Constructing representations of risk in regulatory networks : accounting for financial instruments
The extant literature on accounting regulation in the context of private-sector standard setting has mainly focused on lobbying by means of comment letters. Some rather casual while interesting accounts of the process of standard setting 'behind the scenes' by former insiders and by close observers have complemented this research. Only few detailed studies have looked at how accounting standards emerge over time and in the wider social context. After theory had become deconstructed as providing excuses in the late 1970s, few contributions have looked at the role accounting theory plays in accounting regulation. To analyze the process of accounting regulation in more detail with a focus on the conceptual foundation and the social context of accounting, this thesis looks at one particular international standard setting project that took place over a period of ten years. The thesis focuses on the International Accounting Standards Committee's (IASC) project on financial instruments that was inaugurated in 1988 and resulted in a comprehensive recognition and measurement standard by the end of 1998. Because of the nature of financial instruments, which came to challenge traditional accounting concepts and did not fit easily into existing accounting categories, the project ventured into hitherto unknown regulatory territory. In the process, some of the premises of financial reporting became transformed, in particular with respect to the representation of financial risk. Due to the esoteric nature of the object of regulation - financial instruments - and the intellectual challenges involved, the regulatory debate came to sustain a high level of conceptual independence. Within the debate, new notions of appropriateness of problems and solutions emerged in reliance on a close international network of experts, organizations and ideas. However, legitimately shifting the boundary of what accounting can and should represent became a considerably demanding endeavor, as it was resisted in reference to traditional meaning of accounting. While slowly emerging notions of what accounting can and should represent helped to justify the new accounting guidance, conflicting notions of appropriateness remained resilient. The thesis contributes to refining a model of regulation and accounting standard setting as a regulatory debate that is structured by a meaning-reproducing network of experts, organizations and ideas. Some of the policy and theoretical implications of the study relate to the regulatory role of conceptual frameworks in supporting notions of appropriateness. It also sheds light on notions of regulatory independence, which became prominent in recent proposals for reforming the international standard setting regime. In particular, the structure of the debate was seen to put considerable constraints on pace and direction of regulatory change. Furthermore, the case suggests that the success of regulatory initiatives may depend more on the success of shifting notions of appropriateness of problems and solutions and the meaning given to accounting than on the power and persistence of lobbyists.