Volume 7, Issue 2 - Which Accounting Regulation for Europe´s Economy and Society

In his October 2013 report, Mr Maystadt discussed the possibility of clarifying and expanding the ‘public good’ criterion in EU Accounting Framework, namely that: Any accounting standards adopted should not jeopardise financial stability, and they must not hinder the EU’s economic development. He also suggested that more thorough analysis of compliance with the criteria of prudence and respect for the public good was needed. Since 2013, the European Commission further announced a ten-years assessment of the application of the International Accounting Standards (IFRS) in Europe, as well as an harmonisation project for European Public Sector Accounting Standards (EPSAS) led by Eurostat. By convening together leading scholars and policy-makers, this workshop aims to contribute to this debate about the consequences of accounting regulation for Europe’s economy and society, concerning both public and private sectors.

This article was prepared for and read at the international workshop on “Which accounting regulation for Europe’s economy and society?” held at the European Parliament, Strasbourg, on May 20, 2015, in tribute to Mr Jérôme Haas (1963–2014), first chairman of the Accounting Standards Authority of France (ANC).

This article is the transcript of a speech given at the international workshop on “Which accounting regulation for Europe’s economy and society?” held at the European Parliament, Strasbourg, on May 20, 2015. This speech is based on the work summarised in “Schwarz et al., 2015. ‘Why accounting matters: A central bank perspective’. Accounting, Economics and Law: A Convivium.”.

Thin political markets are regulatory processes characterised by two features: first, a concentrated commercial interest that is also the source of necessary experiential expertise; second, low participation from the general interest driven by low issue salience. Thin political markets generate capture in two ways distinct from the classic collective-action scenario: first, that the nature of necessary expertise is tacit or implicit – knowledge that comes from doing; second, that the issues at stake evince little interest from the general public or its intermediaries such as the media or politicians. The challenge in thin political markets is that business leaders, who are the subject-matter experts, are both the source of capture and the only realistic prospect for solution. I discuss ways in which we can address this challenge.

The benefits of top down financial reporting regulation over the past eight decades are less obvious than its failures to achieve the purported goals. Perhaps it is time to give a chance to an alternative approach of regulatory competition.

This article contains the proceedings of the open debate that followed the plenary panel on ‘Accounting Regulation and the Public Good’ at the international workshop on ‘Which Accounting Regulation for Europe’s Economy and Society?’ organised under the auspices of the European Parliament in Strasbourg, on 20 May 2015.

International accounting convergence led by the International Accounting Standards Board (IASB) has been fostering an accounting revolution by introducing a market basis of accounting. This accounting model makes general reference to current values (mark-to-market, fair value) instead of corporate realised revenues and invested costs, which were central to the previous model (historical cost). This accounting revolution was consistent with the global financial architecture based upon transnational financial markets which was established since the seventies. However, among the main jurisdictions and monetary areas worldwide, only Europe has adopted the international accounting standards (IAS-IFRS), substantially delegating its accounting legislative and regulatory process to the IASB. This delegation has been raising major quarrels with European constituencies, including (i) resistance against the (full) fair value measurement of financial instruments (2003-05); (ii) opposition to amendment of IAS on segment reporting (2006); (iii) forced suspension of fair value measurements and impairments amid the North-Atlantic financial crisis (October 2008); (iv) an institutional conflict over the evaluation of distressed Member States’ sovereign bonds (August 2011). The Maystadt Report of 2013 reviewed and summarised these concerns with both the accounting model, and the governance of Europe’s accounting standards-making. It recommended including further considerations for Europe’s financial stability and public good, while it did consider the option to establish an Accounting Standards Board of Europe.

This article is based upon a speech given at the international workshop on “Which accounting regulation for Europe’s economy and society?” held at the European Parliament, Strasbourg, on May 20, 2015, in tribute to Mr Jérôme Haas (1963–2014), first chairman of the Accounting Standards Authority of France (ANC).

As a fundamental instrument of financial capitalism the today’s IFRS system of accounting is not only totally unsuitable for the needs of a new ecological world but also represents a serious menace for the development of a sound economic system. The goal of this article is to explain the main reasons for this criticism and to suggest some elements of reconstruction of the today’s accounting system with a new international environmental accounting to be promoted by the European Union.

These remarks deal with financialisation of accounting. Financialisation is a process by which windfall capital market gains are crystallised from future earnings over and above those available from current earnings and profit. Accounting numbers reported by business firms are increasingly including the product of windfall gains from capital markets into those accounting numbers. Thus a significant disturbance in market valuations embedded in firm’s assets and earnings could have a significant and material impact upon firm-level financial stability.

This article contains the proceedings of the open debate that followed the plenary panel on ‘Accounting for the European Private Sector: Reconsidering Accounting Objectives From Economy and Finance’ at the international workshop on ‘Which Accounting Regulation for Europe’s Economy and Society?’ organised under the auspices of the European Parliament in Strasbourg, on 20 May 2015.

An important reform project is ongoing concerning harmonising Europe’s public sector accounting standards (EPSAS). The European Commission appears willing to mimic and take the international private sector accounting as frame of reference, following the same pattern of implementation for international public sector accounting standards (IPSAS) that was enacted for the IAS-IFRS. But the Member States did react in a different way, this time, showing alert, raising questions, and providing resistance in some cases. Public sector accounting shall be considered in the specific context provided by public finances in general, and by a monetary union in particular. This paper takes perspective on these specificities while raising issues (i) on the EPSAS-making governance; (ii) relationship between cash-basis and accrual-basis of accounting; (iii) accounting for governmental liabilities by Member States; and (iv) evidence of net assets under accruals-basis.

This article explains why France supports accrual accounting for the public sector. The French CNOCP, in producing accounting standards for the public sector, takes into consideration the public sector characteristics which are mentioned in the Conceptual Framework for public accounts. The last part of this article presents the link between budgeting and accounting in the French context.

This article is based upon the transcript of a speech given at the international workshop on “Which accounting regulation for Europe’s economy and society?” held at the European Parliament, Strasbourg, on May 20, 2015, in tribute to Mr Jérôme Haas (1963–2014), first chairman of the Accounting Standards Authority of France (ANC).

This paper discusses post-New Public Management (NPM) approaches to current patterns of public management reforms as a path-dependent phenomenon and as proposing corrective solutions to unintended shortcomings of NPM-inspired reforms. Public sector accounting reforms are seen as developing coherently with general public managerial reforms, and as showing a shift in the prioritised purposes assigned to public accounts in line with the overall design of projected reform-making. EU public sector accounting harmonisation is interpreted in this framework, and the Italian experience of public sector accounting reform is discussed in the light of EU membership. Particular emphasis is given to the likely overlap between national and government accounting due to increasingly shared purposes, whereby the former acquires a functional supportive role to the latter. Considerations on the drivers, as well as on the technical solutions of the new Italian public sector accounting system, suggest that Italian public sector accounting has taken a step in the direction of European public sector accounting harmonisation. Finally, the Italian case provides evidence of post-NPM-like accounting reform, contributing to the scanty empirical research on this topic.

This article represents solely the views of its author. It is based on a transcript of a speech delivered at the international workshop on “Which accounting regulation for Europe’s economy and society?” organised under the auspices of the European Parliament in Strasbourg, on 20 May 2015, in tribute to Mr Jérôme Haas (1963–2014), first chairman of the Accounting Standards Authority of France (ANC).

This article contains the proceedings of the open debate that followed the plenary panel on ‘Accounting for the European Public Sector: The Ongoing Reform of European Public Sector Accounting Standards’ at the international workshop on ‘Which accounting regulation for Europe’s economy and society?’ organised under the auspices of the European Parliament in Strasbourg, on 20 May 2015.