BE130: Current Issues in Financial Reporting

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BE-130 CURRENT ISSUES IN FINANCIAL REPORTING

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Introduction
The accounting regulations determining the nature of financial reporting process carried
out by business entities worldwide are developed by the standard-setters such as IASB
(International Accounting Standards Board) and the US Financial Accounting Standards Board
(FASB). The standard-setters are largely focusing on converging of the standards for achieving
harmonization in the global financial reporting process. However, the standard-setters are facing
political pressures that are driven by the government of various countries restricting the
convergence of the accounting standards. In this context, the present essay presents a critical
evaluation of the statement ‘Standard setting at the IASC/B is and has long been permeated by
politics’. This has been carried out by examining the nature of processes and practices of IASB
and the impact of political context on development process of accounting regulations.
Impact of Political Context on Accounting Regulations of IASB
International Accounting Standard Board (IASB) has provided in their conceptual
framework the objectives of general purpose financial reporting. These objectives make sure that
reporting entity provides useful information to the existing and potential investors, lenders, and
creditors. The main accounting standard setters such as IASB, FASB (Financial Accounting
Standards Board and UK ASB (United Kingdom Accounting Standard Board) has main
objective to provide all such information to the investors that seem useful and act in the best
interest of the investors. Same has also been provided in objectives of conceptual framework of
accounting.
Nature of Accounting Regulation
All bodies of standard setters’ claims that their respective accounting regulations are
neutral as they are not impact by the external bodies. It means while drafting the accounting
standards only interests of investors, lenders and creditors has been kept in place and no other
external bodies such as political members, big companies and person in charge has any influence
over the provisions of the accounting standard. Accounting regulations are mainly defined in
conceptual framework by IASB and it has certain objectives that fulfill the needs of users of the
financial information. So it can be said that accounting regulations are framed keeping defined
objectives and upon such objectives all the accounting standards are developed (Daske, Hail,
Leuz and Verdi, 2008). Lastly, accounting regulations are developed technically means every
regulations some base and it some meaning behind including in the accounting standards. So it
can be said that accounting regulations has three main defined nature i.e. it is neutral, has clear
objective and technical (Barth, Landsman and Lang, 2008).
Impact of Broader Recognition of Political Nature of Accounting Regulation
During the past few decades political lobbying has increased a lot and it has seen that
standards are framed to satisfy the needs of political bodies. In United States, there have been
cases where it has found that Securities and Exchange Board (SEC) takes active interest in the
accounting standard and it prevents listed companies from deviating from generally accepted