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Lobbying Accounting Standards (Doc)

   

Added on  2020-10-05

11 Pages3635 Words120 Views
Political Science
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A CRITICAL REVIEW OFLOBBYING IN THEACCOUNTING STANDARDSETTING PROCESS
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TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1ANALYSIS......................................................................................................................................1Critically evaluating review of lobbying in the accounting standard setting process............1Impact of lobbying on standard setting in accounting is as follows-.....................................6CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8
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INTRODUCTIONWith the increase of multinational companies across the world, the need for harmoniseaccounting standard also increases. Therefore, such need lead to establishment of Internationalaccounting standards committee where some accounting standards has been published by theinstitution in order to develop transparency and reliability in accounting books of the entities(Bamber and McMeeking, 2016). Thus, in this report issues which relates to the accountingstandards setting process will be evaluated, where different perceptions of the authors will beexamined.ANALYSISCritically evaluating review of lobbying in the accounting standard setting processAccounting lobbying is the term which will be explained with the numbers of economicand managerial theories where agency and stakeholder theory is included. According to theShields (2014) the agency theory suggest only actual outcomes and where decision of developinglobby was associated to reflect the effects of accounting methods for economic well-being oncompany and its manager. Here, the author performed cross industry analysis where authorfound that in different sectors, lobbying activity is large. Author also analysed that entities areusing multiple channels to develop political influence which will affect regulatory and theoutcomes of policy (Reuter and Messner, 2015). However, author also found that the problemwhich associated with managerial and shareholder agency is not associated with lobbyingactivities. At the same time, source has also explores the lobbying practises under differentregulators such as in FASB and in IASB. Author stated both positive and negative aspect. It isstated that lobbying expenditure are relates to the incentives of problem which associate withaccounting. Its positive aspect is that it specifically relates to company's exposures. In the views of Santos and Santos (2014), lobbying in accounting standards has beenfound in 1980, and because of this, several accounting bodies are established in order to bringharmonise accounting process throughout the world. Some few attempts are also been developedtill now. For example: few bodies have examined monetary flow of process for conductingnetwork analysis in order to bring transparency in accounting set of standards. Thus, it can besaid that accounting process has been changed, it is changing and there are high possibility tochange in future as well. It is also true that there are certain type of lobby groups who are1
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playing an important role for establishing and updating changes in accounting standards.Standard setting process which created by privately organised systems is quite open and visible,because of that there are possibility that the lobby groups may able to publicly comment onproposals which established to set standards.However, on the critical note in accordance with the views of Ahmad (2015) there arefew of the questions which has been raised on the participation of accounting bodies for settingset of standards. Although it is also been observed that setting standards is a political process incountries like USA and Europe where very few attempts have been made for linking politiciansin the process of setting accounting standards.According to Morales and Sponem (2017) international accounting standard board is oneof the body which has added agenda in financial instrument project. But the controversy has beenarises with their heavy Anglo-American nature by saying that for in the process of creatingaccounting standard, IASB granting influence of certain lobbying parties. These are the partieswhich plays role in blocking or in providing proposal for changing established accountingstandards. They generally express their views negatively. However, when the internationalfinancial reporting standards have introduced by IASB many organisation across the countiesmake efforts for complying with such standards while preparing financial statements but it hasbeen proven that the result which appeared with such regulations are completely different and isa difficult task as well.However, in the views of Dillard and Vinnari (2017) in order to develop appropriateaccounting standards for dealing with financial instrument has been a constant challenge forIASB. Therefore, adoption of IFRS by EU and standard of financial instrument that is IAS 39were a source of constant debate. Organisations has their biggest concern regardingimplementation of new accounting system with the complexity of IAS 39. Moreover, it is alsobeen observed that financial markets regulators has opposed to measure any financial instrumentwith the fair value option by saying that it would only introduce artificial volatility. Thus, withthis opposition, IASB tried to resolve issue by implementing some limitations to options whichare created in IFRS.With the other concern Mohammadrezaei, Mohd-Saleh and Banimahd (2015) state thatEU is the first nation which has adopted IFRS in order prepare financial statements which is analarming precedence which state future IFRS adoption with the part of standards. By continuing2
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