Relevance of Academic Research and Researchers' Role in the IASB's Financial Reporting Standard Setting

Abstract

The International Accounting Standards Board (IASB) faces a vast number of standard-setting issues at all levels of financial reporting. The purpose of this article is to explore the relevance of academic research for financial reporting standard setting and the role of academic researchers in the standard-setting process.We contribute to the current debate surrounding International Financial Reporting Standards (IFRS) by drawing inferences from prior findings regarding the role of research in the IASB's standard-setting efforts. After defining three broad categories of standardsetting questions, we explore how the international heterogeneity of its constituency imposes constraints on the IASB's work. Then, whether and how academic research can inform policy makers is investigated from an epistemological perspective. Based on a review of extant literature, the general criteria which a piece of research should fulfil in order to be perceived as relevant and useful by standard setters are discussed. This discussion is followed by more detailed considerations regarding the suitability of different research approaches for each of the three categories of standard-setting questions. We also touch on the subject of inferential problems inherent in most academic accounting research. Since the main objective is to contribute insights relevant to the IASB's efforts, we analyse academics' career systems and their incentives to engage in research intermediation, before discussing possible ways in which interested researchers can channel their insights into the IASB's standard-setting process. Overall, the international dimension of IASB standard setting and its implications for relevant research are emphasized. 1 With respect to value relevance studies, which represented one of the most popular areas of academic financial reporting research in the 1990s, Holthausen and Watts (2001, p. 64) comment: 'Conversations with individuals currently and formerly associated with the FASB suggest those individuals are confused about how to interpret the value relevance evidence and how to use it in their deliberations. While intuitively those individuals, as well as academics, sense something useful must arise from the degree of association between equity valuations and accounting numbers, they find it hard to pinpoint exactly what implications that association has for standard-setting.' In a direct response to Holthausen and Watts' article, Barth et al. (2001) argue in favour of standard-setting implications arising from value relevance research. For more detail, refer to section 4.1 below.

Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the International Monitoring Group Consultation, Strengthening the Governance and Oversight of the International Audit-Related Standard-Setting Boards in the Public Interest

“…Also, at the risk of appearing self-serving, we humbly suggest that academics have a distinct role to play in developing standards that serve the public interest, and they would be a valuable addition to the thought leadership on the board. We note that each of the stakeholder groups listed in the proposal have distinct biases and incentives regarding audit standard setting because the outcomes directly affect each of the groups, except academics (Á lvarez, Calvo, and Mora 2014;Fu¨lbier, Hitz, and Sellhorn 2009). Even regulators have missions that can bias them toward a particular standard-setting result.…”

Economic Theories of Accounting: The Review of Modern Approaches and their Relevance for Standard-Setting

“…Uvedené objektivní komplikace vytvářejí u tvůrců účetních předpisů silnou motivaci zohlednit závěry účetního výzkumu při vývoji nových a aktualizaci stávajících účetních pravidel (Barth, 2006;Fülbier et al 2009;Moehrle et al, 2009). Tvůrci standardů často při tvorbě účetních standardů přímo nebo nepřímo odkazují na výsledky relevantních výzkumných prací.…”

Accounting and Regulation

“…Most publications on the international accounting standard setter relate to its structure, its influence, the financing system, and the functioning of the standard setter (e.g., Wallace 1990;Flower 1997;Kirsch 2006;Fulbier et al 2009;Botzem and Quack 2009;Burlaud and Colasse 2011;Bengston 2011;Königsgruber 2010;Zeff 2012). Fewer articles study in an empirical way constituents' participation in the international accounting standard setting process.…”