Sequences of Change in Financial Reporting: the Case of Fair Value

52 Pages Posted: 27 May 2014 Last revised: 19 Mar 2015

Date Written: March 19, 2015

Abstract

This study seeks to explain the transnational shift towards fair value accounting after 1985 by analysing six standard setting projects in the areas of pensions, derivatives and non-financial liabilities. It supplies evidence about the factors driving the outcomes of individual fair value projects through interviews with key actors involved in the standard setting process. In this way, it makes an empirical contribution to the political economy literature by highlighting contextual factors affecting the outcomes of fair value projects (Cooper and Sherer, 1984; Bhimani, 1987; Puxty et al., 1987; Miller and Napier, 1993; Robson et al., 1994; Pong and Whittington, 1996; Arnold and Sikka, 2001; Arnold, 2012).

It also proposes a new methodological approach to explaining regulatory change, arguing that the use of a sequence of projects as the unit of analysis yields a richer account of the process of change than one which focuses on an individual project or area of accounting. Although accounting scholars have identified the significance of network effects between entities at a point in time (Richardson, 2009), accounting change has not been analysed as a chronological sequence of connected events. This study reveals a web of direct and indirect influences across jurisdictional boundaries and between distinct technical areas over time. A hybrid sequence is identified, incorporating both reactive and self-reinforcing elements (Mahoney, 2000; Pierson, 2000; Posner, 2010). The reactive elements are consistent with the political economy literature, revealing interconnected but exogenous factors affecting specific projects. By contrast, the self-reinforcing elements of the sequence drive the norm of fair value accounting within the standard setting environment and are themselves influenced by the publication of earlier fair value standards.

Keywords: Keywords: Fair value, regulatory change, sequences.

Suggested Citation

Morley, Julia Eva, Sequences of Change in Financial Reporting: the Case of Fair Value (March 19, 2015). Available at SSRN: https://ssrn.com/abstract=2441696 or http://dx.doi.org/10.2139/ssrn.2441696

Julia Eva Morley (Contact Author)

London School of Economics ( email )

United Kingdom

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