The Political Nature of Accounting Standard Setting free essay sample

The Treasury readily took on the responsibility, the ASX’s relationship with the Liberal Party enabled it to wield great influence and thus push out competing exchanges. The large companies had influence through the ASX and other groups lobbied for their position in this arena. Admittedly, there are non-political influences that have a role in the factors for adopting IAS’s such as globalization. Yes, this has been put into the non-political box because although it can be viewed as political, globalization is also an evolution of international trade with the assistance of technological advancement.What is meant by this is that once upon a time there were small businesses doing local business with locals. As the internet came about and there were improvements in electronic technology, businesses began to trade on an international level. This also influenced political processes in that there was something to be gained from embracing this inevitable phenomenon. Overseeing and monitoring the implementation IAS is the FRC who supported the adoption of abbreviated international standards with the view of reducing ‘financial reporting costs for Australian multinational companies’ (Bowrey 2007).However, the impacts have reached far and wide. When the IAS’s were adopted it was done so hurriedly, which resulted in â€Å"a more challenging task than originally anticipated† (Chand Cummings 2008 pp. 175). There were complications, the platform had inconsistencies which made transition difficult. Convergence has been rocky due to the constant changes in the platform. (Chand Cummings 2008 pp. 175) This raises the question: what are the advantages and disadvantages of the process? Cost vs Benefits – Winners vs LosersThe Government benefited from the movement of power of setting accounting standards through the Treasury department, who in turn gained by securing an authoritative position, as would the accounting bodies through the auditing division. The â€Å"core-financial and â€Å"partial-financial† interest groups predominate the boards of the IASB and in turn the members of the AASB and FRC, which enables them to set standards that would fit their economic objectives. (Brown 2006 pp. 88). Other stakeholders who would be rewarded with benefits are the large funding companies who, due the monetary amounts they endow, have huge influences.This is mainly because it is hard to imagine that in the real world, those endowed with these funds couldn’t really say no to the demands of the endowers for fear of retraction of funds. So in the end money speaks. What about the losers? There are many out there who have been disadvantaged by the changes such as third world countries and â€Å"non-financial virtue based† groups. (Brown 2006 pp. 88). The fact that these groups are the minority in the IASB, AASB and FRC shows how little they can have an input as to the content of the standards.These groups lack political clout and financial strength in the international market, thereby rendering them almost mute in effecting change. Another problem is that Socio-economists have been unable to ‘influence the regulatory process of accounting from a socio-economics perspective’, this is due to problems with communication (Biondi Susuki 2007). In an article by J. E. Ketz it mentions that â€Å"the presence of political factors prevent standard setters from finding technical solutions to technical problems† which has a negative impact on setting standards for special interest groups.These are issues we hope that the IASB and AASB will consider. Goals, Objectives and Consequences Now we come to the Board members themselves, who are mostly composed of ‘core or partial financial’ interest groups with only 1 member of the FRC being a non-financial based interest group (Brown 2006, pp85). While the IASB does â€Å"claim to serve the public interest†, this raises questions as to whether they are influenced by private interests. (Gallhofer Haslam 2007 pp. 658).The fact that the influences of virtue groups are so minute may indicate that, because of â€Å"accounting issues that are unfamiliar to mainstream accounting standard setters† the board members may be handicapped because of their limited views or objectives, even though they are financial accounting experts (Brown 2006, pp90). Then it comes to the timeliness of all these changes. Australias involvements with international and other domestic standard-setters are changing very quickly (Stevenson 2010). Within a relatively short time period we went from harmonization to standardisation with impacts that may not have been easily determinable.The costs of keeping up with constant changes in the IAS’s may be difficult for third world countries. In Chand and Patel’s article on convergence it showed that for â€Å"emerging economies† it might be difficult to fund the adoption of IAS’s as well as the progressive changes in the standards. This, though, is not the only issue as these countries don’t generally have â€Å"well-established professional accounting bodies† and so cannot easily understand the International Accounting standards (Chand ; Patel 2008, pp89). IN CONCLUSION In summary, the process of setting accounting standards and the eventual adoption of the IAS’s has had its effects.The government benefited by empowering the Treasury, in partnership with the ASX, to influence the setting of accounting standards in Australia. Busines ses were involved in that their â€Å"external political activity† largely influenced â€Å"electoral and legislative processes† (Baysinger 1984, pp249). The many influences have benefited the financial majority over the non-financial minority in regards to the content of the standards themselves, and the endowment of funds have ensured that their goals were given priority. Meanwhile the special interest groups have been disadvantaged because their status allowed them no influence.