Responsiveness as a Challenge for the Legitimacy of the IASB - An Evaluation of Current International Accounting Regulation and of Alternative Approaches
38 Pages Posted: 1 May 2016
Date Written: April 29, 2016
The article addresses the legitimacy of global accounting regulation. In line with other approaches, we relate the legitimacy of standard setting by the IASB to the process of standard development. We argue that the provision of procedural elements in the standard setting process that assure responsiveness vis-á-vis constituents is the key to legitimacy. While this perception is still in line with other, particularly economic, approaches we further elaborate a clearer conception of what is meant by responsiveness. We therefore utilize a sociological framework that analyses standard setting processes as stable social systems and is based on the work of Luhmann (1983). Against this backdrop, we analyse the current due process of the IASB as well as the endorsement process for IFRS within the EU. We further discuss whether specific market approaches to standard setting offer process alternatives that comply with our theoretical framework. Each of the market approaches offers different procedural elements to assure responsiveness. However, we will show that a distinguishing element of stable regulation processes in this regard is missing in most of the analysed procedures. Since this element requires to tie norm development to the political process, we carefully draw sceptical conclusions for the future of global accounting regulation.
Keywords: due process of the IASB, global accounting regulation, legitimacy of the IASB, prediction markets, participation, responsiveness
JEL Classification: G10, G18, M40, M48
Suggested Citation: Suggested Citation