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The purpose of this paper is to describe and analyze the accounting standards reforms that have moved the accounting profession away from rules‐based towards principles‐based accounting practice and financial reporting, and to explore the implications for boards of directors of fair value estimates of the unknowable contaminating financial statements with financial misstatements.

The paper critically reviews the internationally accepted accounting, auditing and financial reporting standards with respect to fair value accounting and relates them to directors' fiduciary duties – the duties of care, of oversight, and of obedience.

The search for relevance in financial accounting raises daunting challenges for boards of directors tasked with fairly presenting the financial condition of a reporting business entity.

The accounting profession has long been epistemologically conservative, judging reliability to be more important than relevance in the compiling of financial statements. With the fair value reforms, relevance has achieved ascendency over reliability. This necessitates an increase in the need for more research in the epistemology and ethics of accounting.

Boards of directors need to be well‐informed about, and fully engaged with, the assessment of the level of risk of material misstatement associated with the fair value accounting estimates, and with the adequacy of the related mandatory explanatory disclosures.

This paper's originality is grounded in its exploration of the epistemology of accounting in the light of the adoption of fair value conventions in the internationally accepted accounting, auditing and financial reporting standards and its drawing out of the implications this has for corporate governance.

This paper investigates the factors influencing the future of the IASB, using as the point of departure, a review of its historical progression towards becoming the global accounting standard‐setting authority. It concludes that the IASB is an organisation vulnerable to (1) political lobbying of influential institutions, (2) US accounting authorities decision makers, (3) potential accounting scandals, and (4) cultural differences resulting in the misapplication of its standards around the world. Such factors should be borne in mind when charting the next steps for the IASB and in evaluating the comparability and quality of accounts produced under IFRSs around the world.

Using market-risk disclosures as an empirical context, and drawing on the diffusion of innovations (DOIs) model, this paper contributes new sociological perspectives to a theorization of compliance. We propose that stakeholder behaviors during accounting standard-setting discussion and adoption phases are motivated by social, political, and economic factors. These phases interrelate, and consequently, any analysis of managerial disclosure decisions benefit from considering them together, rather than in isolation, as is typical.

The authors use a mixed-methods design, including detailed analysis of semi-structured interviews (n = 26), constituents’ comment letters (n = 106), annual report disclosures (FTSE 350: firm-year observations n = 1,131), technical meetings, and standard-setting documents.

Results suggest that constituents initially supported introduction of a set of mandatory market-risk disclosures, but implied costs of the proposed and subsequently approved requirements outweighed perceived benefits and efficiencies. This study elaborates on these issues, exploring how and why a financial reporting innovation that stakeholders deemed technically inefficient was diffused. Although the authors were told that compulsion (i.e., forced-selection) dominates disclosure decisions, some freedom of choice remains, as evidenced by greater than 40% non-compliance during the first year of adoption. Respondents indicate that theoretically, market-risk disclosure adoption decisions rest on assessment of the costs of disclosure (e.g., preparation and competition) versus non-disclosure (e.g., litigation and reputation). Second-phase adoption is more straightforward because the costs of disclosure decrease over time.

Although mixed-methods research offers several advantages, self-selection bias, issues with coding reliability, and interviewer/interviewee bias are possible. It is impossible to achieve a truly holistic understanding of standard-setting, and therefore the authors acknowledge that findings are not generalizable, though the risks were minimized.

Recognizing that disclosure choices are not made in political and social vacuums, this study suggests that sociological perspectives such as innovation-diffusion inform a theory of compliance.

The chapter shows how globalization and the IFRSs have affected the development of financial accounting and reporting in Estonia. This is interpreted through institutional theory.

The theoretical framework takes into account the prior papers published using institutional theory for defining pressures affecting the development of financial reporting model. The discussion part is presented in three sub-sections. Coercive institutional pressure is analyzed using Estonian accounting legislation from 1990–2012 and normative pressure by focusing on the impact of Big 4 audit companies in the Estonian context. The authors also give an overview of mimetic institutional pressures. As a methodological technique literature review and document analysis are used.

In the context of coercive institutional pressure the development of accounting legislation in Estonia has been mostly influenced by the IFRSs and European Union. In the light of recent events it seems that Estonia has the opportunity to follow its own way deciding which accounting principles should be applied to SMEs. Mimetic institutional pressure affecting Estonian accounting system is International Accounting Standards Board (IASB), which practices Estonian Accounting Standards Board (EASB) copies. Normative institutional pressures influencing the development of the Estonian accounting system are the Big 4 audit firms.

Although using institutional theory to interpret the development of financial reporting framework is not new its application is underexplored in the context of post-Soviet countries such as Estonia. The chapter potentially contributes to the accounting reforms evidence in emerging economies.

The International Accounting Standards Board (IASB) has justified the simplification of International Financial Reporting Standards (IFRS) for small- and medium-sized enterprises (SMEs) in several ways, but no effective justification for this simplification has been made based on the information needs of users. This study aims to provide empirical evidence of the decision usefulness of IFRS for SMEs from a prominent user group of SME financial statements – the banks.

This study uses a mixed-method approach. First, a survey was conducted on commercial bank lending officers to assess the usefulness of different disclosure items included in the SME financial statements. Second, semi-structured interviews were conducted with commercial bank lending officers to gain an in-depth insight into the appropriateness and economic consequences of the requirements of IFRS for SMEs on their lending decisions.

The findings show that commercial bank lending officers did not consider all the disclosure requirements presented to them to be equally important. Hence, to facilitate the actual needs of the users’ decision usefulness, it is imperative that when given the opportunity, users participate in the development of accounting standards.

The findings of this study will be of interest to accounting regulators for evaluating the successful implementation of IFRS for SMEs and planning the next review of IFRS for SMEs. The IASB and SME Implementation Group are presently considering ways to increase user involvement for the next review of IFRS for SMEs, and the findings of this study signify the need for user involvement in the standard setting process.

This paper explores how the International Accounting Standards Board (IASB) has dealt with the emerging issue of accounting for cryptocurrencies by investigating its constituents' expectations and the motivations underlying its regulatory response.

The theoretical lens of regulatory space is used to analyse the four-year debate around cryptocurrency holdings and informs the extensive thematic analysis of public documents, meetings recordings and comment letters on the topic.

Facing national standard setters' initiatives to regulate accounting for cryptocurrency, the IASB defended its position in the regulatory space through an agenda decision based on ewct 2xisting standards, which was finalised by the International Financial Reporting Standards Interpretation Committee (IFRS IC) despite criticism from constituents and Board members.

The paper provides insights into the IASB approach to a regulatory vacuum regarding a new class of items, which derive from a new and rapidly-evolving technology. Disruptive technology impacts the contested arena of accounting regulation, in which the constituents ask for new solutions and the IASB tries to resist such pressures, while defending its position.

The paper sheds light on the growing importance of agenda decisions in the IFRS environment and on the limits of the IASB long regulatory process in the circumstance of emerging accounting issues deriving from rapidly-evolving technology.

This investigation is timely and relevant as it considers the regulatory issues arising from disruptive technological innovations (i.e. cryptocurrency), shedding light on the limits of regulatory processes in times of technological change.

This study investigates how disclosure of the board of directors’ leadership and role in risk oversight (BODs oversight disclosure) influences investors’ judgments when information on risk exposures is disclosed. The theoretical lens through which we examine this issue involves negativity bias. Sixty-two stock market investors who engage in the evaluation and/or investment of stocks on a regular or professional basis participated in our study. Our results reveal that the addition of BODs oversight disclosure (positive information) does not carry significant weight on investor judgments (i.e., attractiveness and investment) when financial statement disclosures indicate a high level of operational and financial risk exposures (negative information). In contrast, under the condition of a low level of risk exposures, BODs oversight disclosure causes investors to assess higher risk in terms of worry, catastrophic potentials and unfamiliarity about risk information and, in turn, make less favorable investor judgments. Our findings add to the literature on negativity bias and contribute to the debate on the usefulness of disclosures about risk.

The paper analyses the concept of ‘user needs’, which has been widely adopted by official bodies as the basis of a conceptual framework for financial reporting, including the ASB in the UK, following the lead of the FASB in the US. The user needs approach is essentially deductive: if users of the financial statements are identified, together with the decisions such users want to make with the information such statements contain, then the required information can be specified in the appropriate form. The paper attempts to follow this logic, to test its viability, making reference to the literature and the conceptual framework statements of FASB and the ASB. The paper concludes that the approach throws up such serious problems that no clear conclusions can be drawn from it. FASB and the ASB do not explicitly face these problems, and effectively abandon the user needs criterion. User needs can only serve a rhetorical function within conceptual framework documents.

The Foreign Corrupt Practices Act (FCPA) of 1977 and its amendment – the Trade and Competitive Act of 1988 – are unique not only in the history of the accounting and auditing profession, but also in international law. The Acts raised awareness of the need for efficient and adequate internal control systems to prevent illegal acts such as the bribery of foreign officials, political parties and governments to secure or maintain contracts overseas. Its uniqueness is also due to the fact that the USA is the first country to pioneer such a legislation that impacted foreign trade, international law and codes of ethics. The research traces the history of the FCPA before and after its enactment, the role played by the various branches of the United States Government – Congress, Department of Justice, Securities Exchange commission (SEC), Central Intelligence Agency (CIA) and the Internal Revenue Service (IRS); the contributions made by professional associations such as the American Institute of Certified Public Accountants (AICFA), the Institute of Internal Auditors (IIA), the American Bar Association (ABA); and, finally, the role played by various international organizations such as the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the International Federation of Accountants (IFAC). A cultural, ethical and legalistic background will give a better understanding of the FCPA as wll as the rationale for its controversy.