QUESTION:
The 2007-2008 financial crisis highlighted issues within the international financial accounting. As a result, the political pressure facing the standard setter and International Accounting Standards Board (IASB) in particular has intensified in recent years. As Barth (2008) stressed: ‘Most observers understand that the IASB . . . come under political pressure from time to time…Open questions relating to these issues include the following. What is the role of politics in standard-setting? What are the political forces? Do political forces from different countries offset or reinforce each other? Does the existence of political pressure on the standard-setting process result in higher or lower quality standards?’(Barth 2008, p. 1175). Thus, accounting has been argued to be one of the contributors to the recent financial crisis, the move to fair value accounting has specifically been hotly debated, embroiling not only national accounting regulators but also the already increasingly challenged IASB.
Required:
Critically discuss the above statement by giving examples to outline issues arising in transnational initiatives to govern business corporations through international financial accounting.
Guidance:
The above question requires you to reflect on a number of topics covered and articles from your reading list. Your essay should unpack some key issues in the question:
– How international accounting standards have been adopted globally and the politics in accounting standards setting
– How fair value accounting has caused the global financial services major problems in the last few years supported with relevant examples.