Introduction - UDiNus Repository
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Accounting and Business Research
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inf ormat ion:
ht t p: / / www. t andf online. com/ loi/ rabr20
Introduction
Robert Hodgkinson
a
a
Inst it ut e of Chart ered Account ant s, England & Wales
Published online: 28 Feb 2012.
To cite this article: Robert Hodgkinson (2007) Int roduct ion, Account ing and Business Research, 37: sup1, 5-6,
DOI: 10. 1080/ 00014788. 2007. 9730078
To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 00014788. 2007. 9730078
PLEASE SCROLL DOWN FOR ARTI CLE
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cont ained in t he publicat ions on our plat form . However, Taylor & Francis, our agent s, and our
licensors m ake no represent at ions or warrant ies what soever as t o t he accuracy, com plet eness, or
suit abilit y for any purpose of t he Cont ent . Any opinions and views expressed in t his publicat ion
are t he opinions and views of t he aut hors, and are not t he views of or endorsed by Taylor &
Francis. The accuracy of t he Cont ent should not be relied upon and should be independent ly
verified wit h prim ary sources of inform at ion. Taylor and Francis shall not be liable for any
losses, act ions, claim s, proceedings, dem ands, cost s, expenses, dam ages, and ot her liabilit ies
what soever or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or
arising out of t he use of t he Cont ent .
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or syst em at ic reproduct ion, redist ribut ion, reselling, loan, sub- licensing, syst em at ic supply, or
dist ribut ion in any form t o anyone is expressly forbidden. Term s & Condit ions of access and use
can be found at ht t p: / / www.t andfonline.com / page/ t erm s- and- condit ions
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Accounting and Business Research Special Issue: International Accounting Policy Fururn pp 5-6. 2007
5
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:22 01 October 2013
Introduction
This issue of International Accounting Policy
Forum (IAPF)is especially relevant to current policy debates in financial reporting.
The question of measurement has become increasingly controversial in recent years and standard setters have taken steps to open up debate on
it. First, in 2005, the International Accounting
Standards Board (IASB) published, though it did
not endorse, Measurement Bases for Financial
Accounting - Measurement on Initial Recognition,
which advocated that all assets and liabilities
should be measured initially at fair value, where
this can be measured reliably. Then, in 2006, the
IASB and the US Financial Accounting Standards
Board (FASB) published the first in a series of discussion papers as part of their project to establish
a common conceptual framework.
Although this first discussion paper was on ‘the
objective of financial reporting’ and ‘qualitative
characteristics of decision-useful financial reporting information’, it almost certainly has implications for measurement. Also in 2006, the FASB
issued SFAS 157, Fair Value Measurements,
which clarified how the FASB believes fair value
should be defined and measured. An IASB discussion paper with the same title promptly followed
this.
Most recently, in January and February 2007, the
IASB and FASB hosted round tables in Hong
Kong, London and Norwalk to discuss bases of
measurement. These meetings were held as a first
step in developing the boards’ thinking on measurement ahead of its work on a discussion paper on
measurement to be published as part of the conceptual framework project.
The Institute of Chartered Accountants in
England & Wales (ICAEW) has taken a leadership
position on this subject. In October 2006, as part of
our Information for Better Markets campaign, we
published Measurement in financial reporting.
Our approach in this report is essentially a practical one. The critical test for financial reporting
should be: what works? What information helps
businesses, investors and other users of financial
reporting to achieve their goals more effectively?
The report does not recommend any single ‘best’
basis of measurement. On the contrary, it argues
that financial reporting measurement is a matter of
evolving conventions, not something to which
there are immutably right and wrong answers. It
also argues that the purposes of financial reporting
depend on its institutional context and that this
context affects the costs and benefits of different
measurement bases.
The report suggests that, in making decisions on
measurement requirements, it may be appropriate:
to adopt a mixed approach to measurement for
different items in accounts; and
to distinguish between different types of entity
in accordance with their industry, ownership and
governance structure, and size.
The report also proposes that decisions on the
regulation of financial reporting measurement
should be regarded as matters of public policy,
subject to the overriding tests of cost-effectiveness
and fitness for purpose and the same principles of
good regulatory practice as other forms of regulation.
A practical, utilitarian approach must be based
on evidence of what works rather than on a priori
theory, and in our report we stress the need for evidence and recommend that standard setters’ approach to measurement questions should be
significantly more evidence-based than has typically been the case hitherto. In support of this objective we commissioned the five papers published
here, presented at the ICAEW’s Information for
Better Markets Conference in December 2006.
Mary Barth’s paper gives us a standard setter’s
perspective on measurement issues. Wayne
Landsman’s looks at how fair value information
affects markets, and Anne Beatty’s at how changing measurement affects management behaviour.
Stephen Penman’s paper sets out how alternative
approaches to measurement are rooted in the needs
of users and how they actually use financial reporting information for valuation purposes.
Stephen Zeff provides an historical context from
the US in tracing the SEC’s disapproval of most
upward valuations from its founding in 1934 until
1972.
It gives some indication of the value of these
five papers as contributions to the debate that the
IASB and FASB put links to them, as well as to
Measurement in financial reporting, on their websites as background material for their round tables
on measurement. Indeed, the round tables provided strong evidence - at least as far as those affected by accounting standards are concerned - that in
zyxw
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:22 01 October 2013
6
zyxwvutsrqpo
zy
important respects the debate has already moved
on. Speakers at the round tables showed little appetite for the universal imposition of a single basis
of measurement, and near-unanimous acceptance
of mixed bases of measurement, with different
items in the accounts measured in different ways.
The practical question that needs answering concerns which bases produce the most useful information for different items. The answer may well
vary with the needs of different businesses and different users of financial reports, and may also
change over time. I believe that our report and the
papers published here have contributed to this significant change in the focus of the measurement
debate.
The papers in this issue of ZAPF will certainly be
useful to the ICAEW in the continuing development of our thought leadership work on measure-
ACCOUNTING AND BUSINESS RESEARCH
ment, and I trust that readers generally will find
them helpful in developing their own thinking. I
also hope that they will stimulate further research
on the issues they address.
I am grateful to all the distinguished academic
and practitioner contributors to this volume and,
once again, to Pauline Weetman for her support
and hard work as editor. Finally, I thank the
ICAEW’s charitable trusts, which generously provided funding to support the conference last
December, preparation of the academic papers
published here, and the costs of the publication itself.
zyxw
Robert Hodgkinson
Executive Director, Technical
The Institute of Chartered Accountants
in England & Wales
March 2007
On: 01 Oct ober 2013, At : 01: 22
Publisher: Rout ledge
I nform a Lt d Regist ered in England and Wales Regist ered Num ber: 1072954 Regist ered office:
Mort im er House, 37- 41 Mort im er St reet , London W1T 3JH, UK
Accounting and Business Research
Publicat ion det ails, including inst ruct ions f or aut hors and subscript ion
inf ormat ion:
ht t p: / / www. t andf online. com/ loi/ rabr20
Introduction
Robert Hodgkinson
a
a
Inst it ut e of Chart ered Account ant s, England & Wales
Published online: 28 Feb 2012.
To cite this article: Robert Hodgkinson (2007) Int roduct ion, Account ing and Business Research, 37: sup1, 5-6,
DOI: 10. 1080/ 00014788. 2007. 9730078
To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 00014788. 2007. 9730078
PLEASE SCROLL DOWN FOR ARTI CLE
Taylor & Francis m akes every effort t o ensure t he accuracy of all t he inform at ion ( t he “ Cont ent ” )
cont ained in t he publicat ions on our plat form . However, Taylor & Francis, our agent s, and our
licensors m ake no represent at ions or warrant ies what soever as t o t he accuracy, com plet eness, or
suit abilit y for any purpose of t he Cont ent . Any opinions and views expressed in t his publicat ion
are t he opinions and views of t he aut hors, and are not t he views of or endorsed by Taylor &
Francis. The accuracy of t he Cont ent should not be relied upon and should be independent ly
verified wit h prim ary sources of inform at ion. Taylor and Francis shall not be liable for any
losses, act ions, claim s, proceedings, dem ands, cost s, expenses, dam ages, and ot her liabilit ies
what soever or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or
arising out of t he use of t he Cont ent .
This art icle m ay be used for research, t eaching, and privat e st udy purposes. Any subst ant ial
or syst em at ic reproduct ion, redist ribut ion, reselling, loan, sub- licensing, syst em at ic supply, or
dist ribut ion in any form t o anyone is expressly forbidden. Term s & Condit ions of access and use
can be found at ht t p: / / www.t andfonline.com / page/ t erm s- and- condit ions
zyxwvutsrqponmlk
zyxwvutsrqpo
zyxwvutsrqp
zyxwvutsrqp
zyxwvutsr
Accounting and Business Research Special Issue: International Accounting Policy Fururn pp 5-6. 2007
5
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:22 01 October 2013
Introduction
This issue of International Accounting Policy
Forum (IAPF)is especially relevant to current policy debates in financial reporting.
The question of measurement has become increasingly controversial in recent years and standard setters have taken steps to open up debate on
it. First, in 2005, the International Accounting
Standards Board (IASB) published, though it did
not endorse, Measurement Bases for Financial
Accounting - Measurement on Initial Recognition,
which advocated that all assets and liabilities
should be measured initially at fair value, where
this can be measured reliably. Then, in 2006, the
IASB and the US Financial Accounting Standards
Board (FASB) published the first in a series of discussion papers as part of their project to establish
a common conceptual framework.
Although this first discussion paper was on ‘the
objective of financial reporting’ and ‘qualitative
characteristics of decision-useful financial reporting information’, it almost certainly has implications for measurement. Also in 2006, the FASB
issued SFAS 157, Fair Value Measurements,
which clarified how the FASB believes fair value
should be defined and measured. An IASB discussion paper with the same title promptly followed
this.
Most recently, in January and February 2007, the
IASB and FASB hosted round tables in Hong
Kong, London and Norwalk to discuss bases of
measurement. These meetings were held as a first
step in developing the boards’ thinking on measurement ahead of its work on a discussion paper on
measurement to be published as part of the conceptual framework project.
The Institute of Chartered Accountants in
England & Wales (ICAEW) has taken a leadership
position on this subject. In October 2006, as part of
our Information for Better Markets campaign, we
published Measurement in financial reporting.
Our approach in this report is essentially a practical one. The critical test for financial reporting
should be: what works? What information helps
businesses, investors and other users of financial
reporting to achieve their goals more effectively?
The report does not recommend any single ‘best’
basis of measurement. On the contrary, it argues
that financial reporting measurement is a matter of
evolving conventions, not something to which
there are immutably right and wrong answers. It
also argues that the purposes of financial reporting
depend on its institutional context and that this
context affects the costs and benefits of different
measurement bases.
The report suggests that, in making decisions on
measurement requirements, it may be appropriate:
to adopt a mixed approach to measurement for
different items in accounts; and
to distinguish between different types of entity
in accordance with their industry, ownership and
governance structure, and size.
The report also proposes that decisions on the
regulation of financial reporting measurement
should be regarded as matters of public policy,
subject to the overriding tests of cost-effectiveness
and fitness for purpose and the same principles of
good regulatory practice as other forms of regulation.
A practical, utilitarian approach must be based
on evidence of what works rather than on a priori
theory, and in our report we stress the need for evidence and recommend that standard setters’ approach to measurement questions should be
significantly more evidence-based than has typically been the case hitherto. In support of this objective we commissioned the five papers published
here, presented at the ICAEW’s Information for
Better Markets Conference in December 2006.
Mary Barth’s paper gives us a standard setter’s
perspective on measurement issues. Wayne
Landsman’s looks at how fair value information
affects markets, and Anne Beatty’s at how changing measurement affects management behaviour.
Stephen Penman’s paper sets out how alternative
approaches to measurement are rooted in the needs
of users and how they actually use financial reporting information for valuation purposes.
Stephen Zeff provides an historical context from
the US in tracing the SEC’s disapproval of most
upward valuations from its founding in 1934 until
1972.
It gives some indication of the value of these
five papers as contributions to the debate that the
IASB and FASB put links to them, as well as to
Measurement in financial reporting, on their websites as background material for their round tables
on measurement. Indeed, the round tables provided strong evidence - at least as far as those affected by accounting standards are concerned - that in
zyxw
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 01:22 01 October 2013
6
zyxwvutsrqpo
zy
important respects the debate has already moved
on. Speakers at the round tables showed little appetite for the universal imposition of a single basis
of measurement, and near-unanimous acceptance
of mixed bases of measurement, with different
items in the accounts measured in different ways.
The practical question that needs answering concerns which bases produce the most useful information for different items. The answer may well
vary with the needs of different businesses and different users of financial reports, and may also
change over time. I believe that our report and the
papers published here have contributed to this significant change in the focus of the measurement
debate.
The papers in this issue of ZAPF will certainly be
useful to the ICAEW in the continuing development of our thought leadership work on measure-
ACCOUNTING AND BUSINESS RESEARCH
ment, and I trust that readers generally will find
them helpful in developing their own thinking. I
also hope that they will stimulate further research
on the issues they address.
I am grateful to all the distinguished academic
and practitioner contributors to this volume and,
once again, to Pauline Weetman for her support
and hard work as editor. Finally, I thank the
ICAEW’s charitable trusts, which generously provided funding to support the conference last
December, preparation of the academic papers
published here, and the costs of the publication itself.
zyxw
Robert Hodgkinson
Executive Director, Technical
The Institute of Chartered Accountants
in England & Wales
March 2007