Is culture an easy get out?

To the Management Accounting Research Group yesterday where it was a pleasure to catch up with many academic colleagues and friends. The break out session was a useful idea and allowed members of the large audience a chance to say something.

Although the day was supposed to be about business models, it turned out that people were more interested in talking about culture. As 'Whatdoesaprofessordoallday' has observed, after a disaster culture is often blamed. Is this a way of not blaming individuals? Is culture a form of control to stop people acting in their short run interests?

Small Companies

BIS has a discussion paper on small companies. Although the discussion period has formally closed I understand they are still accepting comments.

House of Lords Report

All power to the House of Lords committee for taking the auditors to task. Predictably they reacted defensively but we shall see if any meaningful reforms result.

Did Financial Reporting contribute to the Global Financial Crisis

People sometimes ask me whether poor financial reporting, in particular the use of fair value measurement contributed to the Global Financial Crisis.

A recent article by Laux and Leuz in Accounting Organisations and Society reviews research on the question. It is linked from here.

The House of Lords Economic Affairs Select Committee is looking into the Audit Market. The meeting televised here considers the question of the financial crisis

http://www.parliamentlive.tv/Main/Player.aspx?meetingId=6801

Ex-chancellor Nigel Lawson describes the auditors as the dogs that didn't bark. Tim Bush provides a number deficiencies of IFRS, including the loss of 'prudence'.

IAS Plus has a timeline on regulation which includes summaries of a number of financial reporting issues

http://www.iasplus.com/crunch/creditcrunch.htm#0911casey

Accountancy Age has numerous articles touching on the topic. A list of them can be found here

How to find the conceptual framework

Further to my previous post, I find that one can obtain free access to the new chapters 1 and 3 of the conceptual framework from the FASB website, where it is lurking disguised as SFAC 8.

The stately dance continues

The IASB and FASB have today published the definitive (for the moment) chapters of their joint conceptual framework for financial reporting. The project, which is supposed to lead to 'internally consistent' standards is already so riddled with contradictions that it has little credibility. However, the long extended search for a framework allows the standard setters to defer awkward questions almost indefinitely.

The latest twist [1] is the assertion that the purpose of financial statements is to

'To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.'

The irony of this is that most equity investors never provide any financial resources to an entity. They buy and sell second-hand shares. When new resources are supplied to an entity, more information, by way of prospectuses and so on, is created that supplements financial statements.


[1] Well I assume the final document includes this phrase. At the time of writing I'm relying on a previous document as I don't have access to the actual document; it is not freely available - one has to pay for a subscription to get it.

A new financial statement? Or an old one?

David Tweedie has apparently confirmed that the IASB is considering including a 'regulators'' page in financial statements so that people concerned with financial institutions can be given the information they need to ensure market stability. It's quite likely that this will include something that looks very like a historical cost balance sheet, and so, rather being something new, this might signal a return to something old.

This could be a fascinating accounting experiment and would give standard setters an opportunity to find out what information is actually demanded, has impact and has value relevance. I foresee the growth of a minor industry in researching the relative importance of regulatory and 'decision useful' information.