Abstract This essay is a comment on the paper authored by Fischer, Ellman and Schocet (2021, The decline of substance over form in accounting. Accounting, economics, and law: A convivium. (forthcoming)) who argue that the trend in financial reporting regulation involves de-emphasizing the important of economic substance relative to form in how auditors are to perceive their role. The danger foreseen by the authors is the further shrinking of the leeway for professional judgment, which is an important hallmark of a true professional. Agreeing the authors have raised a crucial issue for any group claiming professional status, I try to add to the discussion by pointing out that form and substance in the realm of financial reporting regulation are not antipodes but complementary parts of a process of continuous redefining of what economic substance is. Social reality is socially constructed and as such choices of form made by humans effectively shape substance. Given the capture of accounting by economics during the 1960s, accountants have lost an appreciation for the tentativeness of economic substance and now serve not as participants in shaping economic substance but as enforcers of an imaginary economic substance that derives from the assumptions and values in the ideology of neoclassical economics.
{"title":"The Decline of Substance over Form in Accounting: A Problematic Dichotomy","authors":"Paul F. Williams","doi":"10.1515/ael-2021-0119","DOIUrl":"https://doi.org/10.1515/ael-2021-0119","url":null,"abstract":"Abstract This essay is a comment on the paper authored by Fischer, Ellman and Schocet (2021, The decline of substance over form in accounting. Accounting, economics, and law: A convivium. (forthcoming)) who argue that the trend in financial reporting regulation involves de-emphasizing the important of economic substance relative to form in how auditors are to perceive their role. The danger foreseen by the authors is the further shrinking of the leeway for professional judgment, which is an important hallmark of a true professional. Agreeing the authors have raised a crucial issue for any group claiming professional status, I try to add to the discussion by pointing out that form and substance in the realm of financial reporting regulation are not antipodes but complementary parts of a process of continuous redefining of what economic substance is. Social reality is socially constructed and as such choices of form made by humans effectively shape substance. Given the capture of accounting by economics during the 1960s, accountants have lost an appreciation for the tentativeness of economic substance and now serve not as participants in shaping economic substance but as enforcers of an imaginary economic substance that derives from the assumptions and values in the ideology of neoclassical economics.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"31 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2022-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75767933","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper serves as a commentary to Professor Ramanna’s paper, “Unreliable Accounts: How Regulators Fabricate Conceptual Narratives to Diffuse Criticism.” The case analyzed by Professor Ramanna is the case of CON 8 in which the FASB changed the qualitative characteristics originally identified in CON2 to eliminate the concept of reliability from those qualities accounting data must possess before such data is decision useful. This commentary intends to add some historical depth to the particular case analyzed by Professor Ramanna to demonstrate that conceptual veiling has been a continuous process since the FASB’s original concepts statements that created a conceptual framework made up of two conflicting narratives, i.e. a mixing of the language of two metaphors for accounting. These two metaphors are “accountability” and “information.” The fateful error that has plagued the concepts statements with incoherence since the FASB began was the repurposing of accounting to that of “decision usefulness.” Decision usefulness as defined by FASB had to contain the property of prediction, explicitly predicting the timing, amount and uncertainty of cash flows. However, information is always “about something;” it is not a free-floating abstraction. Since knowledge about the future in economic affairs has eluded the ability of economists and likely always will, FASB is allegedly providing information about the future for which is has not any noteworthy expertise. CON 8 is just another stage of the growing incoherence of the concepts project. The norms of double entry accounting that developed over centuries and shaped accounting’s fundamental concepts served the purposes of accountability for which information to be information must be reliable. The entire edifice of science would collapse if scientific information were not reliable. Without reliability, the boundary between information and misinformation is blurred to the point of invisibility. Professor Ramanna’s analysis provides great insight into the absurdity standard setters now endorse that information does not have to reliable!
{"title":"Unreliable Accounts: Governing behind a Veil","authors":"Paul F. Williams","doi":"10.1515/ael-2021-0107","DOIUrl":"https://doi.org/10.1515/ael-2021-0107","url":null,"abstract":"Abstract This paper serves as a commentary to Professor Ramanna’s paper, “Unreliable Accounts: How Regulators Fabricate Conceptual Narratives to Diffuse Criticism.” The case analyzed by Professor Ramanna is the case of CON 8 in which the FASB changed the qualitative characteristics originally identified in CON2 to eliminate the concept of reliability from those qualities accounting data must possess before such data is decision useful. This commentary intends to add some historical depth to the particular case analyzed by Professor Ramanna to demonstrate that conceptual veiling has been a continuous process since the FASB’s original concepts statements that created a conceptual framework made up of two conflicting narratives, i.e. a mixing of the language of two metaphors for accounting. These two metaphors are “accountability” and “information.” The fateful error that has plagued the concepts statements with incoherence since the FASB began was the repurposing of accounting to that of “decision usefulness.” Decision usefulness as defined by FASB had to contain the property of prediction, explicitly predicting the timing, amount and uncertainty of cash flows. However, information is always “about something;” it is not a free-floating abstraction. Since knowledge about the future in economic affairs has eluded the ability of economists and likely always will, FASB is allegedly providing information about the future for which is has not any noteworthy expertise. CON 8 is just another stage of the growing incoherence of the concepts project. The norms of double entry accounting that developed over centuries and shaped accounting’s fundamental concepts served the purposes of accountability for which information to be information must be reliable. The entire edifice of science would collapse if scientific information were not reliable. Without reliability, the boundary between information and misinformation is blurred to the point of invisibility. Professor Ramanna’s analysis provides great insight into the absurdity standard setters now endorse that information does not have to reliable!","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"222 1","pages":"211 - 231"},"PeriodicalIF":1.4,"publicationDate":"2022-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75640196","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Antitrust is high on the reform agenda at present, associated with calls to “break up big tech.” Proponents of reform have invoked history with regularity in making their case. They say reform is essential to reverse the baleful influence of the Chicago School of antitrust, which, in their telling, disastrously and abruptly ended in the 1980s a “golden” era of beneficially lively antitrust enforcement. In fact, antitrust enforcement was, at best, uneven, from the early 20th century through to the end of the 1970s. As for the antitrust “counter-revolution” of the late 20th century, this was fostered as much by fears of foreign competition and skepticism of government regulation as Chicago School theorizing. The pattern helped to ensure that the counter-revolution was largely sustained through the opening decades of the 21st century. This article, in addition to getting antitrust and history in tune by drawing attention to the foregoing points, provides insights regarding antitrust’s future direction.
{"title":"Getting Antitrust and History in Tune","authors":"B. Cheffins","doi":"10.1515/ael-2021-0084","DOIUrl":"https://doi.org/10.1515/ael-2021-0084","url":null,"abstract":"Abstract Antitrust is high on the reform agenda at present, associated with calls to “break up big tech.” Proponents of reform have invoked history with regularity in making their case. They say reform is essential to reverse the baleful influence of the Chicago School of antitrust, which, in their telling, disastrously and abruptly ended in the 1980s a “golden” era of beneficially lively antitrust enforcement. In fact, antitrust enforcement was, at best, uneven, from the early 20th century through to the end of the 1970s. As for the antitrust “counter-revolution” of the late 20th century, this was fostered as much by fears of foreign competition and skepticism of government regulation as Chicago School theorizing. The pattern helped to ensure that the counter-revolution was largely sustained through the opening decades of the 21st century. This article, in addition to getting antitrust and history in tune by drawing attention to the foregoing points, provides insights regarding antitrust’s future direction.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"41 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2022-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90188017","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The theoretical foundations of Karthik Ramanna’s “Unreliable Accounts” are investigated, demonstrating the pluralistic approach which underlies his critique of the accountability and governance of the FASB. In particular, I highlight Ramanna’s use of multiple units of analysis and theoretical frameworks in his arguments for the existence of conceptual veiling, but I question the extent to which extent Ramanna’s account can be viewed as a generalisable causal explanation. Finally, avenues for future research are noted.
{"title":"The Pluralistic Foundations of Conceptual Veiling","authors":"Julia Morley","doi":"10.1515/ael-2021-0049","DOIUrl":"https://doi.org/10.1515/ael-2021-0049","url":null,"abstract":"Abstract The theoretical foundations of Karthik Ramanna’s “Unreliable Accounts” are investigated, demonstrating the pluralistic approach which underlies his critique of the accountability and governance of the FASB. In particular, I highlight Ramanna’s use of multiple units of analysis and theoretical frameworks in his arguments for the existence of conceptual veiling, but I question the extent to which extent Ramanna’s account can be viewed as a generalisable causal explanation. Finally, avenues for future research are noted.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"68 1","pages":"191 - 210"},"PeriodicalIF":1.4,"publicationDate":"2022-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75958017","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Karthik Ramanna recounts how the Financial Accounting Standards Board (FASB) dropped “reliability” as a fundamental property of accounting in 2010. He offers two possible explanations for this change: (1) The FASB removed reliability to clarify its conceptual framework, and (2) It sought to reconcile its framework with the growing use of fair-value accounting. Ramanna does not give total victory to one explanation over another, nor does he assign purely public- or private-interest motives to the actors in the story. Yet this very ambiguity tells us a lot about the distinctive politics of accounting and other technical realms of regulation, and exposes some of the shortcomings of more standard interest-group models in political science.
{"title":"The Politics of Accounting Standards: A Comment on Ramanna’s “Unreliable Accounts: How Regulators Fabricate Conceptual Narratives to Diffuse Criticism”","authors":"Steve Vogel","doi":"10.1515/ael-2021-0088","DOIUrl":"https://doi.org/10.1515/ael-2021-0088","url":null,"abstract":"Abstract Karthik Ramanna recounts how the Financial Accounting Standards Board (FASB) dropped “reliability” as a fundamental property of accounting in 2010. He offers two possible explanations for this change: (1) The FASB removed reliability to clarify its conceptual framework, and (2) It sought to reconcile its framework with the growing use of fair-value accounting. Ramanna does not give total victory to one explanation over another, nor does he assign purely public- or private-interest motives to the actors in the story. Yet this very ambiguity tells us a lot about the distinctive politics of accounting and other technical realms of regulation, and exposes some of the shortcomings of more standard interest-group models in political science.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"21 1","pages":"247 - 252"},"PeriodicalIF":1.4,"publicationDate":"2022-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78844115","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Intangible Flow Theory: A New Way for Conceptualizing Embeddedness?","authors":"Jakob Kapeller","doi":"10.1515/ael-2021-0087","DOIUrl":"https://doi.org/10.1515/ael-2021-0087","url":null,"abstract":"","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"51 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2021-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81477641","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism’ considers how the Financial Accounting Standards Board (FASB) justified a conjunctural break from historic cost accounting (HCA) to Fair Value Accounting (FVA). Karthik’s paper explores how the US Financial Accounting Standards Board (FASB) legitimized the introduction of fair value accounting (FVA). This fundamental reorientation of financial reporting practice can, he argues, be understood within a framing device: conceptual veiling. Firstly, the FASB is (suspected to be) captured by the interests of investors and capital market actors. Secondly, the FASB needed to construct new narratives to enable this reorientation in accounting practice and this was achieved with changes to the governing conceptual framework. An alternative framing device is offered in this review, that of the financialization of company financial reporting and implications for company viability as opposed to a capital market efficiency perspective. Financialized accounting facilitates the valuation of a range of asset classes to a market value. These asset valuations are speculative in nature. FVA accounting imports speculative capital market risk onto company balance sheets and this can threaten company financial stability and viability for a going concern.
{"title":"“Unreliable Accounts: How Regulators Fabricate Conceptual Narratives to Diffuse Criticism” by Karthik Ramanna: A Comment on Ideological Capture","authors":"V. Palea","doi":"10.1515/ael-2021-0054","DOIUrl":"https://doi.org/10.1515/ael-2021-0054","url":null,"abstract":"Abstract Karthik Ramanna in ‘Unreliable accounts: How regulators fabricate conceptual narratives to diffuse criticism’ considers how the Financial Accounting Standards Board (FASB) justified a conjunctural break from historic cost accounting (HCA) to Fair Value Accounting (FVA). Karthik’s paper explores how the US Financial Accounting Standards Board (FASB) legitimized the introduction of fair value accounting (FVA). This fundamental reorientation of financial reporting practice can, he argues, be understood within a framing device: conceptual veiling. Firstly, the FASB is (suspected to be) captured by the interests of investors and capital market actors. Secondly, the FASB needed to construct new narratives to enable this reorientation in accounting practice and this was achieved with changes to the governing conceptual framework. An alternative framing device is offered in this review, that of the financialization of company financial reporting and implications for company viability as opposed to a capital market efficiency perspective. Financialized accounting facilitates the valuation of a range of asset classes to a market value. These asset valuations are speculative in nature. FVA accounting imports speculative capital market risk onto company balance sheets and this can threaten company financial stability and viability for a going concern.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"241 1","pages":"239 - 246"},"PeriodicalIF":1.4,"publicationDate":"2021-11-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74966747","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Infection, hospitalization and mortality statistics have played a pivotal role in forming social attitudes and support for policy decisions about the 2020-21 SARS-CoV-2 (COVID-19) pandemic. This article raises some questions on some of the most widely-used indicators, such as the case fatality rate, derived from these statistics, recommending replacing them with information based on regular stratified statistical sampling, coupled with diagnostic assessment. Some implications for public health policies and pandemic management are developed, opposing individualistic and holistic approaches.
{"title":"Accounting for Pandemic: Better Numbers for Management and Policy","authors":"Y. Biondi","doi":"10.1515/ael-2021-0075","DOIUrl":"https://doi.org/10.1515/ael-2021-0075","url":null,"abstract":"Abstract Infection, hospitalization and mortality statistics have played a pivotal role in forming social attitudes and support for policy decisions about the 2020-21 SARS-CoV-2 (COVID-19) pandemic. This article raises some questions on some of the most widely-used indicators, such as the case fatality rate, derived from these statistics, recommending replacing them with information based on regular stratified statistical sampling, coupled with diagnostic assessment. Some implications for public health policies and pandemic management are developed, opposing individualistic and holistic approaches.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"47 1","pages":"277 - 291"},"PeriodicalIF":1.4,"publicationDate":"2021-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78411582","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In this paper we trace the rapid growth and spectacular demise of online peer to peer lending in China. Drawing on a series of interviews conducted in China in 2017 and 2018, we follow the expansion of the sector from the establishment of the first major platform in 2007, through the introduction of limited regulation in 2015 in response to a series of platform failures to the final de facto closure of the whole sector by the regulator in 2019–20. However, contrary to claims that technology would reduce risk, the new platforms appear to have given rise to new risks by connecting dispersed borrowers and lenders whilst the regulator had decided to leave the sector to evolve without specific regulation. While there were hopes that P2P lending might increase flows of finance to the SMEs that are excluded from the formal banking system, ultimately too much of the activity on the P2P platforms was characterised by what we term ‘transactional ambiguity’ and ‘legal fluidity’: it occurred on the fringes of legality, often amounting to Ponzi schemes, fraud or unlicensed banking activity. In contrast to the banking sector, where their intermediation role ensures that banks are the focal point in the event of borrower default, and conventional moneylending, where moneylenders bear the risk of default, defaults and platform failures in the P2P sector distributed losses far and wide around the country, often to lenders who were not capable of bearing them. Whilst the central government did not formally stand behind the P2P sector (as it does with banks because of the systemic implications of their operations), the government could not help but become involved where P2P lending transmitted losses to lenders who were dispersed around the whole country. Ultimately, central government announced a wholesale reversal of policy that led to the sector effectively being closed down. The episode cautions against overly optimistic claims that technology can eradicate the risks of fraud and fundamental uncertainty inherent in lending, and reminds us that, without appropriate regulation and adequate internal controls, financial institutions will always operate in ways that result in instability.
{"title":"Too Much Technology and Too Little Regulation? The Spectacular Demise of P2P Lending in China","authors":"Ding Chen, S. Deakin, Andrew Johnston, Boya Wang","doi":"10.1515/ael-2021-0056","DOIUrl":"https://doi.org/10.1515/ael-2021-0056","url":null,"abstract":"Abstract In this paper we trace the rapid growth and spectacular demise of online peer to peer lending in China. Drawing on a series of interviews conducted in China in 2017 and 2018, we follow the expansion of the sector from the establishment of the first major platform in 2007, through the introduction of limited regulation in 2015 in response to a series of platform failures to the final de facto closure of the whole sector by the regulator in 2019–20. However, contrary to claims that technology would reduce risk, the new platforms appear to have given rise to new risks by connecting dispersed borrowers and lenders whilst the regulator had decided to leave the sector to evolve without specific regulation. While there were hopes that P2P lending might increase flows of finance to the SMEs that are excluded from the formal banking system, ultimately too much of the activity on the P2P platforms was characterised by what we term ‘transactional ambiguity’ and ‘legal fluidity’: it occurred on the fringes of legality, often amounting to Ponzi schemes, fraud or unlicensed banking activity. In contrast to the banking sector, where their intermediation role ensures that banks are the focal point in the event of borrower default, and conventional moneylending, where moneylenders bear the risk of default, defaults and platform failures in the P2P sector distributed losses far and wide around the country, often to lenders who were not capable of bearing them. Whilst the central government did not formally stand behind the P2P sector (as it does with banks because of the systemic implications of their operations), the government could not help but become involved where P2P lending transmitted losses to lenders who were dispersed around the whole country. Ultimately, central government announced a wholesale reversal of policy that led to the sector effectively being closed down. The episode cautions against overly optimistic claims that technology can eradicate the risks of fraud and fundamental uncertainty inherent in lending, and reminds us that, without appropriate regulation and adequate internal controls, financial institutions will always operate in ways that result in instability.","PeriodicalId":43657,"journal":{"name":"Accounting Economics and Law-A Convivium","volume":"110 1","pages":""},"PeriodicalIF":1.4,"publicationDate":"2021-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87686667","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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