Epistemic commitment and cognitive disunity toward fair-value accounting

Abstract

This paper critically explores knowledge/professionalization relationships in a jurisdictional context characterized by shifting standards of practice. Focusing on the growing movement toward fair value within accounting standards, we examine practitioners' reactions to the growing compulsory application of fair-value accounting standards. To make sense of these reactions, we introduce the notion of epistemic commitment, that is to say one's degree of allegiance to a given knowledge template. Utilizing 27 interviews with Canadian experienced accountants, we rely on epistemic commitment to analyze the extent of variability in practitioners' reactions to the standardization movement toward fair-value accounting. Our analysis demonstrates an important level of variability in practitioners' epistemic commitment toward fair-value accounting, highlighting a lack of cognitive unity in the field. Our findings point to other important professionalization issues: practitioners' inclinations to refer to profitability issues when reflecting on the appropriateness of standards; practitioners' conception of accounting as an objective technology; practitioners' hesitations in voicing deep-level concerns over implementation ambiguities and lack of professional cognitive authority. Overall, our study raises doubts about the professional status of accountancy.

Keywords:

• cognitive authority
• cognitive unity
• epistemic commitment
• fair-value accounting
• professional knowledge
• sociology of professions

Acknowledgements

We sincerely thank interviewees who played a significant role in allowing this research to become reality. We benefited from the comments made by Thomas Carrington, Markus Grottke, Christopher Humphrey, Frank Verbeeten, the late Norman Macintosh, two anonymous reviewers, one Associate Editor, Editor Vivien Beattie, and workshop participants at Copenhagen Business School, the ESSEC Business School (Paris) and the University of Amsterdam. We also acknowledge the comments from participants at the 2011 Annual Congress of the European Accounting Association (Rome), the 2012 Alternative Accounts Conference (Québec City) and Profession Fest 2013 (ESCP Europe, Paris). We gratefully acknowledge the financial support of the Social Sciences and Humanities Research Council of Canada.

Notes

1. We use the expression ‘rank-and-file’ to designate professional accountants working in public practice and dealing with fair-value standards on a day-to-day basis.

2. As specified below, our empirical analysis focuses on micro-processes among members of the latter group, that is to say the practicing professional community, specifically during the implementation stage of professional standards.

3. This paper uses the same data set as a second paper that mobilizes Anthony Giddens' work on late modernity, trust and systems of expertise to investigate implications, from a jurisdictional viewpoint, of the web of inter-professional relationships developing as a result of the normative drift toward fair value (Smith-Lacroix et al. 2012). In contrast, the present paper is resolutely focused on the micro-level, examining how individual accountants have responded to the standardization movement. It is not unusual to find different qualitative research papers drawing on the same data set, each adopting a peculiar perspective (Heaton 2004).

4. Five interviewees provided us with a revised transcript. Only minor modifications were made in those transcripts – apart from one exception where all changes were of a clarifying nature.

5. The IASB recently published IFRS 9 Financial instruments (effective in 2015) that will require equity instruments and derivatives to be measured at fair value. It will allow debt instruments that meet certain criteria to be measured at amortized cost.

6. It is worth noting that fair-value disclosure requirements for financial instruments existed since 1995. The standards published from 2005 required some financial instruments to be measured at fair value.

7. However, the Canadian standard setter issued in December 2009 a new set of accounting standards for private companies, favoring the historical cost principle over fair-value accounting. Nonetheless, private companies are also provided with the opportunity to opt for the application of IFRS. With regard to private sector not-for-profit organizations, they can apply either IFRS or a set of accounting standards specifically developed for them.