The Legitimacy of the IASB

Abstract

This paper takes issue with Burlaud and Colasse (Accounting in Europe, 8, pp. 23–47, 2011a) who suggest that the International Accounting Standards Board (IASB) lacks legitimacy and that this has led to a return of politics to standard-setting. We show that the IASB is supported by the leaders of the world's major economies (G20), and by the European Commission and European Parliament. The European Commission's policy is to pursue wider adoption of the IASB's standards. We go on to suggest that politics has never been absent from standard-setting and to note that a number of the positions taken by Burlaud and Colasse are not supported by the mainstream literature.

Notes

As is made clear in Burlaud and Colasse (2011a), that article is a translation of an article that appeared in French in 2010. We commented on the French version (Danjou and Walton, 2011) and that comment was accompanied by comments from Burlaud and Colasse (2011b) – some journal editors think that a comment on a published piece gives an automatic right of reply to the original authors. We have in preparing this English language version of our comment taken the opportunity to clarify one or two points. We have also added some notes relating to the views expressed by Burlaud and Colasse in their reply.

B&C argue in Burlaud and Colasse (2011b) that it should be possible to give opinions and advance arguments, citing Michel Foucault as an example. They also say that the researcher should be able to have an intuition and then set out to validate it, citing Einstein. While we would support the notion of giving an opinion, our regret is that Burlaud and Colasse (2011a) do not make it clear that the assertions are often an expression of the opinions of the authors, and the article does not often provide any supporting reasoning. Equally, we would support the idea that received wisdom on form should not be allowed to stifle innovation. However, it is not clear to us what is innovative about the subject, nor that any appeal is made to research to validate it. The subject of institutional legitimacy is a well-established one, and so is questioning the legitimacy of the IASC and IASB.

Accessed from the website of the New York Times, 21 February 2011.

http://www.financialstabilityboard.org/publications/r_110219.pdf

Nous devons progresser sur la convergence, car des normes sont moins utiles si elles ne sont pas utilisées par tous. Nous avons donc besoin d'une adhesion toujours plus large aux normes IFRS, à commencer bien sûr par celle des Etats-Unis.

Nous devons aussi rendre les organes de l'IASB plus représentatifs, pour y impliquer davantage les grandes économies émergentes; mais aussi pour refléter la diversité des acteurs concernés par ces normes. A cette fin, le Monitoring Board de l'IASB, dont je suis membre, vient de lancer une consultation (http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/11/89&format=HTML&aged=1&language=FR&guiLanguage=fr).

Commission Services Working Paper on Governance Developments in the International Accounting Standards Board (IASB) and in the International Accounting Standards Committee Foundation (IASCF), 3rd Report.

http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ecofin/101742.pdf

B&C claim (p. 25) that it is generally attributed to Henry Benson but Benson himself did not claim this (Benson, 1989) and Morpeth claims credit for the initial idea, even if Benson was certainly the driving force in the development of the standards' body.

http://www.iata.org/ps/certification/iosa/Pages/index.aspx

In their comments in Burlaud and Colasse (2011b) the authors describe their original article as une histoire raisonnée (perhaps ‘a reasoned history’), but our point is that here, and elsewhere, a statement is made without either reasoning to explain it, or reference to some other literature for clarification or authentication.

See note 2 above.

‘4 members from the Asia/Oceania region, 4 members from Europe, 4 from North America, one from Africa, one from South America, and two members appointed from any area, subject to maintaining overall geographical balance’.

In Burlaud and Colasse (2011b) the authors say it is difficult to date with precision the emergence of an idea. We agree but we read the original article as claiming that the US conceptual framework was directly influenced by these two pieces of financial reporting literature.

We note that neo-classical economics offers the analysis that the equilibrium market price in a perfect market is a market-clearing price that satisfies everyone who wishes to buy or sell at that price.

Burlaud and Colasse (2011b) say they are not against the IASB, merely against the notion of writing standards from the perspective of investors. Since this is what the IASB does, we feel the distinction is a little obscure.

http://www.ifrs.org/NR/rdonlyres/8F888493-D159-41EA-9FF3-8EBE7276659F/0/StrategyReviewREVFORDATE.pdf