Someone Else’s Problem? The IFRS Enforcement Field in Europe

Abstract

This study adopts an institutional lens to explore enforcement as a complex and nuanced phenomenon shaped by the dynamics of its social context. It examines an IFRS regulatory incident that fails to conclude with any decision or resolving action in the context of the European Union, and as such invites serious questioning of enforcement functions. From our analysis accounting enforcement emerges as an interacting issue-based field in which auditors and the national enforcement agency adhere narrowly to their tasks, ensuring formal but not substantive IFRS compliance. Field participants are seen to respond to institutional pressures strategically by avoiding public positions and delegating choices to other actors, substantially accepting earnings manipulation. Our study shows that the national enforcer increased its interactions with other regulatory actors (i.e. agencies concerned with the setting and interpretation of standards) in the case of controversial issues and their responses can heavily influence overall enforcement effectiveness. Furthermore, its findings contribute to debates on the need for a pan-European enforcement agency and shed light on the importance of IFRS interpretation for the enforce-ability of international accounting standards.

Keywords: Financial Accounting, Case Study, IFRS Enforcement, Issue-Based Field, Standard Interpretation, Strategic Responses

JEL Classification: M41, M48, E58, G21