Uniform Financial Reporting Standards: Reconsidering the Top-Down Push

The CPA Journal, March 2007

Posted: 1 Jul 2007

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

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Abstract

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

Sunder, Shyam, Uniform Financial Reporting Standards: Reconsidering the Top-Down Push. The CPA Journal, March 2007. Available at SSRN: https://ssrn.com/abstract=996692

Shyam Sunder (Contact Author)

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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