Socio-Economic Review (2007) 5, 585–602 doi:10.

1093/ser/mwm011
Advance Access publication October 16, 2007

Socio-economic impacts of international

accounting standards: an introduction
Yuri Biondi1 and Tomo Suzuki2
1
CNAM, 75002 Paris, France
2
Saı̈d Business School, University of Oxford, Oxford OX1 1HP, UK

Correspondence: yuri.biondi@free.fr; tomo.suzuki@sbs.ox.ac.uk

‘Why discuss accounting in Socio-Economic Review?’

‘Because accounting constructs socio-economic reality.’
‘How?!’
‘Theoretically speaking, there should be many ways of doing “account-ing” — an
act of explaining business realities to multiple stakeholders of socio-economies.
Practically speaking, however, the current trend is to use “Fair Value Accounting”
which is considered to be useful particularly for investors, and this is now being
globally standardized.’
‘What are the impacts of such new accounting on wider stakeholders and on the
socio-economy at large?’
‘Many aspects of our life may have been undemocratically administrated without
being noticed, because the Fair Value Accounting is presumed to be fair, while it
is not.’
In order to promote discussions over how our socio-economies should be
accounted for, this paper introduces, in a reader-friendly manner, problems
of the International Accounting Standards (IAS) and the International Financial
Reporting Standards (IFRS)1, and calls for diverse perspectives of future
research.
Keywords: politics of accounting regulation, sociology of accounting, UNIAS
project, corporate finance, financialization, business economics
JEL classification: A12 relation of economics to other disciplines,
M41 accounting, Z13 economic sociology, economic anthropology

1
IAS were issued between 1973 and 2001 by the International Accounting Standards Committee
(IASC). In April 2001 the International Accounting Standards Board (IASB) took over the roles of
the IASC and adopted all IAS and continued the development, calling the new standards IFRS.
Terminologically, IAS(s) and IFRS(s) are often used in an exchangeable way.

# The Author 2007. Published by Oxford University Press and the Society for the Advancement of Socio-Economics.
All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org
586 Y. Biondi and T. Suzuki

1. Why discuss accounting in the socio-economic community?

Sales Assets
2Expenses 2Liabilities
¼Profits ¼Net Assets

Economist: ‘This is the so-called Profit and Loss account and the Balance Sheet, isn’t it’?
Accountant: ‘Yes’.
Economist: ‘Then, what is the problem? There are Sales, Expenses, Assets, . . ., which seem to be
straightforward’.
Accountant: ‘No. “Sales”, for example, are not as simple as economists usually think’.
Economist: ‘. . . how? And, does it matter for socio-economists?’
Accountant: ‘Yes. May I have a few minutes to explain’?

Assume an energy company X made a contract, say at the end of this financial
year, with the Government of Y to supply electricity over the next 10 years for
$1 000 000 000. What should be X’s ‘Sales’ for this year? There could be different
accountings or positions for it. Accountants used to say that the Sales should be
zero, because X has not provided electricity to Y and is not entitled to cash. This is
one position. What if, however, we take into account that X’s future cash-in-flow
has already been secured at this point (because, say, Y is financially viable)? If we
accept this criterion of the estimated ‘future cash-flow’, we could recognize the
Sales (and Assets) at this point and this seems to be the growing trend in practice.
So, the Sales can be zero or $1 000 000 000. This is a simplified example. Yet,
through such an accounting process, illusive economic realities are converted
into the ‘performance’ in the Profit and Loss Account and the ‘financial position’
in the Balance Sheet—the financial statements which eventually turn into a pub-
lished official reality of the corporate, industrial, economic and international
economic arenas (see also Hines, 1988; Baker, 2006).
The whole point of this example is to show that the problem of accounting is
not a one-off scandal, like the Enron case. The magnitude of accounting problems
should not be reduced to the risk of accounting scandals. Not only large
businesses, but also small companies, NPOs and government institutions have
the same opportunities of being creative in account-ing as a normal practice.
Indeed, what could not be creative in accounting? Once practiced, and things
turned into financial values, then the accounting data are aggregated to an indus-
trial level, to a national economy and to international economies. In this sense,
our socio-economies are a figurative construct that is deeply embedded in accoun-
ting. Accounting as ostensibly a straightforward routine may have greater signifi-
cance than is usually acknowledged, under which the main stakeholders (such
as financers and financees in the global financial markets) and the other
 Socio-economic impacts of international accounting standards 587

stakeholders (such as employees, labour unions, farmers, environmentalists and

developing countries) are affected in different ways, either positively or negatively.
For many contemporary philosophers, sociologists and ethnomethodologists,
notably Foucault and Bourdieu, it has become almost a fashion to pay much
attention to the trivial and ubiquitous routines in everyday life as a major
source of modern power, from which socio-economists have been significantly
influenced. Following this intellectual tradition, then, how much attention was
paid to accounting? ‘Economic statistics’ have attracted some serious attention
already, but not ‘accounting’. Several volumes have already been devoted to the
socio-political analysis of economic statistics. For example, The Politics of
Numbers (Alonso and Starr, 1987) has been positively reviewed, followed by
Porter’s Trust in Numbers: the pursuit of objectivity in science and public life
(1995). Mary Morgan’s The history of econometric ideas (1990) and Alain Desro-
sières’ The politics of large numbers: a history of statistical reasoning (1998) have
also been read in favour, which articulated the power of economic statistics as
the major part of political reasoning in modern life. However, not much has
been discussed about accounting among the socio-economic community.
Why? There seem to be at least three reasons. First, accounting appears more
neutral, mechanical, procedural, objective and official than economic statistics
(Miller, 1986; Morgan and Willmott, 1993, p. 8). As microfoundation of empiri-
cal data, an uncountable number of accounting clerks keep records everyday
according to the rules of modern accounting regulations. This appears less
manipulative and more apolitical than statistics. Secondly, accounting appears
lifeless and plain boring. Reflecting the prevalent use and usefulness of accoun-
ting, Johann Wolfgang von Goethe (1747 – 1832) characterized double entry
accounting as ‘one of the most beautiful inventions of human spirit’; however,
this was of course a severe irony, because accounting is conceived to be unintel-
lectual and trivial in human life. Thirdly, despite this monotonousness, accoun-
ting does require some degree of technical knowledge and training if one wishes
to join discussions about it. All of these seem to have contributed to accounting
not being subjected to intellectual scrutiny by the socio-economic community.
Unlike the mainstream economists, however, Klamer and McCloskey (1992)
reflected on the above combination of the ‘seeming objectivity’ and ‘problematic
subjectivity’ of accounting, which makes the perfect match for powerful rhetoric.
They claim that economics is full of accounting rhetoric without being noted.

[E]conomics is rhetorical. One of its many metaphors, in fact its

leading one, is the making of a set of accounts. Modern accounting,
[since the 1970s, especially in the US] which has taken over the strict
neoclassical model, is concerned with incentive systems and infor-
mation as an input into the incentive system. One can view economists
588 Y. Biondi and T. Suzuki

as doing the same thing for larger accounting entities—governments

and especially whole nations and whole worlds. The main point is
that economics lives on accounting ideas’. (Klamer and McCloskey,
1992, pp. 158– 159; bracket added).

Indeed, non-numerical economics, which was predominantly influential until

the 1940s, has largely been replaced with a highly quantitative discipline, and
financial control has grown to be one of the most popular means of modern
social management and administration, and accounting is undoubtedly an
important part of the foundation of this new phenomenon (Suzuki, 2003a, b;
Cairncross, 1988, pp. 12 – 13; Biondi et al., 2007).
Such impacts of accounting rhetoric seem cumulative. Once a correspondence
between accounting data and the object of analysis is established, the numerical
data can be manipulated via mathematical operations, and the results assigned
back to the measured economic realities. This happens not only in academia
but also in the public spheres. The media often re-arrange corporate and national
accounting data into reader-friendly graphs, tables, flow charts, matrixes and,
perhaps most importantly, sensational headings that may entail significant
announcement effects and impacts on public opinions. This is a neglected
problem of the ‘unrestricted consumption’ of accounting data, for which we
have so far no means of control. All in all, by rooting its microfoundation in
everyday empirical transactions, by keeping itself as a highly technical procedure,
by allowing itself to be aggregated to the social level and by making itself amen-
able to the media and free consumption, accounting seems to have established an
anonymous, stratified and thus immune mechanism that does not allow socio-
economists to critically examine (Suzuki, 2003a).
Concerned with such problems, the so-called New Accountants developed social
constructivist research on accounting, which is evident in such journals as Account-
ing Organizations and Society (est. 1976), Accounting, Accountability and Auditing
Journal (est. 1988) and Critical Perspectives on Accounting (est. 1990). The space
constraint prevents us from exhibiting a series of important works in these journals
here, but a glance on Accounting Organizations and Society, for example, would
prove intellectual quality of researchers’ consciousness about accounting’s
impacts on society. These journals have certainly come to influence the thinking
of some economists, sociologists, political scientists and even philosophers.2
2
Younger socio-economic researchers, who are developing their research agenda, are encouraged to
look into these journals which are full of insightful suggestions about how seemingly neutral
accounting influences the corporate performance, the management behaviour, the industrial
development, the mode of macroeconomic management and so forth. For further discussions,
seminars, visiting positions, contact the authors via email.
 Socio-economic impacts of international accounting standards 589

However, the problem is that the density of communication between accoun-

tants and socio-economists has not been strong enough to influence the regula-
tory process of accounting from a socio-economics perspective. This lack of
communication should no longer be left unaddressed, particularly when accoun-
ting is being globally standardized in a specific form: the IAS/IFRS.
The main feature of the IAS/IFRS is two-fold: (a) The IAS/IFRS are becoming
the globally standardized regulation and (b) they are replacing the traditional
‘Historical Cost’ with the ‘Fair Value’. How does this change in accounting
re-shape our socio-economies? In Section 2, we will explain potential risks of
this ‘Fair Value’ and the ‘global standardization.’ In Section 3, we consider the
structure of the disadvantaged multiple stakeholders, and move on to the first
step towards a resolution. The introduction of several papers in this volume is
part of such efforts. Finally, in Section 4, we will summarize the main arguments
of this paper, and call for diverse research on the IAS/IFRS in the future.

2. Fair value, standardization and the ‘structure of losers’

For accountants, international standardization has been a long-standing
agendum since the end of the World War II (See details in Baker and Barbu in
this Issue), and recently an undoubted trend in practice in the form of the
IAS/IFRS. In the last decade or so, the London-based private regulatory body,
International Accounting Standards Board (hereafter IASB), has achieved signifi-
cant convergence of financial accounting regulations in more than 100 countries
where the IAS/IFRS are adopted on a mandatory or voluntary basis (see Gallho-
fer and Haslam in this Issue). Such a development may appear to be welcomed or
unnoticed by the majority.
However, this success may have been helped by the rhetorical terms of ‘Fair
Value’ and ‘standards’ that imply positive epistemic virtue without actually refer-
ring to empirical impacts on public welfare. We are also told that the ‘Fair Value’
and the ‘standards’ are pursued for the sake of ‘international transparency’, ‘inter-
national comparability’ and the subsequent ‘efficiency’ of the world’s financial
markets—another set of rhetoric to which objection cannot be presented in
usual discourses of political economy. In the following, we will give some detailed
accounts of the ‘Fair Value’ and ‘global standardization’ in order to explore what
is actually happening in the name of these rhetorics.

2.1 Fair value

Until recently, accountants were predominantly reliant on the ‘Historical Cost
(i.e. book value)’, rather than the ‘Fair Value (i.e. market value)’ to calculate
profits. Let us go back to the financial statements in Section 1, and assume
that a piece of land which was bought 50 years ago for $1 000 000 is listed on
590 Y. Biondi and T. Suzuki

the ‘Assets’, still at the same price. What if, however, the land now is valued in the
market at 10 times of the Historical Cost? Should we increase the Assets (and
therefore the Net Assets) and therefore the Profits? Or, should we wait until
the land is actually sold in the future?
If we follow an aggressive position of full Fair Value Accounting, we should
increase the value of the asset. Because, it is argued, the market value of assets
is more ‘fair’ than the historical cost. ‘Fair’, but in what sense, and for whom?
The current trend around the IASB circle is to say that the market value is
‘fair’ for investors who require up-to-date information of assets and liabilities
(and therefore the Net Assets) to estimate appropriate share prices. In this
sense, the ‘fair’ should be understood as ‘useful’ for investors. This is one position.
We used to hold a different position, however. We used to think that we should
keep the Historical Costs until the asset is actually sold. It is because we did not
want to recognize an ‘unrealized’ profit which is generated from the external
market factor, at least until the land is actually sold. We wanted to use only ‘rea-
lized’ profits that are reliable and conservative, and also indicative of performance
as a matter of companies’ internal operations. On the basis of such internally gen-
erated profit data, the firm’s employees used to negotiate their payments, custo-
mers judged the fairness of business, the government charged tax and
shareholders demanded dividends.
In this sense, the whole calculation regime is changing in our socio-economy
under the IAS/IFRS. What are the overall impacts of Fair Value Accounting on
wider stakeholders and the socio-economy at large? Is the Fair Value ‘fair’ or
‘useful’, to whom, in what ways? Quite simply, we have not had serious discussions
over these questions. Nor has any empirical evidence been presented (Ball, 2005),
although the IAS/IFRS have steadily been implemented in many countries.
Even if the advocates of Fair Value Accounting have good theoretical backups
from the financial community, would Fair Value Accounting be practically oper-
able? One of the fundamental problems of Fair Value Accounting is its underlying
perspective on financial markets and the firm. The Fair Value approach relies
heavily on the efficient market hypothesis, and considers investors as fully clear-
sighted traders adjusting their decisions promptly without costs to price signals,
as if the ‘price system’ alone frames and shapes the dynamics of markets and firms
(Biondi, 2005). What happens, however, when holding shares—acquired at a
definite price—relate to a somewhat unknown and unaddressed congeries of a
legal and economic system involving flows and immobilizations that requires
an ‘accounting system’ to deal with them? Practically, there are many important
assets that simply do not have an efficient market. This is the actual environment
in which firms operate.
As a result of adherence to the Fair Value, the intricacy of forecasting and esti-
mates came into accounting practices at an unprecedented level, and the profits
 Socio-economic impacts of international accounting standards 591

have come to be recognized earlier and earlier before they are actually realized
(Ijiri, 2005, pp. 259–263; recall Company X’s electricity sales which was
recognized at the point of the contract, rather than the supply of electricity, or
the entitlement to cash). The Enron scandal is one of many examples which
have much to do with this practice of estimation. According to Benston et al.
(2003, p. 8), ‘if accounting standards setters want to reduce the likelihood of
future Enrons, they should abandon current efforts to rely further on fair values
for financial reports’ (see also Biondi, 2007). On the basis of such a concern,
Penman (2006), for example, casts insightful doubts on the Fair Value even from
a viewpoint of shareholders to whom the Fair Value is supposed to purport.
Historically speaking, we actually had this experience already. The Conti-
nental European tradition of accounting, together with leading American scho-
lars, abandoned an earlier Fair Value approach that emerged in the nineteenth
century. Instead, we developed an accounting system which aimed to accom-
modate intricacies of the business firm as an ‘enterprise entity’ located in
time and space—a unique environment fundamentally different from the
market (Biondi, 2005; Biondi et al., 2007). According to Hoarau (2006,
p. 43), one of the fundamental accounting principles of the ‘firm as an
entity and a going-concern’ is universally adopted in the context of accounting
regulation. This is, however, about to be replaced under Fair Value Accounting,
in which all assets and liabilities are evaluated at the market price, as if the
firm were being liquidated.
‘Fair’ to whom, in what ways? Without clear answers or even well-informed
discussions, Fair Value Accounting is about to be globally practiced.

2.2 Global standardization

Standardization of accounting is not new in any sense. In many developed econ-
omies after the World War II, it has become an ever-growing phenomenon (see,
for example, Baxter, 1981), which should have attracted serious critical examin-
ations. For example, despite its potential influences on socio-economic manage-
ment, the European Parliament proposed to adopt the IAS/IFRS which passed in
March 2002 almost without any serious questioning (492 voted for, 5 against,
with 29 abstentions). Arguably, this may have been the fastest resolution
among various influential decisions over business administration in the Euro-
pean Parliament. The IAS/IFRS were taken for granted, but now they cause a
lot of dissatisfaction (Bignon et al., 2004).
In order to critically review this fast growing standardization in accounting, we
reviewed extensively the history of standardization in other fields, such as
the units of measurement (weight, time, distance, etc.), various technologies,
the English language and, most importantly, national income accounting. The
592 Y. Biondi and T. Suzuki

reviews of 11 monographs and 17 papers show, among several important features,

that the vast majority of standardization is a matter of politics which is far from
any logical evolution, laws of nature or the ‘view of nowhere’ (Nagel, 1986). Stan-
dardization is a matter of someone wanting to fix the way things exist, not from a
viewpoint of the almighty but from someone who lives in the specific background
context in which this particular standardization is preferred. This is not a surpris-
ing finding, but this tends to be obscured because standardization is strategically
administrated behind the façade of the ‘technical’ (Martinez-Diaz, 2005; Perry
and Nölke, 2006) and in the name of ‘for the public’.
In many cases, dissatisfaction is expressed only posterior, because ‘standardiz-
ation’ is an ex post fact phenomenon, almost by definition. Standardization is a
matter of enclosure that inevitably creates ‘externalities’. Those who are externa-
lized could develop a force of devolution, but this tends to be too late, because the
problem of the externality becomes significant only when the degree of standard-
ization is significant enough. Until then, the standardization is appreciated within
the internal circle based on the advocated purpose and its achievements. For
those who try to standardize, standardization is simply a matter of persuasion
for their given purposes. They have the right to do so and they believe it is for
the ‘public’, i.e. the main stakeholders they have in mind.
A good example of such standardization and externalization is the inter-
national standardization of national income accounting of the 1950s which
attempted to manage national economies in relation to the GNP (now GDP).
This standardization scheme worked in many countries for the purpose of
‘growth’ for a while. However, this accounting failed to capture the negative
impact of pollution. For example, environmental protection, which is an inte-
gral part of management, became externalized from the management and econ-
omic systems, partly because of the introduction of GNP accounting which
directed managements’ and econocrats’ attention quite exclusively to the
growth, rather than sustainability. As a result, actions against pollution were
not taken in time, until victims and environmentalists managed to form a criti-
cal mass for negotiation (see Suzuki, 2003a, b, for the problem of ‘accounting
entrenchment’).
This is actually not a good example, however, because the other cases usually
end up with a failure in forming a critical mass to represent their dissatisfaction.
The global standardization based on the IAS/IFRS seems to fall in this category in
which wider stakeholders cannot form effective means of politics. The dissemina-
tion of IAS/IFRS may be successful, not because of the strength of those who try
to standardize, but because of the weakness of those who are externalized. There
seems to be a structural problem, which may be termed as the ‘Structure of
Losers’, which we now try to examine based on the case of the IAS/IFRS
development.
 Socio-economic impacts of international accounting standards 593

2.3 The structure of losers

The official objective of the IASB is:

to develop, in the public interest, a single set of high quality, under-

standable and enforceable global accounting standards that require
high quality, transparent and comparable information in financial
statements and other financial reporting to help participants in the
world’s capital markets and other users make economic decisions.

The first point to note in this mission statement is that the IASB clearly
acknowledges that the IAS/IFRS are developed primarily for the ‘participants
in the world’s capital markets’. As we found in any other standardizations,
there is a clear aim for the core stakeholders: the global investors and businesses.
Second, again as usual, this standardization is full of rhetoric such as ‘high
quality’, ‘transparent’, ‘comparable’ and ‘in the public interest’. Accounting
firms, financial institutions, business organizations, politicians, teachers, text-
books, business magazines and newspapers generally support the IAS/IFRS-
based development almost exclusively on these terms.
This is followed by another normal course of standardization: after adoptions
by more than 100 countries, objections and critiques came to be intensified. For
example, in academia, Brown (2004) offers a theoretical critique that the actual
milieu of IAS/IFRS may not cover the interests of wider stakeholders such as
‘the public’ and the ‘other users’. The activities of IAS/IFRS ‘may offer a cosy
arrangement for a narrow band of stakeholders’ such as investment bankers,
international institutional investors and Big Four accounting firms, but not for
the other member groups of the global community that IAS/IFRS claim to
serve (ibid, p. 385). Some criticisms are also supported by strong evidence. For
example, Hallström (2004) reveals a less-honourable attitude of an IAS/IFRS
expert (considered to be an ex-IASB board member) which does not encourage
wider stakeholders’ participation in the development of IAS/IFRS:

You shouldn’t put too much weight on different interest groups, you
should be careful with this concept! It’s like the medical profession –
within accounting we are seeking the truth, not over different interests.
We seek the truth for a more efficient capital market. That is what the
IASC is doing and not trying to be democratic. The best experts should
be there. There are about 50 powerful men and women in the world.
And what really is the contribution of developing countries? We
know what is best and we can help the rest of the world with our stan-
dards. So we shouldn’t let developing countries interfere with the tech-
nical work. (Interview with an IASC expert; Hallström, 2004, p. 126)
594 Y. Biondi and T. Suzuki

This is certainly problematic from a theoretical and intellectual viewpoint,

which tries to embrace social and global democracy.
However, the IASB is simply pursuing their objective as a matter of normal
conduct of standardization. They have rights to do so, and they believe it is
‘for the public’, the belief which researchers should not be too cynical about, as
the majority of IASB circles do believe that they are working ‘for the public’.
In fact, careless critiques based on the naı̈ve global democracy can help develop
more sophisticated rhetoric and defence for the standardization. For instance,
consider the following potential hypocritical statements made by IASB circles
that seem to be increasingly present: (a) the ‘draft exposure and comment
process’ ensures opportunities for stakeholders to democratically participate in
the standard setting (which could in fact function for IASB as a means of
self—and ex post fact—legitimization of standardization because the comment
letters are essentially powerless). (b) The IASB does not have any legal power
to impose the IAS/IFRS to any jurisdictions, which is then free to enforce
those standards or not (which could be a cliché, resting its righteousness upon
the legalistic formalism, while the IASB could in fact, exercise superior structural
power in practice). (c) The IASB’s Board membership is increasingly diversified
to respond to the variety of interests from other stakeholders than financial inter-
mediaries (which could also have a self-legitimization effect, because the Board
members’ pre-determined preference for the Fair Value can be concealed
behind the veil of the other stakeholders). These are tentative hypotheses.
However, such hypocrisies may have already been well developed, due to careless
and less-strategic criticisms against those who standardize.
Turning attention to those which are standardized, problems are less often
discussed, but perhaps more serious. There are variations in the Structure of
Losers in different jurisdictions which merit a series of extensive studies.3
However, in this short Introduction, we outline only the main point, drawing
on the illustrative power of the Figure 1.
Figure 1 illustrates one of the typical jurisdiction level structures in which the
excluded stakeholders cannot form effective political vector against the IASB. For
a single focused purpose of the ‘world’s efficient capital market’ (but also in the
name of the ‘public interest’), the IASB manages to collect a large sum of
resources such as funds, personnel, dedicated time and expert knowledge,

3
See Business and Politics journal, 2005, Vol.7, Issue 3, for a few insightful studies. There are also a few
less illuminating studies by political scientists whose interests are simply to apply existing theories
(such as the Game Theory), concluding that ‘accounting standard setting has become political’.
However, for those who know accounting, the standardization of accounting has never been
apolitical, and the winning game of the first movers is by no means enlightening. Research efforts
should be spent to develop theories and schemes that would help to develop dialectical evolution
of global standardization issues.
 Socio-economic impacts of international accounting standards 595

Figure 1 Structure of the Losers model.

which in itself is a normal phenomenon and not a problem. A strong political

vector is then directed to a jurisdiction, such as Japan for example, to change
its accounting regulation. Note here that the counterpart of the IASB is the jur-
isdiction at large such as ‘Japan’ and not the capital market of Japan. Within the
jurisdiction, say in Japan, there are many different stakeholders such as employ-
ees, labour unions, banks, tax office, regulatory agencies, environmentalists and so
forth who either support or object to the proposed change based on their different
interests. The problem here is that, unlike the IASB, the jurisdiction cannot enjoy
the economy of scale in political negotiation due to the diverse interests within the
jurisdiction. The total sum of the fund, personnel, knowledge and time spent
within the jurisdiction may be larger than that of the IASB, but their political
vectors cancel out each other and cannot be co-ordinated to fight the international
politics.4 When the Structure of Losers is so obvious, wider stakeholders do not
even bother to make their efforts in making their voices heard. As a result,
impacts of IAS/IFRS on wider stakeholders remain unknown.
There is certainly a risk of tautological self-legitimization of IAS/IFRS: a
problem in which IAS/IFRS is likely to be accepted only on the basis of their
advocated effects, leaving potentially negative side-effects unexamined. As we
4
Labour unions, or insurance companies, for example, may find it effective to make a coalition with
the other jurisdictions’ counterparts, but again this is not easy from a viewpoint of the economy of
scale.
596 Y. Biondi and T. Suzuki

have already experienced in the international standardization of language,

measurement, law, IT and national accounting, the development of IAS/IFRS
must have some unexplored impacts on the wider members of society, other
than the advocated impacts on the world’s capital market. The magnitude of
the unexplored impacts may override the acknowledged impacts, perhaps nega-
tively as well as positively, from a viewpoint of socio-economics.

3. Classification of the unexplored impacts of the IAS/IFRS:

introducing collected papers
One of obvious ways, however trivial, to address the problem is to intellectually
and strategically map out the possible unintended, unexpected and unexplored
impacts (hereafter, the ‘unexplored impacts’) of the IAS/IFRS, in the way that
the classification could help develop more dialectical forces of discussion. The
‘unexplored impacts’ are a wider notion than the ‘economic consequences’ that
are occasionally used in the traditional literature (see, for example, Zeff, 1978).
Or, we use this term at least with such an intention to accommodate various
impacts of IAS/IFRS on wider stakeholders and socio-economy at large.
Although this notion inevitably remains ambiguous by definition, it can be
defined as the consequences that the development of IAS/IFRS did not intend
to cause, or the effects about which the principal participants of IAS/IFRS devel-
opment cared very little about. The concrete contents of the unexplored impacts
can only be and in fact should be elucidated along with continuous and various
field-based and case studies that this project purports to promote.
As noted earlier, the existence of the ‘IASB’s intention’ per se is not our main
concern. The point is that our society has yet to develop the mechanism with
which the unexplored impacts are effectively presented to enhance the commu-
nicative knowledge about the roles of IAS/IFRS in society. Our intention here
is to embrace novel perspectives and ideas, and incubate opposition parties by
forming strategic coalition of those who are forced to be standardized, so that
they could effectively debate how our socio-economies should be accounted
for, from their own points of view.
In order to map out the unexplored impacts as much as possible, we initiated
various searches including the contents analysis of newspaper articles (Nikkei and
Financial Times) since 1970, the systematic review of the ‘standardization literature’
(of language, law, IT, measurements and national income accounting), the classifi-
cation analysis of the ‘economic consequence of accounting standards’ literature,
random collection of the unexplored impacts through the UNIAS-Web-Platform5
and analysis of conference proceedings and monographs of international
5
For the UNIAS project and data platform, see: http://www.sbs.ox.ac.uk/research/accounting/
UNIAS/IAS+IFRS.htm.
 Socio-economic impacts of international accounting standards 597

accounting. The list of wider stakeholders and unexplored impacts can never be
complete, and the categorization of them is not objective.6 Rather, the list should
be continuously added to and strategically arranged to form effective, intellectual
and practical debates, depending on the context in which researchers are situated.
Table 1 shows the classification of impacts of IAS/IFRS developed through
such efforts to enhance communication between accounting and socio-economic
communities, which was also used to call for papers for the five special sessions
under the title of ‘Accounting and Economics’ at the Annual Conference of the
Society for Advancement of Socio-Economy (SASE) in 2006 in Trier, Germany.
We attracted attention of approximately 100 contributors (108 abstracts of the
potential conference papers were received). Eventually, 19 papers were selected
for presentation at the conference.7 After the conference, 15 authors, including
Shyam Sunder—the President of the American Accounting Association, were
encouraged to develop and submit their papers for the normal double-blinded
review process towards this special issue of Socio-Economic Review.
Following this Paper 1 as an introduction to the special issue, Baker and Barbu
offer an extensive literature review of the overall topic of international accounting
harmonization (IAH), Paper 2. The primary objective of their paper is to struc-
ture and classify the prior IAH research using a typology. It is hoped that their
paper, with a comprehensive list of literatures, provides readers a useful starting
point to study the IAH (Table 1, Mgt 8). Gallhofer and Haslam review the IASB
from a critical point of view, Paper 3. Among many critical literatures in accoun-
ting, which tend to degrade only the process of standardization, their paper also
looks at the potential of the global standardization for the sake of the public
(Table 1, Mgt 6; Econ 10 and 11). As one of the examples of the positively
reviewed impact of international accounting, Suzuki et al. illustrate the overall
role of international accounting in China’s transitional and developing econ-
omics, which also covers the issue of democratization (Table 1, Econ 3 and
11), Paper 4. On the same setting in China, however, Biondi and Zhang illustrate
overall structure of accounting and the influence of IAS/IFRS, Paper 5, particu-
larly in relation to business combinations (mergers and acquisitions), a key issue
in the globalized capital market. Accounting could function quite differently
between what IASB assumes and what is actually happening in China (Table 1,
Mgt 1 and Econ 12). The impact of IAS/IFRS goes beyond business organiz-
ations. In Paper 6, Robb and Newberry clarify the risk of a widely held

6
The comprehensive results are expected to be published later, together with the result of the
interviews with the wider stakeholders in Japan.
7
A special session on Accounting and Economics was kindly hosted by SASE 2005 in Budapest,
Hungary, co-organized by one of the co-editors of this special issue. See: http://www.yuri.biondi.
free.fr/downloads/SASE2005.pdf and http://yuri.biondi.free.fr/downloads/SASE2006.pdf.
Table 1 Classification of the impacts of IAS/IFRS on economics literature

598
Class Sub-class Example questions/reference Code Paper

Y. Biondi and T. Suzuki

Management and Strategy Change in global strategy, such as M & A? Mgt 1 Biondi and Zhang
microeconomics HM Impacts on human resource management? Mgt 2 –
Employee – union Impacts on trade union negotiations in Germany and Japan? Impacts Mgt 3 –
relationship on pension (funds)?
Corporate governance Change in corporate governance style? Mgt 4 –
Customer– supplier Impacts on customer’s relationship or marketing strategy? Mgt 5 –
relationship
CSR Impacts on corporate social responsibility? Mgt 6 Gallhofer and Haslam
Profession Management of professional firms such as the Big 4s? Mgt 7 –
Others E.g. evolution of international accounting research? Mgt 8 Baker and Barbu
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Macroeconomics and Theory Implications for theories of economics? Econ 1 –
institutional Economic statistics Timely and autonomous economic statistics by XBRL? Impacts on Econ 2 –
economics epistemic framework?
Developing/transi- Positive and negative impacts of IAS/IFRS on BRICs economies? Econ 3 Suzuki et al.
tional economics
Public economics Better or worse government administration? Econ 4 Robb and Newberry
Tax Fairer tax and public finance? Built-in stabilizer? Econ 5 Robb and Newberry
Fair Trade Would Fair Trade be enhanced or undermined? Econ 6 Elad
Financial market More volatility and wider financial crises? Econ 7 Boyer
Banking and insurance Benefits and disadvantages for banking/insurance Industries? XBRL Econ 8 –
monitoring system for banking?
Law Co-ordination problem with accounting and the law? Econ 9 –
Regulation/ How to regulate in a globalized economy? Model for global Econ 10 Gallhofer and Haslam
standardization governance?
Globalization Accounting’s role in globalization? How accounting helps knowl- Econ 11 Gallhofer and Haslam,
edge transfer of global business? Suzuki et al.
Industrial Change in industrial development process? Impacts on a specific Econ 12 Biondi and Zhang
development industry, such as leasing or insurance industry?
Others – Econ 13 –

Note: The purpose of this classification is to enhance the co-ordination of concerns and research over diverse impacts of the IAS/IFRS on wider stakeholders in socio-economies.
 Socio-economic impacts of international accounting standards 599

presumption that the IAS/IFRS framework works not only in the business enti-
ties but also in the other organizations, based on a case study of the Australian
government accounting (Table 1, Econ 4). In Paper 7, Elad points out how the
use of Fair Value could possibly undermine the growth of Fair Trades (Table 1,
Econ 6). Finally, in Paper 8, Boyer also warns that Fair Value Accounting could
endanger even the financial markets which the IASB purports to serve, by
making financial markets excessively volatile and rent-seeking (Table 1, Econ 7).
This collection of papers is by no means comprehensive, many of which also
suffered from the lack of time and the space-constraints of this special edition of
Socio-Economic Review. However, there is perhaps only little point to be simply
comprehensive or to wait until the paper is ‘completed’ in a luxury of time.
The standardization of accounting is a matter of swift political economy in prac-
tice as well of insightful theorising. Rather than being evenly comprehensive,
it may be important to select fewer programmes under which internationally
scattered stakeholders could be united to argue for alternative accounting for
the sake of their interests.

4. Summary, limitations and future development

In Section 1, we illustrated how accounting can be a central constituent factor of
socio-economies. Accounting is often seen as merely a technique of numeration,
and the resultant numbers are seen as having less to do with quality and mean-
ings. However, accounting is in fact making sense of life in specific ways, because
accounting is not an unintentional use of numerals, but a specification of the
valuation criteria, the unit of measurements, the accounting period, the accoun-
ting entity, the category of accounts and the format of representation. And, this
specification can be achieved only with a background context, whether theoreti-
cal, practical or political.
In Section 2, we explained that this background context has now turned out to
be the ‘making world’s capital markets efficient’, and for this end, accounting is
globally standardized based on the ‘Fair Value’. We also explained, however,
that such standardization entails extensive ‘unexplored impacts’ on wider stake-
holders and the public at large whose voices are structurally made powerless.
In order to initiate the mitigation of this problem, we introduced, in Section 3,
one of the classifications of unexplored impacts which are listed to help commu-
nicate between accounting and socio-economic researchers in the future. The
subsequent papers in this volume are just a few examples of such joint efforts
between the two.
Within the space constraint, this Introduction to the special issue of Socio-
Economic Review attempted to introduce controversial features of globally stan-
dardized accounting in society. As it stands now, the contribution of this
600 Y. Biondi and T. Suzuki

project is very modest. The idea of classifying the unexplored impacts in order to
unite the opposition parties may end up with an idealized attempt. For example,
when Elad says that the IAS/IFRS may undermine the growth of Fair Trade, or
when Boyer says that the IAS/IFRS may damage even the capital markets, what
may be the impact of these papers in practice, unless these are followed up by
a series of papers and actions in collaborations with academics and practitioners?
We hope that the presented classification is flexibly amended to form a critical
mass which aims at developing effective means of political economy to debate
over how our socio-economies should be accounted for.
Accounting is important, because it shapes our socio-economies in a specific
way, but it does so very quietly. Have we noticed?

Acknowledgement
We acknowledge, with thanks, various instances of help from: Richard Baker,
David Cooper, Fiona Anderson-Gough, Trevor Hopper, Anthony Hopwood,
Paolo Quattrone, Shyam Sunder, Shizuki Saito, David Marsden, Sebastian
Botzem, Robert Teller, Reuven Avi-Yonah, William W. Bratton, Louis Klee, Lawr-
ence Cunningham, François-Régis Puyou, Taka Fujioka, and Ray Loveridge.
We would like to thank SASE, particularly Mary Grossman (Executive Direc-
tor), Glenn Morgan (Network Coordinator on Occupations and Professions),
Gregory Jackson (Network Coordinator on Markets, Organizations and
Institutions), and Wolfgang Streeck and Juergen Feick (Editors of SER) to have
kindly encouraged and supported our work with SASE for the special sessions
on ‘Accounting and Economics’ (2005 and 2006 meetings) and SER, which
have made this special issue possible.

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