Maintaining economic stability as a motive for statutory accounting requirements

Abstract

The impact of selected accounting rules on economic stability is analysed. Maintaining economic stability is claimed to be an important motive for regulatory intervention. In the first part of the paper, a framework for analysing the usefulness of such stabilizing intervention is proposed. There are differences between countries relating to the kind of economic relationship regulators are focusing on. To what extent should standard setting activities attempt to stabilize relationships between debtors and creditors rather than between capital market players? Should the determination of distributable profits or investor information be the predominating tool of policy making? In relation to these issues several common accounting rules are examined for their contribution to economic stability.