Transnational Regulation and Standardization

AC 424 – Linking Accounting, Organisations and Institutions

Topic: Transnational Regulation and Standardization

Group number: 7

Group members: Aizhan Sambetbayeva, Franziska Burkart, Wenting Huang, Yuan Peng, Chanittha Vichetpan

This document has been prepared by the above group members and provides an indication of how the specified topic relates to the core concepts of ‘Accounting’, ‘Organizations’ and ‘Institutions’. The document is prepared to help enable reflection on the core aspects of AC424 and should be used by students to help reinforce your own understanding of the material. The document is not designed as a comprehensive summary and does not provide a ‘solution’ to all of the issues covered in lectures and seminars.

What aspects of accounting are addressed by this topic? (e.g., what accounting practices, procedures, rules, regulations, etc.?)

This week’s topic focused on the emergence and shifting of Accounting standards and regulations internationally. The topic was historically developed and argued overtime because of the concentration of regulatory power. However, there is a national diversity with accounting standards, which means accounting standards differed considerably in substance and procedure, and the change is initiatives to make financial reporting standards comparable across national borders (early post-war period) (Botzem & Quack, 2006) Additionally, the shifting of accounting standards affects accounting reports, such as shifting centres of capital accumulation and expansion of the financial sector (intangible assets). Moreover, according to case study of Accounting for Stock Options, it is mainly about the examination of debates surrounding the regulation of the accounting for stock option compensation, which have been a controversial topic. Also, employee stock options (ESO) are an accounting procedure and regulation. More importantly, the case brings out three accounting notions (fundamental categories), which are relevance, reliability and comparability. An accounting report should contain relevant, reliable and comparable information (quantification) in order to let users to evaluate and make valuable decisions. These concepts’ remaining shifts in direction of financialization and it helps to increase transparency of financial reporting.

What aspects of organizations are addressed by this topic? (e.g., size, uncertainty, uniformity, strategic direction, failure, sustainability?)

International standard setting, both the issuance of IFRS as well as SFAS 123 that expense stock options, is a negotiation process involving organizations with different even conflicting interests, perceptions and strategies. Take stock compensation case as an example, small high-tech companies were vocal opponents arguing that expensing stock options would impair their competitiveness and put them at a disadvantage compared to larger corporations. In contrast, large corporations were in favour of the regulation because they have already voluntarily disclosed such information and because SFAS 123 would make comparability possible. Given such divergence in interest, standard setting, which pursues uniformity and comparability, is not easy to reach a satisfactory outcome for every organization related.