) and also the AARF has continued to get involve in the standard setting process. Therefore the standard was applied quite well in Australian standard setting.

Under the private interest theory, government plays an active role that has its own economic interest. Its legitimate authority to govern becomes a bargaining chip not only for its self, but also among different lobby groups such as accounting professionals and corporate sectors who are often viewed as in conflict

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(2009, 11). The Theries We Use to Help Us Understand Standard Setting in National Arenas Don’t Work So Well at the International Level Where the International Accounting Starndards Board Is Taking a Lead Role.We Will Have to Modify Them or Expand Our Theoretical Re. EssaysForStudent.com. Retrieved 11, 2009, from https://www.essaysforstudent.com/essays/The-Theries-We-Use-to-Help-Us-Understand/15058.html

"The Theries We Use to Help Us Understand Standard Setting in National Arenas Don’t Work So Well at the International Level Where the International Accounting Starndards Board Is Taking a Lead Role.We Will Have to Modify Them or Expand Our Theoretical Re" EssaysForStudent.com. 11 2009. 2009. 11 2009 <https://www.essaysforstudent.com/essays/The-Theries-We-Use-to-Help-Us-Understand/15058.html>.

"The Theries We Use to Help Us Understand Standard Setting in National Arenas Don’t Work So Well at the International Level Where the International Accounting Starndards Board Is Taking a Lead Role.We Will Have to Modify Them or Expand Our Theoretical Re." EssaysForStudent.com. EssaysForStudent.com, 11 2009. Web. 11 2009. <https://www.essaysforstudent.com/essays/The-Theries-We-Use-to-Help-Us-Understand/15058.html>.

"The Theries We Use to Help Us Understand Standard Setting in National Arenas Don’t Work So Well at the International Level Where the International Accounting Starndards Board Is Taking a Lead Role.We Will Have to Modify Them or Expand Our Theoretical Re." EssaysForStudent.com. 11, 2009. Accessed 11, 2009. https://www.essaysforstudent.com/essays/The-Theries-We-Use-to-Help-Us-Understand/15058.html.