Special Issue on Accounting and Politics

During the last years many things have happened in the European accounting landscape. We observe the new proactive role of the EU Parliament that started in the aftermath of the financial crisis in 2008 (Bengtsson, 2011; Burlaud & Colasse, 2011) and regained strength after the European Commission (EC) evaluation of its decision to introduce IFRS Standards (EC, 2015). In the same time period, we are also witnessing changes in the governance structure of the European Financial Reporting Advisory Group (EFRAG) that followed the publication of the Maystadt report in 2013. Beyond the European sphere, we cannot ignore the end of the convergence project between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), which began with the very ambitious purpose of achieving a common set of standards. Although after some achievements towards that direction, the convergence project was ended around 2018 without accomplishing the initial goal. Was that a natural consequence of the US political change towards the rest of the world?

Observing these influences of politics on accounting, we included in the call for papers for this special issue the following list of topics/questions that could serve as a catalyst to researchers. In particular we referred to:

• The politics of private rule-making in the public interest, a mechanism to articulate a political view?

• Legitimacy of private accounting standard setters

• Accounting standard setting and accountability

• Private vs public accounting standard setting bodies

• Lobbying on accounting standard setters

• Political pressures on the accounting standard setting process

• Should the economic consequences of accounting be taken into account when issuing accounting standards?

• Should all stakeholders be considered equally when issuing accounting standards?

• European institutions vs international accounting standard setter

• International standards vs US GAAP

• In the light of Trump, Brexit and the EU fitness check, has the local vs global pendulum turned its swing against the role of the IASB?

The large response to this call, 17 papers, and the variety of themes selected by the 26 authors who sent their research, provided evidence that this was a topic worthwhile to research. Moreover, the subjects covered in the submitted papers show that this combined area of research has much more angles than initially thought and listed in the call for this special issue on ‘Accounting and Politics’.

This volume gathers six papers that have received the full support of the reviewers as well as the guest editors and the editor. We sincerely thank the authors for sending their research to the special issue on ‘Accounting and Politics’, and the reviewers for having devoted their time in an unselfish manner to help to improve those papers. But there are other papers still in the pipeline, and we are confident that there will be another later volume in this journal in which a number of these papers still in review will appear. The last thing we would like is to end with the feeling that this huge number of specialists — authors and reviewers— have lost their time, and so we will do our best to achieve that the good research gets published when ready. Below we highlight in brief the topics of the six papers and illustrate how they contribute to insights on the theme of ‘Accounting and Politics’, either from a European or broader perspective. The papers have been organized from the most general perspective, which considers an international perspective, to the more specific one that presents two case studies referred to a particular country.

Kees Camfferman adopts the broad perspective, and introduces us into a new domain in his paper ‘International accounting standard setting and geopolitics’. He refers to the ‘return of geopolitics’ to stress how the new political environment might affect the current situation characterized by the use of a single set of accounting standards in most countries. In his view there is an apolitical element in the way IFRS Standards are developed and used, but he indicates examples that illustrate how geopolitics have interacted with the setting of the international standards, both by the IASB and its predecessor the International Accounting Standards Committee (IASC), and may do so in the future. The author concludes his paper with the building blocks for a more extended analytical framework that could be developed and would allow a better understanding of the role of geopolitics in the context of international accounting standard setting.

As the title of Masatsugu Sanada’s paper ‘Legitimacy of private accounting standard setters: Literature review and suggestions for future research’ suggests, it provides an impressive and well-structured literature review on the legitimacy of private standard setting bodies. Due to the lack of legal authority of these institutions, the author claims legitimacy is critical for their survival. Regarding the accounting field, as the author states it is necessary to consider simultaneously the standard setter and the standards. In that vein, he evidences that the key elements of the IASB’s legitimacy have been changing from responsiveness to technical expertise, and then acccountability. In addition, the paper provides new avenues for future research; in particular he refers to the dynamic nature of organizational legitimacy, and the need to identify strategies not only how to gain or maintain legitimacy, but also how to repair it, since this might have been a consequence of the financial crisis.

The paper by Peter Walton entitled ‘Accounting and politics in Europe: influencing the standards’ offers a very personal view about the political activity in Europe regarding the process of accounting standard setting, as well as the endorsement process. His privileged access to the actors involved in this activity has given him a complete picture about it; and in the paper he explains how despite the extensive open lobbying process organized through the due process, there are also other fewer overt channels that are used to attempt to influence outcomes. Moreover, the author suggests that those lobbying procedures that are not visible, and not subject to any scrutiny, are the most successful, since they do not leave any evidence. Being able to somehow capture these underlying informal lobbying attempts remains a serious challenge for all academic research studying the development of standards.

The use of the European public good concept in the endorsement process of IFRS Standards in Europe is the key topic of the paper ‘The evolution of the European Public Good Assessment in the EU Endorsement Process of IFRS’ by Christopher Hossfeld, Yvonne Muller-Lagarde, and Lionel Zevounou. The authors argue that there has been a politicization of the use of this concept since it was introduced in the EU Regulation 1606/2002 which made compliance with IFRS Standards mandatory for listed groups in the EU from 2005 onwards (European Parliament and Council of the EU, 2002). The paper uncovers that the initial economic approach of this concept, which was related to achieve the efficient functioning of the markets at European level, evolved to a more political interpretation of the concept associated with financial stability and the protection of the European economy. The authors make a detailed analysis of the change, and highlight the role of the financial crisis in such change. This paper reveals underlying political pressures in the EU that influence financial reporting. Similar political forces are probably at work at the moment in the domain of non-financial reporting.

Costanza di Fabio also deals with the public interest concept in the paper ‘The use of public interest arguments in the European accounting field’. The author makes a textual analysis based on various sources. In particular, the paper focuses on the views of the IASB and various European actors who responded to the EC’s public consultations in 2014 and 2018, among other sources. The paper maintains that the public interest is a construct that has several interpretations, depending on the interpretation of ‘public’ and the type of interests involved. Moreover, the author shows that different institutions have different perceptions and public interest arguments are employed rhetorically as a form of meta-discourse. This implies that such a concept is used as a political tool to influence the applicable accounting standards, and in her view the EU’s arguments show a potential threat to the IFRS’s status of globally accepted standards.

In the last but not least relevant paper ‘IFRS in a national regulatory space: insights from Sweden’, Berit Hartmann, Jan Marton, and Josefin Andersson Sol discuss the adoption of IFRS Standards and the difficulties in implementing and enforcing those standards in one particular country: Sweden. Using two case studies the paper examines how ‘intrusive events’, such as the IFRS, trigger responses in a national context. The authors refer to the complexities that arise in the local ‘regulatory space’ due to the specificities of the national context, in particular the political, legal, and cultural attributes that characterize it. Their study contributes to the contextualization of financial accounting; thus, as the authors argue, even when IFRS Standards are truly influential, the accountability, comparability, and relationship between financial reporting and organizational behaviour need to be understood in the context of the regulatory space. Their study can provide further ideas to academics who want to gain a better understanding of the IFRS adoption process in an individual country, and the mechanisms that are triggered in such a situation.

We hope that the ideas, research approaches, and research methods suggested in these papers will inspire academics to conduct further research into the topic of ‘Accounting and Politics’. We really think that the studies provided in this special issue will be useful to understand in a more refined and more in-depth way the political influences around the development of standards. These insights can be applied to research on the development of financial reporting standards, as well as on the development of non-financial reporting standards, which is perhaps the highest priority on the agenda of various institutions and even companies. The interest of the European Parliament on this area of reporting, as well as of the EC for leading the development of standards to regulate its provision (European Commission, 2020; European Parliament and Council of the EU, 2014), opens up a wider area for accounting researchers in which evidence on how politics influence the development of non-financial reporting standards is more than welcome.

To conclude, the research published in this special issue illustrates that the development of financial accounting standards goes beyond a technical exercise to represent the underlying economic situation in a reliable way.