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- Title
Unreliable Accounts: How Regulators Fabricate Conceptual Narratives to Diffuse Criticism.
- Authors
Ramanna, Karthik
- Abstract
In 2010, the U.S. accounting rulemaker (FASB) updated its longstanding constitution to eliminate "reliability" as a fundamental accounting property. FASB argued that "reliability" was misunderstood in practice and that this amendment clarified its original intent. Drawing on primary archival resources and field interviews with regulators, I provide evidence that the change also sought to legitimize the rise of fair-value accounting. By eliminating the need for accounting to be "reliable," the change attempted to neutralize concerns about the subjectivity in fair-value estimates. Such subjectivity can facilitate accounting manipulation, and some fair-value rules can be attributed to lobbying by managers who stand to benefit. The change illustrates "conceptual veiling," wherein regulators, seeking to diffuse criticism, including suspicions of capture, manufacture costly conceptual narratives for justifying their actions.
- Subjects
FINANCIAL Accounting Standards Board; FAIR value accounting; ARCHIVAL resources; CRITICISM; ACCOUNTING
- Publication
Accounting, Economics & Law, 2022, Vol 12, Issue 2, p81
- ISSN
2194-6051
- Publication type
Article
- DOI
10.1515/ael-2021-0002