The Hollow Promise of an Accounting Standard Setter

Purpose – This paper applies a power framework to critically analyse the international accounting standard setting process for the extractive industries. Design/methodology/approach – Publicly available data, including comment letters, annual reports, company websites, and IASC/IASB pronouncements, is used to make connections between the key plays involved in the international accounting standard setting process for the extractive industries. Findings – Lukes’ (1974) conception of power is used to explain the community of interests that developed between the IASC/IASB and extractive industries constituents. This community of interests is shown to have enabled the extractive industries to mobilise its power to paralyse the standard setting body and secure favourable regulation. While the politicisation of accounting standard setting is widely acknowledged, the revelation that economically dominant groups can covertly wield such power is a sobering one in the light of the worldwide promotion and adoption of International Financial Reporting Standards. Originality/value – This paper contributes to understanding of the presence of power in the international accounting standard setting process and how it is mobilised by key constituents

Politicisation of the international accounting standard setting process: evidence from the extractive industries

Purpose - The purpose of this paper is to provide a detailed example of the way in which extractive industries constituents participated in the setting of the international accounting standard for the extractive industries, IFRS 6 - Exploration for and Evaluation of Mineral Resources. Design/methodology/approach - A cross-section of extractive industries constituents is selected and their participation in the accounting standard setting process is examined via analysis of their comment letters and other interactions with the process. Findings - The paper contributes to our understanding of the politicised nature of accounting standard setting for the extractive industries. In doing so, it highlights the opportunities within the standard setting process through which key constituents can influence outcomes. Research limitations/implications - This paper reflects only a small sample of constituents involved in the standard setting process for the extractive industries and therefore focuses specifically on the relationships between key players selected

Powerful players: How constituents captured the setting of IFRS 6, an accounting standard for the extractive industries

This paper illustrates the influence of powerful players in the setting of IFRS 6, a new International Financial Reporting Standard (IFRS) for the extractive industries. A critical investigative inquiry of the international accounting standard setting process, using Critical Discourse Analysis (CDA), reveals some of the key players, analyses the surrounding discourse and its implications, and assesses the outcomes. An analysis of small cross-section of comment letters submitted to the International Accounting Standards Committee (IASC) by one international accounting firm, one global mining corporation and one industry group reveal the hidden coalitions between powerful players. These coalitions indicate that the regulatory process of setting IFRS 6 has been captured by powerful extractive industries constituents so that it merely codifies existing industry practice

Investigating iternational accounting standard setting: the black box of IFRS 6

This paper examines the role of powerful entities and coalitions in shaping international accounting standards. Specifically, the focus is on the process by which the International Accounting Standards Board (IASB) developed IFRS 6, Exploration for and Evaluation of Mineral Resources. In its Issues Paper, the IASB recommended that the successful efforts method be mandated for pre-production costs, eliminating the choice previously available between full cost and successful efforts methods. In spite of the endorsement of this view by a majority of the constituents who responded to the Issues Paper, the final outcome changed nothing, with choice being retained. A compelling explanation of this disparity between the visible inputs and outputs of the standard setting process is the existence of a “black box”, in which powerful extractive industries entities and coalitions covertly influenced the IASB to secure their own ends and ensure that the status quo was maintained

The directionality of uncertainty expressions and the foreign language effect

Purpose – This study investigates two issues inherent in accounting judgements: (1) the directional influence of uncertainty expressions and how they might positively or negatively affect accounting judgements and (2) the foreign-language effect (FLE), which refers to the reduction of judgement bias that occurs when an accounting judgement is made in one’s foreign language. This study examines both issues in the context of accounting judgements made in Chinese and English languages. Design/methodology/approach – This study conducts two experiments. The first experiment applies a 2x2 between-subject research design, and the second experiment adopts a 2x2 within-subject approach. Findings – The overall results reveal that directionality biases exist in the exercise of accounting judgement in subjects’ native and foreign languages. However, when switching the language from the subjects’ native tongue to a foreign language, overall directionality biases are reduced. Research limitations/implications – This study suggests that the use of native and non-native languages can have unintended consequences on accounting judgements. However, due to the limitations of using students as proxies for professionals and applying self-assessed language scales, the literature would benefit from future research that extends the subject profile to professional accountants and that assesses language skills more objectively. Originality/value – This study contributes to the literature on cross-lingual accounting, both theoretically and methodologically. It also extends the FLE theory to an accounting context, providing insights on how language is involved in judgements concerning uncertainty expressions

Standard setting for the extractive industries: A critical examination

This study identifies the players involved in the international accounting standard setting process for the extractive industries. Publicly available data is used to expose connections between key constituents involved in the process, to enhance understanding of how the international accounting standard setting process occurred, and to identify future research possibilities

Should the Dodd-Frank Act force miners to publish what they pay?

[extract] This week, the powerful American Petroleum Institute (API), along with a coalition of trade organisations, won a significant battle against increased corporate transparency

The power of the extractive industries: capturing the international accounting standard setting process

Purpose - This thesis examines the role of power in the international accounting standard setting process for the extractive industries and explains how that process was mobilised by key extractive industries constituents. For many years these constituents, highly significant in the global economy, have enjoyed choice in the application of accounting standards, enabling them flexibility in the way they present their operations. This investigation illuminates the way in which they have influenced the process of setting an International Financial Reporting Standard (IFRS) for the extractive industries. Design/methodology/approach - The methodology is based on a critical approach to accounting research, termed critical investigative inquiry. This methodology focuses on the political, economic, and social influences on accounting and facilitates the questioning of taken for granted assumptions and power relations involved in accounting and accounting standard setting. The research method that is used to conduct these inquiries is based on Critical Discourse Analysis (CDA). CDA is used to identify the key players involved in the international accounting standard setting process for the extractive industries, and to analyse their discourse and its implications. The outcomes of the international accounting standard setting process are then explained using power/capture theory, which was developed for this research as an integration of Lukes\u27 (1974) conception of power and Mitnick\u27s (1980) theory of regulatory capture. Lukes\u27 (1974) theory recognises that power need not be empirically verifiable to exist and that the status quo may need to be questioned in order for the presence of power to be illuminated. Mitnick\u27s (1980) theory explains regulatory processes and identifies the factors that contribute to a predisposition of regulatory bodies to take actions consistent with the preferences of the industry they were intended to regulate. Power/capture theory, in combination with CDA, provides a framework to make possible the exposure of these factors and recognises that the presence of power/capture may be insidious and the result of a relationship formed between the regulatory body and the regulated industry. Findings - The IASC/IASB\u27s extractive industries project, commenced in 1998, resulted in the issue in December 2004 of IFRS 6, Exploration for and Evaluation of Mineral Assets. This IFRS is simply a codification of existing industry practice, resulting in a perpetuation of the disparate accounting and financial reporting endemic to the extractive industries. This has occurred because of the mobilisation of a powerful community of interests within the extractive industries, which has enabled them to capture the IASC/IASB in order to maintain status quo of flexibility in accounting and financial reporting. Research contributions - The contributions of this research are three-fold. First, as a critical methodology and research method, critical investigative inquiry and CDA have the potential not only to uncover the social practice and public discourse of accounting standard setting, but also to expose the discourse practice underlying the process and make visible the presence of power. Secondly, the theory of power/capture developed to explain the international accounting standard setting process is an innovative approach developed from two theories which are themselves relatively absent from extant accounting literature. Further, CDA and power/capture theory are complementary, and may be used together as a comprehensive framework for critical examination of the accounting standard setting process. Thirdly, this research provides a contribution to practical knowledge of international accounting standard setting processes by tracing the history of accounting for the extractive industries, identifying key players involved in the process, and making connections between these players to provide confirmatory evidence of the effect of power in the international accounting standard setting process. Research limitations/future research - Because this research is based on publicly available information and identification of key players based on lobbying activity, it relies on overt behaviour that may occur relatively late in the process of setting the accounting standard, compared to agenda setting and committee formation. Further studies may overcome this limitation by examining international accounting standard setting from inside the process, by means of participant observation. The CDA and power/capture framework developed in this thesis can be applied to other studies of international accounting standard setting projects or to studies of other aspects of the extractive industries project

Investigating international accounting standard setting: The black box of IFRS 6

This paper examines the role of powerful entities and coalitions in shaping international accounting standards. Specifically, the focus is on the process by which the International Accounting Standards Board (IASB) developed IFRS 6, Exploration for and Evaluation of Mineral Resources. In its Issues Paper, the IASB recommended that the successful efforts method be mandated for pre-production costs, eliminating the choice previously available between full cost and successful efforts methods. In spite of the endorsement of this view by a majority of the constituents who responded to the Issues Paper, the final outcome changed nothing, with choice being retained. A compelling explanation of this disparity between the visible inputs and outputs of the standard setting process is the existence of a “black box”, in which powerful extractive industries entities and coalitions covertly influenced the IASB to secure their own ends and ensure that the status quo was maintaine