Came across some overhead notes used in an Accounting Theory class, 2007. Some of the points made, in relation to the role of the accounting standard setter, plus relating to regulatory behaviours generally:
• Standard setters and those affected by standards want standards that do not have negative economic impacts. Troubled loan restructuring provisions (compare to stock writedown provisions—or lack thereof—during the 1930s) . Idea of accounting standards having no immediate or near term negative impact on society.
Footnote: See L. Kryzanowski and G. Roberts (1990), “Canadian banking solvency 1922-1940”, Journal of Money, Credit and Banking 25 (1993), 361-376.
• Standard setters wanting to appear to have been doing something while at the same time not “rocking the boat”, economically. No dramatic, proactive positions, yet it is not difficult for a standard setter to be proactive. For example, the CICA [the Canadian Institute of Chartered Accountants, now known as CPA Canada] publishes an annual review of approaches to Handbook and general GAAP compliance in Financial Reporting in Canada.
Footnote: See summary of publication contents.
• Problem that a reactive standard setter, much like a reactive legislator or regulator, will always fail to meet public expectations. Example: the Walkerton contaminated water crisis. Problems were known long before people were killed and seriously harmed through tainted water.
Footnote: See, for example, “Leadership and fecal coliforms: Walkerton 2000” Editorial, Canadian Medical Association Journal, 163(11), November 28, 2000.
And ten years on