The Influence of Standard Setters on the Properties of International Financial Reporting Standards

Abstract:     

This paper investigates whether and how personal characteristics of International Accounting Standards Board (IASB) members are associated with properties of International Financial Reporting Standards (IFRS). Properties of IFRS are captured by linguistic proxies. I document that the overall importance of principles relative to rules in the full set of IFRS decreased over time, while the overall fair value orientation increased. Focusing on single IASB decisions on IFRS changes, I find that members with an auditing background are associated with decreases in the importance of principles relative to rules, while members from common law countries are associated with increases in the importance of principles relative to rules. Furthermore, the results suggest that members with an auditing or financial services background are associated with increases in fair value orientation. This paper is the first to document an association between personal characteristics of standard setters and properties of accounting standards in the IASB setting. Furthermore, I provide detailed descriptive evidence on the time series of IFRS properties and IASB membership.

Number of Pages in PDF File: 57

Keywords: Standard Setting, IASB, IFRS, Principles-based Accounting, Fair Value

JEL Classification: D72, D78, M40, M41, M48