Modernization and Dependency Theory - amazonia.fiocruz.br

Modernization and Dependency Theory Video

This paper discusses the legitimacy source the convergence of accounting regulation from the view of path-dependence theory. It is argued here that legitimacy of converged accounting rules is almost impossible to achieve because of the path-dependent development of corporate governance systems, which depends on the prevailing norms and beliefs of society. The different elements of corporate governance systems have to Modernization and Dependency Theory consistent with these values in order to achieve the real convergence of accounting standards.

The paper analyses the development of accounting convergence and discusses different convergence strategies from the Modernization and Dependency Theory of legitimacy theory and path-dependence theory. Finally, the paper presents a hypothetical solution under which real convergence of accounting standards seems possible. The results of the paper are relevant for accounting research, and important to regulators as well, because, by analysing the factors that influence convergence, the paper is Theorg to help us to understand why real convergence of accounting regulation may be difficult to achieve.

Introduction

Financial reporting has faced many changes over the years, some of these reflecting the tendency towards more global activities by reporting entities. Consistent with this, the international comparability of accounting reports arose as a regulatory aspiration, which has led to the formation of the International Accounting Standards Board IASB Footnote 1 as a standard setter that was established with Modernizatlon goal of introducing the worldwide acceptance of financial reporting standards.

For this reason, the IASB put much effort into constructing its legitimacy in order to be accepted as the global accounting standard setter.

The global spread of IFRS— countries require IFRS for all or most companies Footnote 2 —supports the assumption that the work of the IASB has been successful, and that the international standard setter has indeed gained much legitimacy because considerable convergence of accounting rules has occurred. Nevertheless, click IASB has to maintain—and increase its legitimacy. Recent examples have shown that the IASB still has to actively manage its legitimacy. Footnote 3 This challenges any jurisdiction that has moved more firmly away from the primacy Theoey the prudence principle within its own regulatory system; for instance, the Australian and New Zealand constituents of the IASB have argued against Modernization and Dependency Theory reintroduction of the prudence concept since it might lead to over-provisioning and income-smoothing.

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Footnote 4 This example https://amazonia.fiocruz.br/scdp/blog/work-experience-programme/improving-a-more-value-and-quality-driven.php the problem of standard-setting for different countries when corporate governance systems Footnote 5 display their own path-dependent development. Accounting is only a part of the corporate governance Modernization and Dependency Theory and those making efforts to establish convergence in accounting have to be aware of the interdependencies between accounting rules and other parts of corporate governance regulation Hail et al. The development of corporate governance systems is path-dependent and any change of regulation concerning one element within the system has to consider these interdependencies.

For this reason, transferring accounting standards from one system to another may induce inconsistencies within the system where they are implemented. Certainly, in such circumstances, it seems impossible for a national standard setter, like the FASB, to be the legitimate global accounting standard setter.

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The IASB tries to establish principle-based Dependfncy standards that are not constrained by corporate governance systems. In order to ensure that its standards are legitimate and therefore accepted by its constituents, the IASB has constructed a way of standard-setting that should eliminate legitimacy concerns. Indeed, its formal approach to standard-setting seems to be accepted by the constituents.

But the problem of differences in norms between different corporate governance systems link