مرتب سازی و مقایسه : استاندارد-تنظیمات و مقوله های "اخلاقی"

The Financial Accounting Standards Board (FASB) describes its public interest function as “…developing standards that result in accounting for similar transactions and circumstances in a like manner and different transactions and circumstances…in a different manner (Facts about FASB).” This statement implies that rule-makers possess an expertise that makes analogizing transactions or circumstances to other transactions or circumstances unproblematic. In this paper we utilize two instances of standard-setting, SFAS 123R and SFAS 143, to demonstrate from FASB's analogic reasoning in these cases that similarity and dissimilarity are not so easily ascertained. A judgment about similarity invariably involves ignoring some perspectives of similarity that would lead to substantially different conclusions about the appropriate accounting. We also illustrate via the two examples the inherent value judgments that underlie the conclusions reached by FASB and how these value judgments raise questions about the ethics of the current standard-setting process.

Formal financial accounting and reporting practices in the U.S. change continuously. Sometimes, these changes are connected to the emergence of new transactions or events. Other times, they are linked to dissatisfaction arising from perceived flaws within existing accounting standards. Although many groups may participate in the process of altering promulgated generally accepted accounting principles (GAAP), the designated standard-setter maintains jurisdiction over the process – adding new projects to its agenda, shaping and defining these projects, expanding and contracting their scope with the issuance of exposure documents and final standards. The standard-setter's authority is based upon its expertise that is purported to be of a value-free, technical nature. Acknowledging this alleged expertise through its executive agencies, e.g., the SEC, society defers to the “experts” to write accounting rules. Thus, the accounting standard-setter becomes part of the governmental regulatory apparatus. As discussed in the following section, the designated accounting standard-setter follows defined procedures in issuing accounting rules: processes to decide the content of its agenda, to allow opportunity for comment on proposals and to evaluate the relevance or irrelevance of these comments. Using two instances of standard-setting – employee stock options and asset retirement obligations, we turn our focus away from the details of these processes and towards the construction of similarity and difference that forms the foundation for accounting standard-setting efforts. In so doing, we highlight the inherent value judgments required to accomplish this construction and the complex intertwining of ethical and technical concerns in establishing the content of accounting rules. We examine the choices made during the standard-setting process and how such choices contribute to the construction and perpetuation of a particular moral and social order. 1.1. Standard-setting: process and expertise In the U.S., the Financial Accounting Standards Board (FASB) is currently designated as the writer of accounting rules and guidance. As a public regulatory agency, the FASB has opted for the “… the classical New Deal model of an independent expert…” rather than “… the post-war pluralistic model of a politically responsive regulator” (Bratton, 2007, p. 9, emphasis added). In adopting the independent expert model the FASB has established a well-developed and documented due process procedure that draws upon the Administrative Practices Act. This act must be followed by over 50 U.S. regulatory agencies (e.g., Environmental Protection Agency, Food and Drug Administration) when creating the rules and regulations necessary to enforce major legislative acts like the Clean Water Act or the Occupational Safety and Health Act. The deployment of the Act's procedures by FASB is an explicit acknowledgment that FASB is, de facto if not de jure, a U.S. federal government regulatory body writing some of the rules and regulations for enforcing the Securities Acts. However, the FASB due process procedure is incompletely analogous to the Administrative Procedure Act in certain very significant ways. For example, there is no explicit process through which a party putatively injured by an accounting standard can seek redress nor is there any process whereby an interested person has a right to petition for the repeal of a rule.2 Further, adopting the due process procedures employed by other federal regulatory agencies may prove insufficient given the differences between accounting rules and those rules issued by other regulatory agencies such as the FDA. The rules and regulations promulgated by these agencies such as the EPA, FDA, FCC or FAA may be based, in theory at least, on science. For example, the FDA's approval of new drugs is based on an extensive assessment of the benefits and risks of new drugs through scientifically rigorous double-blind, placebo experiments. There is some reasonably sound scientific basis for FDA actions. In contrast, accounting rules can have no grounding in any kind of science that provides even a minimal degree of causal reliability (Ravenscroft and Williams, 2009). As Sunder (2005, p. 6) notes: “Rule makers have little idea, ex ante, of the important consequences … of the alternatives they consider.” Historically, accounting and financial reporting practices have been based on social norms or subjective expectations: “The object of norms is behavior (emphasis added), not belief” (Sunder, 2005, p. 9). Further, “…there can be no authoritative source (emphasis added) of accounting norms either, even as individuals and groups remain free to provide their own statements of what the norms are (Sunder, 2005).” Consequently, FASB rules rest primarily on a conceptual framework consisting of the ontological assumptions and value judgments of the FASB itself. FASB is in substance a writer of law which has also created its own constitutional guidance.3 Rather than focusing on the processes followed by the accounting standard-setter, we focus on the content of its work. This standard-setting work is most frequently described as resolving the measurement and recognition problems posed by particular transactions and events. Such measurement issues are often posed by FASB as technical problems – should we employ current market prices or historical costs? Should we estimate future cash flows and, if so, what interest rate should we employ to calculate the present value of such cash flows? However, this focus on measurement issues ignores an equally, if not more important, element of the work performed by the standard-setter – the work of sorting transactions, events and objects into the pre-existing financial statement categories – assets, liabilities, equities, revenues, expenses, gains and losses, thus eliding the essentially ethical nature of FASB dicta.4 Categorization and classification, the sorting and ordering of things and events, are at the heart of accounting standard-setting. Further, accounting categories are regarded as mutually exclusive in that a thing cannot be simultaneously categorized as an asset and a liability, as an asset and an expense, as an expense and equity. Instead, the objects incorporated within financial statements must be placed into one and only one category (although under certain conditions they may be subsequently re-classified). Equally importantly, many objects are placed outside accounting categories and thereby excluded from the scope of financial statements. How are events, transactions and objects placed into or excluded from accounting categories? During the standard-setting process and within issued accounting guidance, reference is frequently made to the FASB's conceptual framework and how particular events, transactions or objects “fit” into the categories employed within financial reporting, the elements of financial statements (see SFAC no. 6). However, these elements and their definitions can only provide a starting point for any exercise in accounting classification. Categories such as financial statement elements should be regarded as radial categories. Lakoff (2002, p. 6) describes these categories as “not definable in terms of some list of properties shared by every member of the category. Instead, they are characterized by variation on a central model.5” Johnson (1993) makes a similar observation in arguing that although categories have prototypes or clear-cut cases that unarguably should be included within the category, classification activities frequently involve cases that move beyond these prototypes and consequently require deliberation. Although we are often left with “…the impression that we just categorize things as they are, that things come in natural kinds and that our categories of mind naturally fit the kinds of things there are in the world” (Lakoff, 1987, p. 6), events, transactions and objects rarely sort themselves into existing categories. Consequently, classification and categorization are not passive activities but are active processes of placing and ordering things into various boxes or containers. These containers or categories are then said to provide us with “knowledge” about the thing (Bowker and Star, 1999, p. 10). The knowledge we acquire about the classified thing will vary depending upon the category into which we have assigned it. So although definitions of accounting categories exist, the items appearing on the standard-setting agenda rarely conform precisely to these definitions and, therefore, cannot be said to sort themselves into or exclude themselves from particular categories. As a corollary, it is also the case that there are things not on the agenda that do fit these categories but stay invisible merely by omission. Indeed, the issues included on the standard-setting agenda might be regarded as the “hard cases” (setting aside considerations that the cases now regarded as easy or self-evident may have themselves once been regarded as hard cases). The agenda includes those things that either have been or can be placed in multiple conflicting accounting categories. It includes things that do not readily fit within the confines of an existing category. In addition, as the scope of the project is defined and refined, some possible financial statement objects are concluded to not fit within existing categories and are thus, to be excluded from financial reports. The work of assigning or excluding frequently involves comparing items or transactions to other items or transactions already assigned to an accounting category. In other words, assessments of similarity and difference must be made. Indeed, diversity and uniformity, similarity and dissimilarity are frequently taken as background facts against which the standard-setting process occurs (Young, 1994). The FASB itself refers to the significance of assessments of similarity and difference stating that it serves the public interest by “developing standards that result in accounting for similar transactions and circumstances in a like manner and different transactions and circumstances … in a different manner” (Facts about FASB, emphasis added). Such assessments of similarity and difference are both significant and difficult. In “Seven Strictures on Similarity,” Goodman problematizes the notion of similarity and questions its obviousness. He considers the conditions required to appropriately refer to two things as similar and notes that many, if not most, individuals deem two things similar when they share a common property.6Goodman (1992, p. 19), however, argues that this response is useless as “every two things have some property in common.” He then considers whether we can find a way out of this dilemma by requiring that two things be considered similar whenever they share important properties. Obviously, a range of possible properties could be employed to make this assessment of similarity. We must select the qualities to be used in deciding whether two objects are similar and so belong within the same category or classification. In selecting the properties that “matter,” we simultaneously dismiss other possibilities as unimportant or irrelevant to our assessment.7 With these selections, we choose to highlight only certain limited aspects of the things to be assessed and, in so doing, ignore other aspects. Therefore, assessments of similarity cannot be regarded as value-free judgments resulting from a strictly technical process. These choices are not trivial as they render things and events as visible or invisible and thereby designate them as “relevant” or “irrelevant” to the decisions of investors and creditors (the FASB's stated purpose or objective for financial reporting). These judgments and choices inescapably draw upon our values and always contain an ethical component (Bowker and Star, 1999). Specific values and particular ideas about socioeconomic reality are always embedded within our assessments of similarity. The inclusion of these values and ideas is inescapable as they guide us in selecting the qualities to be used in making an assessment. Such assessments are then employed to place things within existing categories or to create new categorizing schemas. Further, once we classify a transaction, event or object as being of type x or belonging within category y, we then lose sight of the synchresis or multi-sidedness of the object classified (Abbott, 2001).8 By necessarily focusing our attention to a limited set of possible characteristics – this event is of type x – our categories potentially exclude other ways of thinking about that specific and particular person, item or event. We may more easily ignore how it differs from others within the same category (the within group differences) as we construct a class of “those.” Once categorized, we may more readily suppress the details that might have led another individual to classify it differently. Instead, we tend to assume that “reasonable” individuals would have made similar classification decisions. In other words, our assessments of similarity and efforts to categorize draw upon particular values and ideas, and simultaneously they also reinforce the propriety of their use, imparting a sense of “naturalness” to our categories and to their contents. Our categories valorize some points of view and silence others (e.g., the importance or unimportance of sex, the fixity of notions of belonging to one and only one race; Bowker and Star, 1999). Assessments of similarity and difference are critical to the work of classifying events, transactions and objects into accounting's radial categories. The work of assigning or excluding such items frequently involves comparing them to other events, transactions or objects already placed into a specific category which requires the standard-setter to select or construct a comparison group.9 The standard-setting process does not and cannot simply uncover similarities and differences but rather constructs these through the choice of comparison groups and/or the features of an item or transaction that are highlighted for emphasis and comparison.10 During the standard-setting process and in the texts of exposure drafts and accounting standards, specific examples are used to highlight similarities or expose differences with a selected comparison group. Through this highlighting and exposure, things are configured to fit into accounting's radial categories11 or are “shown” to not fit and therefore require exclusion. This process inevitably requires dismissing as irrelevant certain aspects of a specific event, transaction or object – specifically those aspects that would otherwise call into question the selected categorization. Assessments of similarity are also important in deciding how to quantify particular items or transactions. By comparing new situations or transactions to others, a case can then be made for measurement methods or valuation techniques already in use for “similar” items or transactions. The FASB, thus, does not uncover the “true” nature of things but rather acts to bring new expenses, new liabilities, new assets into being as well as to deny the existence of assets, expenses or liabilities in other instances. Bringing new expectations into existence simultaneously makes someone accountable for them. Denying the existence of other items holds others unaccountable for them. Every new accounting standard is an assertion of power – creating a behavioral expectation thus, holding someone accountable for that which they were not before accountable or holding them not accountable for that which they might otherwise have been responsible. In the following two sections, we explore the assessments of similarity and construction of accounting categories that occurred during the standard-setting process for stock options and asset retirement obligations. These two cases will be used to illustrate the inescapable amibiguity of standard-setting and the equally inescapable value judgments employed to resolve the ambiguity. In the instance of stock options, the FASB worked to fit these items into the expense category by emphasizing their compensatory element and ignoring other aspects of the options that might have resulted in different categorization. In the case of asset retirement obligations, the FASB chose to emphasize the characteristic of unavoidability in deciding which obligations to include and which to exclude from the category of liability. The paper then ends with some concluding comments.

Whilst caught in its own image of itself as an objective mirror, accounting can think only to improve the quality (emphasis added) of the mirror image (Roberts, 1990, p. 355). Accounting standard-setters often insist that accounting should “tell it like it is” (e.g., Leisenring in U.S. Senate, 1993, p. 112) and emphasize that “truth in accounting is always good policy” (Beresford, in U.S. Senate, 1993, p. 108). Similarly, in Facts about FASB, the Board states that it develops standards that report “economic activity as faithfully as possible without coloring the image it communicates for the purpose of influencing behavior in any particular direction.” In addition, these “neutral” standards are argued to “result in accounting for similar transactions and circumstances in a like manner and different transactions and circumstances … in a different manner” (Facts about FASB). Such statements present similarity, dissimilarity as obvious and unproblematic concepts; as states of the world that simply present themselves to standard-setters. However, the two cases presented here illustrate the subjective nature of rule formation and the work involved in making such assessments. In the instance of stock options, the lens of exchange was employed to reach the conclusion that the issuance of stock options represented another means to compensate employees. Using market logic to evaluate the transaction, the FASB chose to ignore any possible significance that might be accorded to the connections such options might create between employees and the employer. It, instead, emphasized the similarities between these instruments and other items classed as compensation. In contrast, the case of ARO provides an example in which differences were emphasized to exclude constructive obligations from the liability section of the balance sheet. In each case, comparisons to other decisions contained within previously issued accounting standards might have been used to reach different conclusions. The issuance of stock options might have been compared to the effects of pension plan amendments that had earlier been argued to create intangible assets. Instead, the accounting required by FAS 123R reflects a simplistic market logic that can only depict the relationship between a worker and company as an exchange relation. This perspective and this accounting suggest that workers make no lasting contribution to an entity. They appear in financial statements only as expenses. The FASB assumes that the quality of accounting rules must be assessed only from the perspective of stock traders and bankers. Other perspectives are of no importance. Similarly, constructive obligations for ARO might have been compared to the obligations for post-retirement benefits. Although avoidability and objectivity were highlighted as important considerations in the decision to exclude ARO from the liability category, these same qualities or characteristics had been shadowed in the earlier decision to require inclusion of post-retirement benefits. While obligations to workers were recognized, obligations to other stakeholders such as communities serving as sites for company operations were excluded. The costs associated with an obligation to repair any environmental damage arising from such operations were not to be classified as a liability unless the company judged the obligation to be “unavoidable.” Placing attention upon the work required to assess similarity or dissimilarity and/or to assign events and transactions into accounting categories reinforces the observations of many others: the process of standard-setting cannot be regarded as a technical process (e.g., Collett, 1995, Hines, 1988, Sunder, 2005, Williams, 2002 and Young, 1996). The FASB and other accounting standard-setters cannot claim a technical innocence for their processes and their decisions. These two cases (and we could have included many others) clearly indicate that much of standard-setting work involves assessing similarity and categorizing items and transactions. The items/events do not sort themselves into categories. Instead, the standard-setting process involves selecting some qualities or characteristics while ignoring others as the standard-setter actively sorts the items. Through this sorting/categorizing process, the standard-setter brings into being new expenses, liabilities as well as constructs a world in which other obligations are not counted. Although the FASB (and other accounting standard-setters) maintain that accounting standards are technical documents, these two cases illustrate that the standards are filled with choices – choices involving which value to select for emphasis in supporting and justifying a “technical” decision about how to classify a particular item or transaction. In other words, standard-setting is a process through which some values/perspectives are valorized and more deeply embedded within accounting practices and reports. Given the selection of values and the performativity of the standard-setting process, frequently heard claims that the consequences of accounting standards lay outside the scope of standard-setting attention are untenable. The due process employed by FASB is important procedurally. However, this process does not allow for redress or for petitioning for the repeal of accounting standards.29 Perhaps more importantly, these procedures do not provide an avenue for reconsideration of the continuing acceptability of the valuation premises of financial reporting – the privileging of investors. The FASB, as a writer of law, is inescapably part of the justice system, an apparatus of the state. Its self-touted due process procedure, however, does not provide sufficiently for the “laws” FASB writes to be legitimate. The FASB itself sets the discursive boundaries (e.g., the Concepts Statements) within which debates over accounting standards are to take place. FASB, in essence, determines what constitutes a valid argument and acts as the sole judge of what are valid arguments. FASB's due process procedures do not allow for anyone to engage in a substantive process of debate over what the terms of debates on standards shall be. There exists no party or institution that judges the validity of arguments; as both writer and legislator of accounting standards FASB alone determines the validity of arguments for or against any standard it writes. The only evidence admissible is what FASB itself decides is evidence; it is free to rule any argument out of order. FASB is not compelled to recognize any argument as superior to any rationalization it chooses to justify the rules it writes. We have seen from the incongruity and ambiguity of the arguments over the standards discussed what the consequences of this process are for the writing of coherent, impartial standards. The FASB has no secure, reliable knowledge of the economic reality it purports to be dedicated to representing. The New Deal model of independent “expert” is not viable for promulgating what are essentially moral preferences. Since it has the privilege of writing law in a democracy, the FASB is unavoidably immersed in what Holmes and Sunstein (1999, p. 131) characterize as “…the outstanding philosophical dilemma of American political theory: What is the relationship between democracy and justice, between principles of collective decision-making, applicable to all important choices, and norms of fairness that we consider valid regardless of deliberative decision or majority will?” Intelligent and “good” processes for collective decision-making require that we consider and trace the consequences of our actions (Seigfried, 1996) rather than maintaining that an examination of these consequences lies outside the scope of our abilities or authority. Williams (2002) has argued that accounting claims for itself a moral status that is then used to regard failures to appropriately follow existing accounting standards as ethical failures. For accounting standards to justifiably have this moral status, they must emerge from a process in which alternative values and multiple perspectives are openly debated and in which the value judgment underpinning the anticipated consequences of particular choices are also carefully articulated. The aftermath of the most recent economic crisis seems a propitious time to critically examine the premises that underlie the current accounting standard-setting regime.30 Perhaps it is time to consider financial reporting not as a separate domain of expertise, but as one part of the responsibility of a “pluralistic model of a politically responsive regulator (Bratton, 2007, p. 9).” As re-regulation of the finance industry proceeds, making the output of accounting reports reflect a broader array of values, interests and perspectives, other than those of the finance and accounting industries, would seem an appropriate topic for debate and consideration.