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Few would deny that the U.S. accounting profession is in a very troubled state. The aim of this two-part article is to explain how and why the profession evolved and changed during the 20th century, with particular emphasis on the last three decades. It is my hope that this article will illuminate the origins and consequences of these changes that collectively brought the profession to its current condition.

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INTRODUCTION Now that the International Accounting Standards Board (IASB) has emerged from the restructuring of the International Accounting Standards Committee's (IASC) board, it seeks to establish high-quality International Financial Reporting Standards (IFRSs) and to engineer convergence at that level with eight leading national standard setters via a formal process of liaison. One obstacle lying in the IASB's path is the set of "political" pressures that may be triggered by any board initiative to prescribe specific accounting treatments, eliminate alternative treatments, impose additional disclosure requirements, or tighten the allowed interpretations. I define "political" to mean self-interested considerations or pleadings by preparers and others that may be detrimental to the interests of investors and other users, a phenomenon that has been associated with the term "economic consequences" (see Zeff 1978). The IASB's initiatives will prescribe acceptable standards with greater specificity and provide less room for flexibility. Because the European Commission (EC) has given notice that, no later than 2005, all listed European Union (EU) companies must adopt "endorsed" IFRSs in their consolidated statements, EU companies will see the stakes as being much higher than they were with the standards issued by the old IASC board. Much depends, of course, on how effectively the several countries' regulators enforce compliance with IFRSs. This article relates numerous attempts by industry and other affected parties, both in the U.S. and other countries, to move aggressively to prevent an accounting standard setter from imposing an objectionable requirement. They exemplify the lengths to which the powerful critics of proposed standards will go to defend their self-interests. This paper served as the basis for a plenary address at the International Workshop on Accounting and Regulation, in Siena, Italy, on September 27, 2001. The conference was sponsored by the European Institute for Advanced Studies in Management. The author is grateful for the comments of Dennis Beresford, David Cairns, and Elizabeth Tebeaux on an earlier draft. The comments of the reviewer are much appreciated. The responsibility for what remains is entirely the author's.

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Institutional efforts in the U.S. to develop a conceptual framework for business enterprises can be traced to the Paton and Littleton monograph in 1940 and later to the two Accounting Research Studies by Moonitz and Sprouse in 1962–1963. A committee of the American Accounting Association issued an influential report in which it advocated a “decision usefulness” approach in 1966, which was carried forward in 1973 by the report of the American Institute of CPAs' Trueblood Committee. All of this laid the groundwork for the conceptual framework project of the Financial Accounting Standards Board (FASB), which published six concepts statements between 1978 and 1985. A seventh concepts statement is likely to be published in 2000. It is still not clear how the FASB's conceptual framework has influenced the setting of accounting standards, and some academic commentators are skeptical of the usefulness of all normative conceptual framework projects.

This paper replies to a statement made in this journal that ‘Australia definitely adopts IFRSs’. We analyse and compare the several methods that jurisdictions can use to implement International Financial Reporting Standards (IFRS). These include adopting the International Accounting Standards Board's (IASB) process of setting standards, as well as various forms of standard‐by‐standard implementation. We conclude that the Australian method of implementation is different in major ways from those used in such countries as Israel and South Africa, which involve adopting the IASB's process. By contrast, Australia follows a multi‐step process of enrolling each new standard into a category still entitled ‘Australian Accounting Standards’. To refer to the Australian method as ‘adoption’ of IFRS might therefore mislead, even though Australian companies eventually comply with IFRS.