The purpose of this paper is to add to the literature on accounting change in explaining a decade-long effort by the FASB and IASB to develop a set of global accounting standards accepted by markets worldwide. This research studies the effort as one of “convergence” in accounting standards and aims to bring theoretical and empirical clarity as to how we can conceptualize the notion of convergence.
Through a longitudinal study of 23 key FASB-IASB projects undertaken between 2002 and 2011, this paper analyzes processes of accounting change using a blend of institutional theory and political economy. A process perspective provides a method to unfold variants of accounting change by identifying patterns that help us to understand the conditions for and characteristics of convergence.
The author highlights specific variants of accounting change observed during the convergence effort – direct emulation, difference reduction and progressive redesign – as analogous to institutional processes. Where direct emulation and difference reduction reflect institutional processes of imitation and editing or translation, respectively, the author shows how progressive redesign of accounting standards goes beyond these classical categorizations to encompass the notion of “institutional co-construction” (Djelic, 2008).
A longer (shorter) period of study and a greater (lesser) number of projects could be argued for a more comprehensive (more detailed) study; however, limiting the period and project to the terms of the formal convergence program allows for forces driving this particular process to be isolated and their effects extrapolated to broader thinking on accounting and global regulation.
This research informs the global standard-setting community of the evolution of convergence and the factors which impact that evolution by revealing the influence of various institutions, actors and events over time. In particular, the author identifies the impact of the competitive and cooperative conditions under which the FASB-IASB convergence effort operated and reveal how these conditions were influenced by the macro-level economic and political developments occurring over the period.
This paper was developed as part of the author's dissertation at ESSEC Business School. The author is grateful to the supervisors Marie-Laure Djelic and Chrystelle Richard for their continued guidance and Peter Walton for sharing his institutional knowledge and access to data. The author appreciates very much the time and data provided by the experts who agreed to be interviewed as part of this research. The author also thanks participants in the Brown Bag Seminars of the Center for Capitalism, Globalization, and Governance at ESSEC Business School as well as those in the ESSEC C2G2/Max Planck Institute doctoral workshop on Transnational Governance: Exploring New Research Avenues for their helpful comments. Finally, the author appreciates the thoughtful comments of David Cooper and anonymous reviewers at AAAJ.
Baudot, L. (2014), "GAAP convergence or convergence Gap: unfolding ten years of accounting change", Accounting, Auditing & Accountability Journal, Vol. 27 No. 6, pp. 956-994. https://doi.org/10.1108/AAAJ-03-2013-1297Download as .RIS
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