Role of Political Factors in Accounting Standards Development

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Accounting

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Table of Contents
Case study 1.....................................................................................................................................3
Role of political factors in accounting standards development...................................................3
Australian government's involvement in the setting of accounting standards.................................5
Case study 2.....................................................................................................................................7
References......................................................................................................................................10

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Case study 1
Role of political factors in accounting standards development
Accounting standards are developed in all the countries and so is in Australia and here the initial
development was made by the professional bodies in accounting. For this, the code of ethics is
followed and by that appropriate methods are used. In Australia, there was the adoption of the
international financial reporting standards and this was done with the direction of financial
reporting council. Due to this, all the issues which were faced by the IASB program were also
included in the AASB working process (Trombetta, Wagenhofer and Wysocki, 2012). All the
issues which are involved are identified by the AASB board members. In the adoption of the
standards, there are various factors which affect them and political factors are also included in
that. By the setting of the standards, all the interests of investors are safeguarded. For this
purpose, the setting of the standard is an important activity and in that appropriate process is
followed. There is the use of the various authorities who will be making the standard which is
best for all the parties who are affected by the set standard.
The main step in this is the identification of the technical issues which are involved in the IFRS.
All of them will be determined so that the problems which are faced in them can be resolved in
an effective manner (Gipper, Lombardi and Skinner, 2013). All of the work is performed by the
other bodies is monitored by the accounting standards board and then they take the process by
taking them into consideration. There are certain issues which are identified by the board and
also the stakeholders provide information about the issues which are in their knowledge. There
are issues by which the reliability of financial information can be improved (FASB, 2019). The
process includes the involvement of the stakeholders and they affect the decision which is made
by the board and so this is the political aspect which is covered in the development of the
standard.
After the successful determination of all the technical issues, there is the need to develop the
proposal for the project by the AASB. In the proposal, all the aspects relating to the project will
be considered such as the cost which is involved, benefits of the project and available time and
resources for the same (Arnold, 2012). The decision in relation to the undertaking of the project

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will be taken by considering all the information which has been determined. If the project is
considered to be feasible then the same will be incorporated into the agenda.
The discussion will be made by the AASB on the agenda which is made and alternatives for the
issues will be researched upon. If the information is required then it can be taken from all the
available sources whether internal or external (Chua, Cheong, and Gould, 2012). There is the
need for the public comment also in the process which is involved. Stakeholders will be involved
in the discussion and the information which is collected will be provided to them in the form of
exposure draft or invitation to comment or discussion paper. In that, the standard which required
amendment and the change which is to be made is specified. There will be a discussion which
will be made and in that various advice are provided by the stakeholders. There arises the point
of conflict as all see their interest in the standard. There is the issue of lobbying in which all the
parties will want their interest to be satisfied with the undertaking of the proposal. The regulators
will be looking at the interest of the society whereas all the stakeholders will advise making the
changes by which they will be benefitted. The standard will be suffering from the same as the
main aim of the standard is affected by this conflict (AASB, 2019). There are various parties
who are involved in the process of setting the standard and the ones that are most powerful will
be dominating others. They will be demanding that advises provided by them are to be
incorporated in the making of the standard. There will be various parties who will be involved
and it will be making a burden on the board as to the advice of who should be considered.
This will be involved in the process of the new standard as well as in the making of the
amendment to the existing standard. This was noted in the IFRS 2 in relation to the share-based
payments in which there was a high level of the lobbying involved (Giner and Arce, 2012). In
that, there were various comments which were made resulting in the conflict of the interest. The
board will be considering all the comments which are made and will be deriving the formal letter
for the same. The making of standard, therefore, involves the involvement of all the stakeholders
and authorities as the advises are asked from them. It becomes the responsibility of the board to
consider then and the most powerful ones will be forced to make the board accept the ones which
are their judgments.