Minding Our Manners: Accounting as Social Norms
Yale University - School of Management; Yale University - Cowles Foundation
Yale ICF Working Paper No. 05-18
The accounting standardization project, kicked off by the passage of U.S. securities laws in the 1930s, has steadily gained momentum over seven decades. Today, written standards dominate accounting thought, practice, regulation, instruction, even research. Generally accepted accounting principles - originally a mere description in its plain English meaning - have since been capitalized into a proper name - Generally Accepted Accounting Principles - and now describes rules and regulations issued by authorities with power to inflict punishment on those who do not to accept them. How and why did financial reporting get caught in the standardization project, replacing norms of corporate and professional behaviour by written rules and standards? What are the consequences of this transformation? What alternative courses are available to accounting and corporate governance? I argue that heavy reliance on the codification of financial reporting has been a wrong path. A shift from rules towards norms of behaviour may yet help accounting and corporate governance recover a better balance.
Number of Pages in PDF File: 38
Keywords: Accounting rules, financial reporting, standards, social norms, enforcement sanctions, corporate governance
JEL Classification: B25, G34, M41, M44
Date posted: June 2, 2005