Management Accounting on the Regulatory Agenda? The Transnational and Local Arenas of Financial Reporting Change in Britain

Abstract

This qualitative study investigates societal and historical settings, which enabled proposals for mandatory narrative reporting on a business' underlying non-financial and future-oriented success factors in an Operating and Financial Review (OFR) to become a key issue on British Company Law reform-agenda in 1998 to 2006. The analysis argues that accounting regulation reform is shaped by a wide range of non-accounting disciplines that intersect with accounting at a certain moment in history. The British accounting reform debates are seen in relation to other national and arenas of discourse to explain how ideas of future-oriented narrative reporting that have been discussed among British accounting professionals for more than 30 years gained momentum in public regulatory activity after further evolution through history. The analysis begins with a review of British proposals for inclusion of accounting narratives in financial reporting-regulation since mid-1970s, and argues that regulatory reform-initiatives in accounting are also shaped by a wide range of non-accounting disciplines that intersect with accounting at a certain moment in history. The study then outlines a locally detached constellation of overlapping problem-discourses in corporate social responsibility (CSR), strategic management, and management accounting in light of new global competition during 1980s, which challenged and expanded commonly agreed notions of appropriate accounting practice to integrated strategic financial and non-financial performance measurement. The translation of this transnational frame of reference into financial reporting regulation reform-proposals is then traced in British accounting reform agents' problem-discourses on financial reporting in mid-1990s. Financial reporting standard setters, corporate governance reformers, and public policy think tanks drew on expanding conceptions of accounting beyond the numbers to address problems of international economic competitiveness and a lack of trust in national corporate governance and financial reporting systems. Their particular critique on traditional financial reporting seemed to parallel relevance lost thesis in management accounting. The study concludes that presentation of non-financial and future-oriented reporting as a solution to bigger problems of international economic competitiveness and a lack of trust in national corporate governance systems stabilised a national constellation of debates in financial reporting, public policy-making, and corporate governance as much that a regulatory space for introduction of mandatory OFR could eventually emerge. The genealogy of OFR as an issue for public regulation provides basis for further examination of dynamics of actors and ideas within a regulatory space over term of British Company Law Review from 1998 to 2006.