On the Construction of Transnational Accounting Policy: Dynamics of Negotiating Order between 'Space Cadets' and 'Dinosaurs'

Abstract

The process of accounting policy-making is addressed within an important and evolving body of literature. This paper adds to that literature in explaining the contemporary phase of transnational accounting policy-making through efforts by the FASB and IASB to construct a set of standards accepted for worldwide market regulation. Specifically, this paper examines the process of transnational accounting policy-making through a study of seven years of debate surrounding a particular policy decision made in selecting between two conventions for the measurement of revenue. I use archival documents in the form of narrative accounts of FASB and IASB proceedings to analyze the actors involved in this particular decision, their changing discourse, and their power dynamics throughout the history of debate. I mobilize the negotiated orders perspective and concepts from institutional theory to theorize actor resources, rationales and power dynamics in the process of constructing a policy decision. The analysis reveals how board composition and power dynamics matter in determining the content of accounting standards. In addition, the analysis reveals how power is structured by two coalitions, referred to as the “Space Cadets” and “Dinosaurs”, whose membership is not only somewhat fluid but often reflects seemingly unlikely groupings of actors. Further, this study highlights the differing rationales that these two coalitions mobilize in the process of negotiating order. The findings support the importance of micro-level processes in explaining the development of macro-level accounting policy. These factors are crucial to enhancing our broader understanding of the way in which accounting standards and rules are ultimately institutionalized.