4 Pages Posted: 13 Mar 2007
Date Written: March 2007
Financial reporting environment of the world is dominated today by a top down push for uniform financial reporting standards. The advantages of uniformity and monopoly standards have been well-publicized compared to their disadvantages. No language, accounting included, can flourish under the protective umbrella of punitive authority of state. Like languages and dictionaries, accounting and other social phenomena develop best through bottom up processes. We do not have enough the design knowledge to set standards whose consequences cannot be undone by adjusting transactions. Elimination of alternative accounting treatments prevents credible revelation of information through financial statements. Codification of accounting diminishes the judgment-honing function of class room discourse to promote rote memorization that drives away talent from the profession. Introduction of regulatory competition among alternative sets of financial standards may help improve accounting practice.
JEL Classification: M41, M44
Suggested Citation: Suggested Citation
Sunder, Shyam, Uniform Financial Reporting Standards: Reconsidering the Top-Down Push (March 2007). Yale ICF Working Paper No. 07-11. Available at SSRN: https://ssrn.com/abstract=969731 or http://dx.doi.org/10.2139/ssrn.969731
By Ray Ball