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

See all articles by Karsten Eisenschmidt

Karsten Eisenschmidt

Fachhochschule Kiel: University of Applied Sciences

Matthias Schmidt

University of Leipzig - Chair of Financial Accounting and Auditing

Date Written: April 29, 2016

Abstract

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

Eisenschmidt, Karsten and Schmidt, Matthias, Responsiveness as a Challenge for the Legitimacy of the IASB - An Evaluation of Current International Accounting Regulation and of Alternative Approaches (April 29, 2016). Available at SSRN: https://ssrn.com/abstract=2772445 or http://dx.doi.org/10.2139/ssrn.2772445

Karsten Eisenschmidt (Contact Author)

Fachhochschule Kiel: University of Applied Sciences ( email )

Sokratesplatz 2
Kiel, 24149
Germany

Matthias Schmidt

University of Leipzig - Chair of Financial Accounting and Auditing ( email )

Grimmaische Straße 12
04109
Germany
493419733691 (Phone)
499733699 (Fax)

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