Methodological Foundations of Central Rulemaking for Corporate Financial Reporting
Gaa, James Clyde
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https://hdl.handle.net/2142/71370
Description
Title
Methodological Foundations of Central Rulemaking for Corporate Financial Reporting
Author(s)
Gaa, James Clyde
Issue Date
1982
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Abstract
The essence of a rulemaking approach to corporate financial reporting is that there is a rulemaker (or rulemaking body), delegated to make judgments about the desirability of financial reporting practices. The purpose of this study is to provide the basic elements of a methodological theory of the process of financial reporting rulemaking. Methodology is understood to be the study of the logic of rational inquiry. Financial reporting rulemakers are regarded here as decisionmakers, trying to decide rationally which, among a set of alternative rules, is best, and should therefore be promulgated. The method used in this study is called "codification." Codification involves the development of an account of, or theory of, some aspect of actual human behavior, which is (in one sense) a description of actual practices, and yet, at the same time, holds such behavior up to a critical standard.
Chapter 1 is an introduction to the study.
Chapter 2 is an analysis of the evolution of financial reporting rulemaking. Two basic themes are revealed: (1) that the rulemakers espouse a commitment to "the public interest;" and (2) that the choice among alternative rules need not be arbitrary, but could be justified by appeal to a "theory" or set of basic principals. These two themes form the foundation of the theory developed.
Chapters 3 through 5 analyze the concepts of individual interests and of the public interest, and then applies the analysis to financial reporting.
Chapter 6 provides a justification for the existence and role of a rulemaking body. The role of the rulemaker is to produce a more nearly ideal securities market, and to make more specific investors' general right to reliable and relevant information.
Chapter 7 analyzes preference aggregation approaches to the logic of rulemaking, which are based on the idea that financial reporting issues are collective choice issues. Chapter 8 examines conventional theory-based approaches to the logic of rulemaking, according to which rules are (in some sense) implied by a more basic theory.
Chapter 9 presents the theory advocated here as a codification of the rulemaking process. The rulemaker is claimed to seek a reflective equilibrium between the rules promulgated and a "conceptual framework." The theory is applied to a case study of the promulgation of two rules by the Financial Accounting Standards Board.
Chapter 10 uses some of the ideas developed in previous chapters to address several additional issues, including the notion of serving the public interest.
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