Outlining regulatory space: Agenda issues and the FASB

Acooquntin&Organ/xatfonsand$oc/ety, Vol. 19,No. 1,pp.83-109,1994. Printed in Great Bfltain

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OUTLINING REGULATORY SPACE: AGENDA ISSUES AND THE FASB*

JONI J. YOUNG

A n d e ~ o n School o f Managemeng University o f N e w Mexico

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Remmrchenmining the proce~ o~accountingctmt~ has focmm~upon Oramaticchanges inch as ~e ~ offdiscounted ca~ flow atmly$~ Ho~cvt~, mUdr of accounting change centem around recognition and serves to expand and enhance the dmmin of accrual accotmt~g Th~ paper employs Owee mgltes (accounting for loan fees, leases and nonprofitorsanizattom) to examine the lXOCCmof enacUn8~ ~ recognition pracaces. The paper follows the construction ~ accounting issues as accounting lxo~ems within a regulatory g~ce, and the mbsequent conmmcfion~ the~ problems as ~ for ~amdardaetting actimx The study employsa ~ space metaphor and a qogic o ~ ~ " to ~ m U ~ the comOex pro,x,se, Ommghwmch a c c o u n ~ c t m ~ occum

Several scholars have examined the process of innovation in account~ung practice including the rise o f discounted cash flow analysis (Miller, 1991), the rise and decline o f value added accounting (Burchell et aL, 1985), the production o f p r o d u c t costs ( H o p w o o d , 1987), the p r o d u c t i o n o f standard costs and budgets (Miller & O'Leary, 1987), and the e m e r g e n c e o f an accounting standard-setting group (Robson, 1991). In contrast to these major changes in accounting practice, m u c h of accounting change may appear less innovative and m o r e mundane. Changes in accounting practices in the financial accounting domain oRen center around recognition issues m

enhance the domain o f accrual accounting (and often historical cost accounting). The processes underlying these types of accounting changes remain largely unexamined.

In the United States, the Financial Accounting Standards Board (FASB) is perceived a s :the entity responsible for enacting changes in accounting practices. The FASB maintains a technical agenda o f accounting projects that will eventually alter existing recognition practices. The addition o f an accounting problem to the teclmical agenda of the FASB is a necessary condition for the subsequent issuance o f accounting standards. Indeed, FASB chairman Dennis Beresford has indicated that "setting the agenda may be the most important single activity o f the Board" (Previts, 1991, p. 71).

w h e n to recognize assets, liabilities, revenues and expenses. Chap~es in these practices may require the reporting entity to recognize "liabilities" previously excluded from the balance sheet, to delay the recognition o f income or to hasten the recognition of expense. These accounting changes typically expand and

Financial accounting standards have far-re~___chJng e c o n o m i c consequences from their potential redistrtbutive effects (Zeff, 1978) as well as social consequences from the potential use of accounting reports as irrstruments of social

• This paper has benefited greatlyfrom thecomments ofTed O'l.,eary,OraceJohnson, Tony cebuhar, lwanBull,Ruth Hines, Dean Neu, the participants of the Third lnterdiscipl/nary Perspectives in Account/rigConference~the Un/verslty of New Mexico accounting workshop and two anonymousreviewers as well as from comments at various other workshops. Any errors are mine, I wish to thank the many individuals in a c c ~ prance and at the FASBwho gave freely of their time to talk with me. Finally, I wish to acknowledgethe ~ n sapport provided by Deloitte and Touche. 83

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control (Zeff, 1978) and from the subtle reinforcement by accounting standards ofwhich things are "worth" capturing in accounting reports (Burchell et aL, 1980; Tinker et aL, 1982; Hines, 1988, 1991). This paper explores the processes through which changes in financial accounting practices occur or fail to occur, by examining three accounting issues (accounting for loan fees, leases and nonprofit organizations) that were considered for inclusion on the FASB technical agenda. This paper emphasizes the construction of accounting issues as accounting problems and the interpretation of actions as appropriate by the accounting standard-setter within the broader space in which accounting regulation occurs.

REGULATORY SPACE Although the formation of the FASB technical agenda is an important element of accounting standard-setting and the processes of changing financial accounting practices, it would be a serious mistake to study the emergence of issues onto this agenda by focussing solely upon the internal dynamics of the FASB. Such a study would presume that strict organizational boundaries can be drawn between the FASB and its environment. Such a study would presume that it is the decisions of the FASB that are most "important" in studying the issues included on its agenda. Such a study would ignore that FASB decisions are embedded in social and historical contexts, and would assume that accounting "problems" are obvious and uncontested. Accounting and accounting change are interrelated with events occurring elsewhere (Burchell et aL, 1985; Miner, 1991; Robson, 1991). The FASB (often thought of as the primary change agent for U.S. financial accounting) resides within an uneasy institutional nexus located between the accounting profession and the state and operates withirl a broader social and economic environment. The FASB both responds to this environment and contributes to changes in the environment.

Although events and practices intertwine in the emergence of a project onto the FASB agenda, these events and practices may not have been directed specifically towards this outcome. The initiation of accounting change may emerge from the unanticipated consequences of actions or events and at the intersection of disparate practices that give rise to requests for accounting change. To understand the emergence of issues onto the FASB agenda, one must look beyond the boundaries of this organization and examine the broader space in which the FASB operates and accounting regulation occurs. This paper adopts the perspective that accounting standards are produced within a regulatory space (Hancher & Moran, 1989). Regulatory space is an analytical construct that is defined "by the range of regulatory issues subject to public decision" (Hancher & Moran, p. 277). The shape of this space and the allocation of power within the space are affected by the political and legal setting, history, organizations and markets (Hancher & Moran, p. 271). Hancher and Moran develop this concept as a means to summarize and integrate a set of studies about economic regulation and suggest that regulation can be best understood through the use of regulatory space. Regulatory space bears some resemblance to the "accounting constellation" usefully employed to examine the emergence of value added accounting (BurcheU e t aL, 1985), the rise of discounted cash flow in capital expenditure analysis (Miller, 1991) and the formation of a British accounting standardsetting group (Robson, 1991 ). This accounting constellation is formed by the intertwining of forms of knowledge, institutions, economic and administrative processes, systems of norms and measurements, and classification techniques (Burchell et aL, 1985, p. 400). In this paper, regulatory space is an abstract conceptual space within which changes in the recognition and measurement practices of financial accounting occur. This space is constructed by people, organizations and events that act upon accounting and accounting practices. Regulatory space encompasses the set

OUTLINING REGULATORY SPACE

o f accounting problems for which a rationale for standard-setting action can b e developed. It is within this space that the process o f change in financial accounting practices occurs. Regulatory space is an arena w h e r e the accounting standard-setter issues standards that in the FASB's words "refine" and "improve" the financial reports o f the organization. Regulatory space is not a space within which dramatic changes in accounting practices occur. Instead, it is a space for tinkering with existing practices and financial statements. However, this tinkering is significant given the social and economic consequences arising from accounting standards. It is within regulatory space that the fundamental claims made for accounting and accounting reports are defended, maintained and promoted. Regulatory space is a very particular arena of accounting change in which the accounting standard-setter or FASB is e x p e c t e d to participate and alter the accounting practices of individual companies. This is the space within which the accounting standard-setter requires, permits and proscribes specific accounting measurement methods and recognition practices. Because these accounting standards and practices highlight certain features of an organization and r e n d e r an organization calculable by transforming it into material traces, regulatory space is a highly contested space. (See for example Latour, 1987; Rose, 1990; and Miller & Rose, 1990, for a discussion o f the importance of such traces.) These material traces created in regulatory space are the financial reports o f an entity including its balance sheet and income statement. It is within regulatory space that the content o f these reports, the ILming of the recognition o f profits and the amounts of the carrying values of assets and liabilities are decided. Through the p r o d u c t i o n o f accounting standards, the participants acting within regulatory space develop and direct the methods of producing material traces for organizations. If accounting reports and profits are score-keeping mechanisms, then regulatory space is the abstract locale in w h i c h the rules for keeping score (measuring profitability) are selected.

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The use of the regulatory space metaphor recognizes the complexity o f the standardsetting and agenda formation processes and serves as a broad theoretical lens to focus upon the issue of agenda formation. Several benefits arise from the choice o f this theoretical lens. First, because regulatory space is "a space, it is available for occupation" (Hancher & Moran, 1989, p. 277). This lens forces the researcher to ask: w h o is involved in the process? The researcher must look b e y o n d the organizational boundaries of the FASB and consider the roles o f other actors including the SEC, auditors and preparers o f financial statements. By focussing upon accounting "issues" rather than upon the operations of a regulatory organization such as the FASB, this research recognizes that accounting change and the shaping of demands for accounting change o c c u r both inside and outside the boundaries marked by the FASB. This lens emphasizes the intercormectedness o f the FASB with other actors and other organizations as well as the importance o f the broader social and economic environment. The FASB is not acting in a vacuum.

Second, using this lens, the researcher does not assume the dominance of interests as explanations for the actions 'of the FASB and other groups. Instead, no one-to-one correspondence may exist between the "demands" of various groups or entities for accounting change and the issues included on the agenda of the FASB. Demands for accounting change may b e unfocussed, lacking in specificity, and ambiguous. Pressures from many institutional and policy arenas impinge o n accounting and increase the difficulty of ascribing accounting change to a single interest imperative (Hopwood, 1989, p. 151; Burchell et aL, 1985). Interests are themselves constructed and interp r e t e d in particular situations (Hindess, 1986). Interests do not unambiguously define the actions of actors involved in the regulatory process nor do interests inhere to actors as a result of their membership in a particular category (Hindess, 1982, 1986). Instead, these actors interpret, construct and reconstruct

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their interests while constructing and linking upon by the standard-setter to construct an "appropriate" response to constructed problems, actions and solutions. Finally, this lens permits the researcher to accounting problems. This paper argues that "lighten the weight of causality" (Foucault, the standard-setter employs a "logic of appro1981) and to provide explanations in terms of priateness" (March & Olsen, 1989) in conditions of possibility rather than employing constructing responses to accounting problems. causal explanations that omit the political, R is to the logic of appropriateness that we now cultural and technical conditions that create a turn. "space" in which change becomes possible (Miller, 1991 ). The U.S. mainstream accounting THE CONSTRUCTION OF APPROPRIATE models that employ a supply and demand metaphor (Watts & Zirnmerman, 1979; PROBLEMS Johnson & Messier, 1982) implicitly stress the The issues that emerge onto the agenda of importance of disruptive events in upsetting a regulatory equilibrium. However, the implicit the FASB are those classified as "problems". assignment of causality in these models to However, within this perspective accounting specific event types is overly simplistic. These problems are not seen to be simply ':there", models cannot help us understand why events rather they must be constructed as problems by that exhibit surface similarities are "disruptive" participants in regulatory space. The changes in in some circumstances but not others, nor can accounting practices enacted through FASB these models help us to understand why some accounting standards are typically justified by accounting issues emerge onto agendas in the references to getting the accounting "right". apparent absence of disruptive events. Several These changes are depicted as facilitating researchers have questioned the usefulness of accounting progress and allowing accounting to simple deterministic models to understand become what it should be (Hopwood, 1987), complex processes as they omit much of the as well as eliminating what accounting should institutional structure through which politics not be. Central to getting accounting "right" and (March & Olsen, 1984, 1989), accounting (Burchell et aL, 1980, 1985; Hopwood, eliminating what is "wrong" is the issue of 1987; Lowe et aL, 1983; March, 1987), and diversity in practice. In accounting standard organizations (Meyer & Scott, 1983) operate after accounting standard, and in statement after and occur. The metaphor of regulatory space statement, the FASB explains and thereby demands that one pay closer attention to the justifies its decisions to undertake a particular actors and institutions that contribute to the accounting project by reference to diversity in accounting practice. For example, because of processes of accounting change. In this paper, the process of accounting "the diversity in practice among the different change is seen to consist of several stages (that types of financial institutions making loans" may occur simultaneously or sequentially). (Agenda Decisions, 1984), the FASB justified Accounting conditions must be constructed as • adding a loan fees project to its agenda. Because accounting problems. Accounting problems "hiconsistencies exist in practice and in the must be constructed as appropriate for standard- authoritative specialized industry literature" setting action. Solutions must be constructed as (FASB, 1987), the FASB justified adding to its appropriate resolutions to particular accounting agenda a project on accounting for nonprofit problems. While this construction and linkage organizations. Despite such explanations and occurs in regulatory space, the actions of the justifications, however, I argue that diversity in standard-setter and others are constrained practice is a condition not a problem and the by expectations that exist about their role FASB's explanation of the agenda decision is at and purpose. These expectations are drawn best incomplete. Diversity in practice becomes

OUTLINING REGULATORYSPACE constructed as a problem within a particular intersection of events, conditions and demands placed u p o n accounting and accounting reports. This process o f constructing diversity in practice as a problem may b e evidenced by the fact that the FASB does not interpret diversity in accounting practice as a problem in all situations n o r advocate the elimination of all such diversity, l Instead, the FASB emphasizes that only certain variations in accounting practice should be eliminated to ensure that "like" things will look alike and "unlike" things will look different (FASB submission in U.S. House, 1985a, p. 214). I suggest that diversity in practice b e c o m e s a "problem" only w h e n it is judged to clash with such accounting claims as relevance, reliability and representational faithfidness. Despite the problematic nature o f these claims, they nevertheless play an important role in constructing accounting conditions as accounting problems within regulatory space. These claims about accounting and accounting reports are reiterated in the conceptual framework of the FASB. Thus, "good" accounting information is claimed to balance the characteristics of relevance, information useful in making e c o n o m i c decisions (FASB, 1980, para. 47), and reliability, information relatively free from error that represents what it purports to represent and possesses the quality o f representational faithfulness (FASB, 1980, para. 59). Actors in regulatory space draw u p o n these accounting claims and, particularly, the accounting claim of representational hithfulness to justify the construction of accounting conditions such as diversity in practice as problems. This construction occurs within highly visible arenas amid historically specific contexts and situations. Thus, diversity in practice is used to justify the inclusion of projects o n the FASB agenda and representational faithfulness is used to justify the designation o f diversity in practice as a problem. The e m e r g e n c e o f projects on accounting for

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loan fees and accounting for depreciation and contributions by nonprofit organizations onto the FASB agenda provides examples of the importance o f attending to the process and circumstances b y which an accounting condition such as diversity in practice becomes constructed as an accounting problem that requires the attention of the FASB. Similarly, the case of leases illustrates h o w a former "solution" may b e c o m e constructed as an accounting problem. However, constructing an accounting issue as an accounting problem is not sufficient to ensure t h e e m e r g e n c e of a project onto the FASB agenda; not all accounting problems result in FASB standard-setting projects. Accounting problems must also b e constructed and interp r e t e d as appropriate for FASB standard-setting action. The studies contained in this paper suggest the relevance of a "logic of appropriateness" (March & Olsen, 1989) in understanding the e m e r g e n c e o f issues onto the FASB standard. setting agenda. This logic involves "f~llfilli~tg the obligations of a role in a situation, and so of trying to d e t e r m i n e the imperatives of holding a position" (p. 161). The emphasis is upon upholding duties and obligations rather than selecting outcomes to p r o m o t e self-interested behavior. Behavior is driven b y rules, and actions are matchings of situations to the demands of a position (p. 23). Ambiguity is resolved b y "trying to clarify the rules, make distinctions, determine what the situation is and what definition 'fits'" (p. 161). Thus, rules provide "good" reasons for actions. For March and Oisen, rules include "the routines, procedures, conventions, role, strategies, organizational form, and technologies around which political activity is constructed" (p. 22). Within this framework, one understands the FASB response to constructed accounting problems as a process of interpreting the situation and matching an appropriate action to the demands of this situation. In this way, the

1See Merino & Coe (1978) for a historical perspective on uniformity in accounting practice.

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actions of the FASB are seen to arise from "duties and obligations rather than anticipatory, consequential decision-making" (March & Olsen, 1989, p. 23). The process o f agenda formation and constructing standard-setting actions as appropriate within regulatory space is heavily mediated by language and the ways in which the participants discuss an accounting issue and compare it to other issues. Because the FASB is not the only actor in regulatory space and is neither of the profession nor of the state, it may experience considerable "difficulties in establishing a mandate for action that is accepted as legitimate by significant groups" (Hopwood, 1983a, p. 13). Because the standard-setting group cannot appeal to the traditions of the profession or to the prerogatives of the state, a different rationale for action may be n e e d e d (Hopwood, 1983b, p. 172). Thus, the logic of appropriateness may be especially important for understanding the actions of an organization such as the FASB that resides in an uneasy authority position. I believe that deploying the logic of appropilateness as an analytical lens provides several benefits. First, the actions o f the FASB must be perceived as consistent with the constructed contemporary role and purpose of an accounting standard-setting organtzatiorL InstitutiOttaliTed expectations attach to particular roles such as the standard-setter and these expectations create obligations that bind the actor. The actions of the FASB must be interpreted as consistent with the exlmctations held by the other actors in regulatory space about the role and purpose of the FASB. In other words, the FASB must be seen as exercising a logic of appropriateness. By upholding norms and signalling one's willingness to play b y the rules, social action can p r o c e e d even in changeable settings such as political organizations and regulatory space (Biggart & Hamilton, 1984, p. 548). The procedures followed by the FASB in promulgating accounting standards may reflect the expectations of participants in regulatory space. (See for example Johnson & Solomons, 1984; Dyckman, 1988.) These expectations limit the role of the FASB to

promulgate accounting standards that are interpreted by participants as s o m e h o w "improving" financial accounting and reporting in a fashion consistent with accounting claims. For example, the Wheat Committee (MCPA, 1972, p. 20) stated that the most important aspect of accounting standards is "whether they contribute to progress in achieving the objectives of financial accounting and reporting" and, by inference, sustaining the accounting claims contained in the conceptual f r a m e w o r k (Also see Financial Accounting Foundation, 1977; Beresford, 1989, p. 24; Chandler, 1990.) Second, this "logic" suggests the importance of expectations and the ways that these expectations may be interpreted to limit the types of actions that are seen as appropriate for a standard-setter to undertake. The studies in the following sections suggest that the emergence of agenda projects is based on an interpretation of which projects are appropriate for the FASB to undertake and an interpretation of w h e n expectations exist about the need for FASB action. The studies show that agenda formation includes the interpretation of expectations about the role and purpose of standard-setters and is not a simple response to "pressures" from various interested actors. Agenda formation is more than a FASB effort to p r o m o t e orgamza"tional survival by reacting to constituent demands. Finally, the necessity for standard-setter interpretations suggests that a variety of responses by the standard-setting organization is possible and may be interpreted as appropilate. The following studies suggest that agenda formation is more than a yes/no action and illustrate various responses to expectations about the role of the standard-setter. While these studies do not exhaustively detail the set of responses available t6 the standard-setter and other actors, they demonstrate that agenda formation is a complex process. As illustrated b y the leases study, agenda formation was seen to be used by the FASB to argue that no feasible solutions exist and to develop a rationale for inaction. As illustrated

OUTIJN1NG REGULATORY SPACE

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b y the nonprofit organizations study, agenda structing accounting problems as appropriate formation was seen to be used to increase for standard-setting actiorL The studies of the scope of FASB operations while enacting agenda formation draw u p o n regulatory space expectations that the FASB be the standard- as an organizing framework and begin to setter for all organizations. As illustrated by each develop its theoretical contours. 2 o f these studies and accounting for loan fees, agenda formation was seen to be used to develop ACCOUNTING FOR LOAN FEES arguments by the FASB and other members of regulatory space to suggest the necessity of altering accounting practices in specific Background With the advent o f the Reagan era and situations. However, a logic o f appropriateness does not increased deregulation, the financial industry preclude self-interested actions. Rather, it does underwent significant changes. Deregulation limit the circumstances and situations within blurred the sharp distinctions that had existed w h i c h se•interested actions may be construed between the banking, savings and loan and seoxrities industries (MCPA, 1981, 1982; U.S. a s consistent with the expectations of other actors in regulatory space. Further, this logic Senate, 1983b; McQuade, 1984) and increased does not deny the possibility that actors such the competition for capital and deposits as the FASB may ( o v e r time) alter the expecta- among these institutions. These changes also tions o f other actors and expand o r diminish the heightened interest in the comparability of accounting p r a c t i c e s between the various set of "appropriate" actions. The three studies contained in the following financial institutions (McQuade, 1984; MCPA, 1981) and o c c u r r e d in a hostile economic sections examine the e m e r g e n c e of issues onto the technical agenda of the FASB. These studies climate. In the early 1980s, interest rates illustrate the operation of regulatory space in reached record high levels and threatened constructing existing accounting conditions as the viability of many fmancial institutions accounting problems and constructing account- particularly the savings and loan industry. In ing standard-setting action as appropriate for 1981, the Federal Home Loan Bank Board these problems. These studies suggest that (FI-ILBB) Chairman reported that 25% of savings accounting claims and expectations about the and loan institutions w e r e not viable in an role and purpose of the standard-setter are e c o n o m i c environment with high interest rates important elements in the operation of regu- (Washington Post, 15 July 1981). In 1982, the latory space. Accounting claims play an FHLBB Chairman reported that 80% of savings important role in constructing accounting and loans were unprofitable and stated that these conditions as accounting problems. F.x2~ectations entities w e r e "experiencing their worst period about the standard-setter are critical in con- since the Depression" (U.S. House, 1982a, pp. 2 T h e ~ ~ t l d l ~ w e r e d e v ¢ l o ~ tl~lng a varioty of data $ o u r ~ i r l d u d i t ~ confidential irltct~¢w$. T h e author c o n d u c t e d t h e s e interviews w i t h palrtidgglnt$ in t h e t~alKlard-$cttittg p r o c e s s during t h e st~mm~t and fall o f 1990. T h ~ p~'tidpant~ included m e m b e r s o f t h e F/kSB, t h e FASB staff, and t h e Securities Exchange C o m m L ~ o n staff as well as t h e m e m b e r s o f

other organization* that interact more frequently with the FASB(e.g the AccountingStandards Executive Committee of the AmericanInstitute of Certified Public Accountants,the Committeeon Corporate Reportingof the FinancialExecutives Institute, a n d t h e M a n a g e m e n t Accounting Practices C o m m i t t e e o f t h e Natiotmi Association o f Accotmtants). T h e e

interviews were taped and transcribed by the author. The following~udies include quotes from the interviews. These quotes have been edited (as indicated by [] or ... ) to conform the oral English of the interview to written standards of En~lt~h. R~¢fiC~ tOFASBmembers include both FASBmembers and F ~ sta~ Documentaryand ~2ondary d~t~sources were also employed.The documentary data consisted of FASBdocument, such as meeting summaries (minutes), exposure drafts, discussion memoranda, concepts statements, standards and invit~t~ns to comment~ Financial Accounting Smndat~ AdvisoryCommittee documents and U.S.Congre~donalhearing tramcripts and documents. The secondarydata sources included newspaper and busine~ periodical articles on the FASBand the accounting issues included in this study.

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201-213). Based upon concerns about the e c o n o m i c h e a l t h o f t h e b a n k i n g a n d savings a n d loan industries, Congress held several hearings to examine the competitive and economic c o n d i t i o n s o f t h e s e i n d u s t r i e s (e.gr U.S. H o u s e , 1981b, 1982b; U.S. Senate, 1981a, b ) a n d t o d i s c u s s w a y s t o assist t h e s e e n t i t i e s (e.g, U.S. H o u s e , 1981a). In this c l i m a t e o f e c o n o m i c d i s t r e s s a n d deregulation, Congress lessened restrictions o n t h e a c t i v i t i e s a n d asset p o w e r s o f financial i n s t i t u t i o n s . E v e n so, financial regulators continued to employ solvency and capital requirements to monitor the "health" of these i n s t i t u t i o n s a n d t o p r o v i d e a basis for r e g u l a t o r y intervention. Financial accounting was a significant i n p u t in assessing w h e t h e r a n e n t i t y m e t t h e s e c a p i t a l a n d s o l v e n c y r e q u i r e m e n t s . In r e s p o n s e t o t h e difficult e c o n o m i c e n v i r o n m e n t , f e d e r a l r e g u l a t o r s s u c h as t h e FHLBB a l t e r e d t h e a c c o u n t i n g m e a s u r e m e n t s u s e d t o assess compliance with regulatory capital and solvency r e q u i r e m e n t s . T o m i n i m i z e t h e n u m b e r o f "sick" classifications, t h e FI-ILBB b e g a n t o p e r m i t savings a n d l o a n i n s t i t u t i o n s t o a c c e l e r a t e i n c o m e r e c o g n i t i o n a n d t o d e l a y loss r e c o g n i t i o n ( B a k e r , 1981; A u e r b a c h & McCall, 1985; U.S. Senate, 1990; W h i t e , 1991). Savings a n d l o a n s also i n c r e a s e d r e c o r d e d i n c o m e a n d "improved" the appearance of their income statements by originating risky loans and r e c o g n i z i n g i m m e d i a t e l y as i n c o m e t h e fees r e c e i v e d for o r i ~ n a t i n g t h e s e l o a n s ( B e r t o n , 1985; R u d n i t z ~ & Sloan, 1984).

Participants in regulatory space T h e A m e r i c a n I n s t i t u t e o f Certified P u b l i c A c c o u n t a n t s ( A I C P A ) a n d t h e FASB v i e w e d t h e a c t i o n s o f t h e FHLBB a n d savings a n d l o a n o r g a n i z a t i o n s as a c c o u n t i n g g i m m i c k r y d e s i g n e d t o c o n c e a l t h e " t r u e " financial condition of these organizations (Deloitte, Haskins & Sells, 1981; Kirk, 1982, 1987). F o r e x a m p l e , FASB c h a i r m a n , D o n a l d Kirk c o n d e m n e d FHLBB a c t i o n s t h a t p e r m i t t e d t h e d e f e r r a l o f losses o n t h e sale o f l o w - y i e l d mort~lges:

I also recognize that bookkeeping entries do not make an S&L any more solvent or any less solvent than it otherwise would be. It should be the overriding purpose of a statement of financial position to measure and report real world phenomena as faithfully and as factually a s possible. If the FHLBB believes its net worth requirements or other solvency tests may no longer be valid, it should consider revising those tests. . . . But revising the financial statements so that the tests are not violated, in my opinion, does little for the credibility of the S&Ls or financial reportin~gin general (in Deloitte, Haskins & Sells, 1981, p. 2, emphasis added). T h e AICPA a n d FASB b e g a n a c t i n g t o e l i m i n a t e t h e s e p e r c e i v e d abuses. I n 1981, t h e AICPA issued a notice to practitioners directing a u d i t o r s n o t t o a p p l y n e w FHLBB g u i d e l i n e s o n l o a n fee r e c o g n i t i o n in e x t e r n a l financial s t a t e m e n t s . I n M a y 1982, t h e FASB staff b e g a n to monitor the accounting implications of C o n g r e s s i o n a l p r o p o s a l s t o aid t h e savings a n d l o a n i n d u s t r y a n d t h e B o a r d d i r e c t e d t h e staff t o p r e p a r e a d i s c u s s i o n p a p e r a n a l y z i n g issues affecting savings i n s t i t u t i o n s (FASB m i n u t e s , 5 M a y 1982). T h e AICPA's A c c o u n t i n g S t a n d a r d s E x e c u t i v e C o m m i t t e e w o r k e d t o p r e p a r e an issues p a p e r r e l a t i n g t o a c c o u n t i n g for l o a n fees a n d u r g e d t h e FASB t o u n d e r t a k e art a g e n d a p r o j e c t o n this t o p i c . A FASB m e m b e r l a t e r noted: We had a meeting.., with a cross-section of representatives for the AICPAbanking committee, S&L committee and all the rest of the financial institution area ... We said look we can't put a project like accounting for all financial institutions on the agenda But, if there was .anything we could do that would improve financial reporting in the area, what would it be? And [they] absolutely overwhelmingly said you got to clean up the loan fee mess. You've got to clean up the guys that are out there just front-ending income and the only way they are remaining solvent is doing that ... [e2,1 ]. O t h e r s also e x p r e s s e d p a r t i c u l a r c o n c e r n s a b o u t l o a n fee a c c o u n t i n g F e d e r a l b a n k regul a t o r s i n d i c a t e d t h a t n e i t h e r GAAP n o r regulatory accounting principles specifically a d d r e s s e d t h e r e c o g n i t i o n o f fee i n c o m e b y b a n k s a n d s u b s t a n t i a l d i s c r e t i o n h a d r e s u l t e d in d i v e r s i t y in p r a c t i c e (U.S. Senate, 1983a, p. 257). T h e U.S. G e n e r a l A c c o u n t i n g Office also v o i c e d concerns:

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Banlmcan appear more profitable than they actua//y a r e when loans are retw.heduled and large reschedulin~ fees are posted to current income. This result is especially anomalous when loan portfolios have typically become riskier and tess profitable (U.S. Senate 1983a, p. 22, empha~ added~

R u d n i t z k y & Sloan, 1984). In r e c a l l i n g t h e reasons underlying the decision to examine loan f e e a c c o u n t i n g , a FASB m e m b e r d i s c u s s e d t h e a c c o u n t i n g p r a c t i c e s u s e d in t h e savings a n d loan industry:

I n 1983, C o n g r e s s d i r e c t e d t h e F e d e r a l F i n a n c i a l I n s t i t u t i o n E x a m i n a t i o n C o u n c i l i n T i t l e IX o f Public Law 98-181 to develop income recognit i o n r u l e s t o b e u s e d in r e c o r d i n g f e e s f r o m r e s t r u c t u r i n g i n t e r n a t i o n a l l o a n s in r e g u l a t o r y reports. 3 When asked about the relevance of congressional attention to the emergence of a p r o j e c t o n l o a n f e e s o n t h e FASB a g e n d a , a FASB member commented:

I've forgotten the _~_t~ now but the crisis [in S&Ls]has been going on for quite a long time and one of the factors that was of concern was the fact that they had been taking the points, mortgage points, up front and taking them into income immediately.And we didn't agree that that was proper. . . . There was a lot of concern at that time about bad accounting in the S&L industry and this one seemed to be getting more flagrant as time went on and involved a lot of money. . . . But it was really the S&L crisis and the concern that they were taking in a lot more income than they had ~al/y earned [b3, emphasis added].

... that was a factor at the time. And It was one of those things that gives a topic a high profile which is one of t h e things that gets them on our agenda, ff they begin to stir interest broadly and particularly Congressional concerns [b3a]. A u d i t o r s ( a s r e p r e s e n t e d b y t h e AICPA), financial r e g u l a t o r s , t h e G e n e r a l A c c o u n t i n g Office, C o n g r e s s a n d t h e FASB all e x p r e s s e d c o n c e r n s a b o u t t h e i n t e r e s t in t h e a c c o u n t i n g for l o a n f e e s a n d all o c c u p i e d r e g u l a t o r y space. A l t h o u g h t h e AICPA, C o n g r e s s a n d t h e FASB indicated that diversity in practice was a problem, their primary concerns appeared to center on whether some of the accounting practices for loan fees "misrepresented" the financial c o n d i t i o n o f t h e o r g a n i z a t i o m T h e s e concerns about misrepresentation were especially a c u t e in l i g h t o f t h e p r e c a r i o u s financial h e a l t h o f m a n y savings a n d l o a n a n d o t h e r financial institutions. Thus, p r a c t i c e s t h a t increased recorded income and maintained required solvency and capital requirements b e c a m e l a b e l l e d as " a b u s i v e " ( D e l o i t t e , Haskins & Sells, 1981; Kirk, 1982, 1987; G e n e r a l A c c o u n t i n g Office in U.S. Senate, 1983a; Baker, 1981; A u e r b a c h & McCall, 1985; B e r t o n , 1985;

T h e a c c o u n t i n g p r a c t i c e s in a h i g h l y v i s i b l e and closely monitored segment of the economy were considered to conceal the "true" picture and therefore contradict a central claim conm i n e d in t h e c o n c e p t u a l f r a m e w o r k C o n g r e s s , MCPA, t h e G e n e r a l A c c o u n t i n g Office a n d others called into question the validity of the c l a i m o f r e p r e s e n t a t i o n a l faithfulness for t h e a c c o u n t i n g r e p o r t s o f financial institutions. S o m e o f t h e a c c o u n t i n g p r a c t i c e s u s e d to c o n s t r u c t t h e s e r e p o r t s w e r e l a b e l l e d as a b u s i v e and misleading and considered unreliable and p e r h a p s n o t r e l e v a n t f o r e c o n o m i c a n d financial decision-making.4 These accounting practices w e r e j u d g e d t o fall s h o r t o f t h e c l a i m s m a d e for a c c o u n t i n g . If o n e a c c e p t s t h e s e claims, t h e n financially u n s t a b l e e n t i t i e s s h o u l d b e d e p i c t e d as u n p r o f i t a b l e a n d a c c o u n t i n g p r a c t i c e s s h o u l d e m p h a s i z e a n d h i g h l i g h t this instability. Instead, s o m e a c c o u n t i n g p r a c t i c e s for l o a n fees i n c r e a s e d t h e r e c o r d e d profits o f s o m e financially u n s t a b l e institutions. O n e financial a r t i c l e d e s c r i b e d t h e s e p r a c t i c e s : "Taking p o i n t s i n t o i n c o m e as t h e y a r e p a i d has h e l p e d m a n y a thrift . . . r e p o r t h e a l t h y profits e v e n as it w a s g o i n g

3 These bills also addressed nonaccounting issues and the accounting for loan loss reserves, a topic that did not emerge unto the FASBagenda. 4 The business press also questioned the accounting practices of financial institutions (e.g. S&L'sVarious Strategies, 1984; Baker, 1981).

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d o w n the tubes" (Hayes, 1986, p. 97). Within this perspective, the accounting practices for loan fees failed to emphasize sufficiently the "badness" of these entities. In this way, diversity in practice for loan fees was constructed as abusive accounting that required the attention o f the standard-setter. Diversity in practice here m a y b e seen to represent a shorthand to describe an intersection of events, conditions, and demands u p o n accounting that suggest the "need" to e!!minate accounting alternatives. As another FASB m e m b e r c o m m e n t e d : . . . yon have to think about that one [loan fees addition] in the context of S&L problems in general and I think a recognition o n the Board's part that it was an industry that was full of abuses and tvimmicks ~ the reglllgtors w e r e fostering it. So w e would have been very sermitivc to . . . issues that w e r e in the S&L area [o7a].

An "'appropriate" action In February 1984, the FASB m e m b e r s v o t e d to add to the FASB ted3nical agenda a project to address the accounting for loan fees because "of c o n c e r n s expressed to it that current guidance provides for different accounting for similar transactions b y the various kinds of entities in the financial services industry" (FASB, 1984a, p. i). This diversity in practice was constructed as a p r o b l e m within a set of concerns about w h e t h e r s o m e o f the accounting practices for loan fees "misrepresented" the financial viability o f financial institutions. Q u e s t i o n s about misrepresentation provided the FASB with a rationale for action to eliminate the diversity in practice a m o n g various types of financial institutions. No single event "triggered" the e m e r g e n c e of an agenda project. Instead, general concerns about the financial viability o f financial orsanizations coupled with concerns that m a n a g e m e n t and regulators w e r e employing accounting to conceal the "ill-health" of these organizations w e r e c o m b i n e d to construct diversity in practice as an accounting "problem". A FASB

m e m b e r interpreted the decision to undertake the loan fee project as follows: This was an area w h e r e w e knew the criticism would be severe because the practices w e r e questionable. In some instances, they w e r e far from reality. The whole notion that it really wasn't a yield adjustment that it was

something different [That it] was really compemation for doing something else was always very smpect We, I think, knew well here that the S&Lthin4gwas just going to get worse and then there would be finger pointing We knew that to at least demonstrate w e w e r e on top

of thinss this was an issue we had to deal with [oSa]. The savings and loan i n d u s t r y and its then powerful lobbying arm, the League of Savings Institutions, o p p o s e d the FASB decision to examine accounting for loan fees. The association periodical Savings Institutions closely followed the progress o f the MCPA issues p a p e r on accounting for loan fees and the subsequent FASB agenda project. These articles predicted dire consequences to arise from any action b y the FASB to change accounting for loan fees (AICPA Issues P a p e r , 1984; FASB Loan Fee Stance, 1986). Financial organizations (particularly the savings and loan industry) undertook a lobbying campaign to mitigate the extent of changes arising from the FASB project. A FASB m e m b e r later c o m m e n t e d : ... but w e p e t it [the agenda] o n because w e thought there was something abusive going on and w e knew the response would be very strong because some of them [savings and loan institutions] really needed that income

to m~,-tain their capital standards [bS]. These entities responded to the subsequent invitation to c o m m e n t and exposure draft in large" numbers. In their c o m m e n t letters, m a n y organizations claimed that changes in accounting practices for loan fees would harm their operations: O t h e r respondents predicted that financial institutions would simply change their operations to avoid the impact o f changes in accounting rules. 5 The executives in savings

s In order to maintain reported profitability levels after the FASB issued its standard o n accounting for loan fees, portfolio lenders and mortgage bankers engaged in transactions m o r e influenced by favorable short.term accounting results than long-term economic considerations (Parks, 1988).

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and loan organizations attempted to o c c u p y highly visible and financially troubled industry. regulatory space and challenged, in a variety of The efforts of the savings and loan industry ways, the appropriateness o f FASB actions. to stop the FASB failed. The industry was unable Despite this vocal opposition, the FASB to gain a foothold in regulatory space. The presented itself as working to improve financial FASB ignored the savings and loan industry accounting and reporting even if that meant complaints as it pursued a course of action to changing predominant accounting practices of alter loan fee accounting practices. FASB efforts financial institutions and ignoring their Intensive were buttressed by the support of powerful lobbying efforts. 6 They could, however, do allies within regulatory space including this because of the support of other influential Congress. Within this context, the FASB could occupants o f regulatory space. Business more easily act out its mission statement periodicals published FASB staff c o m m e n t s that and further enhance its o w n legitimacy as presented the staff as antagonistic to the savings the organization acting to eliminate "bad" and loan industry and striving to end the "bad" accounting, in a highly visible arena. accounting practices in this industry. The staff evinced little sympathy for the predicted ACCOUNTING FOR LEASES e c o n o m i c consequences of the proposed accounting changes and stressed the importance Background of getting the accounting "right": The FASB inherited accounting for leases from the Accounting Principles Board and included Those arguments are completely irrelevant. The Board this matter on its initial technical agenda. The is here for the purpose of improvingfinancial reporting, and if it tells you your baby's ugly, then your baby's ugly FASB "solved" accounting for leases in 1976 (FASBproject manager quoted in Hayes, 1986, p. 98). with the issuance of Financial Accounting Standard (FAS) 13 (FASB, 1976). This standard Thus, standard-setting action was constructed established criteria to classify leases as either as an appropriate response to eliminate the capital or operating leases and required lessees "bad" accounting practices of the financial to r e c o r d an asset and associated liability industry. The FASB observed the practices of for those leases classified as capital leases. these entities and shared the concerns voiced The solution required substantial subsequent by others about these practices. In the case of clarification and interpretation. Almost imaccounting for loan fees, the actions of the Board mediately upon issuing FAS 13, the FASB began can be interpreted as acting u p o n its mission to amend and interpret the standard. Between statement - - to consider promptly significant 1977 and 1979, the FASB issued seven amending areas of deficiency in financial reporting that standards and six interpretations and, in 1979, might be improved through standard-setting released nine technical buUetins. 7 Thus, the (FASB, 1990). The Board acted u p o n these "solution" to the problem of accounting for expectations to end accounting "abuse" in a leases created its o w n difficulties.

6 The FASBrecounted its efforts to eliminate "bad" accounting from the financial institution arena in two appearances before the Dingell committee investigations into the auditing and accounting practices in the fmancial services industry. On both occasions, the FASBcited its efforts to reduce the diversity in practice for loan fees (U.S. House, 1985b, pp. 333--335, 1986, p. 456). 7See FAS 17 ( FASB,1977a), FAS22, ( FASB,1987a), F/kS23 (FASB, 19781)),FAS26, ( FASB,1979a); FAS27, ( FASB,19791)); FAS 28 (FASB, 1979c); FAS 29 (FASB, 1979d); Financial Interpretation (FIN) 19 (FASB, 1977b); FIN 21 (FASB, 1978c); FIN 23 (FASB, 1978(1); FIN 24 (FASB, 1978e~, FIN 26 (FASB, 1978f); FIN 27 (FASB, 1978g); Technical Bulletin (TB) 79l0 (FASB, 1979e); TB 79-11 (FASB, 1979f); TB 79-12 (FASB, 1979g); TB 79-13 (FASB, 1979h); TB 79-14 (FASB, 1979i); TB 79-15 (FASB, 1979j); TB 79-26 (FASB, 1979k); TB 79-17 (FASB, 19791); TB 79-18 (FASB, 1979m).

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A crowded regulatory space In issuing FAS 13, the FASB had attempted to implement the perspective that "a lease that transfers substantially all of the benefits and risks incident to the. ownership of property should be accounted for as the acquisition of an asset and the incurrence of an obligation by the lessee and a sale or financing by the lessor" (FASB, 1976, para. 60). Despite this intent, the FASB standard was later criticized for failing to capture and record the "true" economic substance of many leasing transactions. Accounting theorists and practitioners were c o n c e r n e d that the application of FAS 13 resulted in too little capitalization of leases (Phalen, 1978; Dieter, 1979; FASB's Rule 13, 1979; Abdel-Khalik, 1981). Many individuals also believed that companies structured n e w lease contracts and renegotiated existing lease contracts to avoid the FAS 13 capitalization requirements (Abdel-Khalik~ 1981). It was believed by many that the arbitrary criteria outlined in FAS 13 to classify leases as either capital or operating leases had contributed to this "game playing" by corporate entities. In doing so, it may be interpreted as increasing diversity in practice and of contradicting the accounting claim of representational faithfulness. A FASB m e m b e r recalled: [There was] theoretical dissatisfaction among some Board members who might not have been among the original ones [to issue FAS 13] and some outsiders like [a Big 6 firm] that we had [drawn] an arbitrary line ... people were structurin~ deals to avoid it. What kind of standard was that? [o2,1b]. And another individual noted: .. one of the problems of Statement 13 [is] it is a form not a substance standard and people will continue to structure leases to get around that form standard [p 2- 3b]. •

In light of this "game playing", several accounting theorists and practitioners believed that the application of FAS 13 failed to represent faithfully the perceived purpose o f many leasing

transactions, an "in substance" purchase of assets. A separate set of concerns also arose around FAS 13. The amendments, interpretations and technical bulletins issued to clarify and interpret FAS 13 accented the "cookbookish" nature of lease accounting and increased the complexity of implementing FAS 13 into accounting practice. While the FASB and its staff worked to issue these documents, special committees of the AICPA discussed the burden that numerous accounting standards placed on small, closely held and medium-sized firms (AICPA, 1976, 1983). The Financial Executives Research Foundation and the FASB also studied these issues. In study after study, FAS 13 was criticized for its complexity (AICPA, 1983; Arthur D. Little, Inc., 1983; FASB, 1983a; Abdel-Khalik; 1983) and several studies r e c o m m e n d e d its revision (AICPA, 1983; Arthur D. Little, Inc., 1983). Regulatory space was c r o w d e d with theoreticians, small audit practitioners, preparers of financial statements, and the FASB and its staff. While regulatory space was c r o w d e d with individuals and groups w h o agreed that FAS 13 was a problem, these occupants disagreed about not only a solution but also importantly o n an appropriate construction of the problem. Was it too m u c h complexity or too little capitalization?

Further crowding o f regulatory space In 1983, the FASB began to explore publicly alternatives to the existing standard. The FASB staff readily acknowledged the complexity of FAS 13 and claimed an inability to suggest a solution to reduce its complexity. Instead of recommending the immediate addition of a technical agenda project, the staff suggested studying the feasibility of developing a "better" answer to replace FAS 13 (FASB Minutes, 18 May 1983). The Board later indicated that a simplification of lease accounting could not result from minor changes to FAS 13. Instead, a fundamental change in lessee accounting was needed to simplify this accounting. The Board specifically discussed two alternatives: no

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capitalization o f leases 8 and capitalization of all leases (FASB Minutes, 8 J u n e 1983).

95

... you say capitalizeall [leases]but you don't really mean capitaUzeaUl~mses] because you're not going to capitaUze

car rentals. So you say that's easy just capitalize those The FASB p r e s e n t e d these alternatives to its Financial Accounting Standards Advisory C o m m i t t e e (FASAC) 9 for consideration and advice in July 1983. Many FASAC m e m b e r s identified the no capitalization "solution" as the alternative m o r e likely to satisfy small business concerns and to reduce accounting c o m p l e x i t y (FASAC, 1983, p. 10). However, the m e m b e r s questioned the theoretical support for this alternative and w h e t h e r foregoing the capitalization of all leases w o u l d " i m p r o v e " financial reporting. Several FASAC m e m b e r s characterized this alternative as a "step backwards" in accounting practice and expressed their beliefs that bankers and analysts w o u l d not accept this "solution". These m e m b e r s indicated that this alternative w o u l d exacerbate existing criticisms a b o u t too little lease capitalization. The FASB staff also raised the b o g e y of SEC intervention ff the no capitalization alternative was selected: Before Statement 13 was issued, the Securities and Exchange C o m m i s s i o n had taken a strong stand against lessees' accounting for leases at that time. Virtually n o leases w e r e being capitalized then. An FASB decision to eliminate capitaliTation of leases could result in a confrontation b e t w e e n t h e FASB and SEC (FASB, 1983b, p. 5).

The FASB also e x p l o r e d another alternative capitalization o f all leases. This alternative had b e e n considered during the FASB deliberations leading to the issuance of FAS 13 (FASB, 1976, para. 6 3 ) but had b e e n dismissed as too radical a departure f r o m then existing practice to gain a c c e p t a n c e in the business community. A FASB m e m b e r indicated:

[lesses] with [terms of] 1 or 2 or 3 years or whatever, pick your time. But ttlat immediately begins to get yoU into the sort o f drawing of lines that are easy to get around . . . . w h i c h is o n e of the p r o b l e m s with [FAS] 13. So you can't totally escape the p r o b l e m s . . . [b,89].

Further, there was no assurance that this alternative would simplify lease accounting ( e.g. Baker, 1980). A FASB m e m b e r later discussed w h e t h e r capitaliziog all leases would simplify lease accounting: You'd be introducing m o r e and m o r e p r e s e n t value notions into what people have always t h o u g h t [were] rental agreements. And y o u ' d be creating m o r e timing differences for tax purposes and as a result adding to what was another c o m p l e x statement, deferred tax accounting [o,89 ].

Many FASAC m e m b e r s also expressed the opinion that this alternative would not address c o m p l e x i t y concerns, achieve broad support a m o n g the FASB's constituency, or "improve" financial reporting (FASAC, 1983). The FASB and its staff gathered information, discussed lease accounting issues at several Board meetings, used staff time to develop project proposals, and discussed lease accounting issues with FASAC. The Board e m p l o y e d the agenda process m highlight the conflicting p r o b l e m constructions for lease accounting arising from the complexity and theoretical concerns. Those solutions likely to address c o m p l e x i t y concerns w e r e theoretically unacceptable. Those solutions likely to address theoretical concerns w e r e unlikely to alleviate c o m p l e x i t y concerns. A FASB m e m b e r recalled the conflicting perspectives of the c o m p l e x i t y and theoretical concerns about lease accounting

8 T h e n o capjt21iTatinn alternative required only disclosure o f reformation about lease c o m m i t m e n t s . 9 FASAC has responsibility for consulting with the FASB about major policy questions, technical issues, project priorities and o t h e r matters (FASB, 1990). T h e Council consists of m e m b e r s selected by t h e Financial Accounting Foundation. These m e m b e r s are broadly representative of preparers, auditors, and users o f financial irfform~tion (FASB, 1990).

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J.J. YOUNG ... then the Institute standards overload complexity concerns came in and you had a combiningof overload and theoreticians pushing for reconsideration whose motives were entirely different and expectations were entirely different ... so there was sort of a convergence of entirely different perspectives that put pressure on the Board [o, lb].

T h e FASB had a c c e p t e d the alternative p r o b l e m constructions of the other participants i n r e g u l a t o r y space as "given" a n d e x p l o r e d t h e s e alternatives. This e x p l o r a t i o n b r o u g h t o t h e r actors s u c h as FASAC i n t o t h e r e g u l a t o r y space. I n calling o n FASAC, t h e FASB f u r t h e r c r o w d e d r e g u l a t o r y space as FASAC m e m b e r s speak as unofficial r e p r e s e n t a t i v e s for the b a n k i n g , analyst, p r e p a r e r a n d a u d i t o r c o m m u n i t i e s . T h e FASB also called o n t h e SEC to cast its s h a d o w o n t o the r e g u l a t o r y space a n d to b u t t r e s s t h e i n a p p r o p r i a t e n e s s o f f o r e g o i n g the capitalization o f leases. This f u r t h e r c r o w d e d r e g u l a t o r y space w i t h m u l t i p l e o p i n i o n s a n d r e s p o n s e s a n d assisted t h e FASB i n classifying a c c o u n t i n g for leases as an i n t r a c t a b l e accounting problem.

i n FAS 13. T h e Board v o t e d again n o t to u n d e r t a k e the p r o j e c t a n d later i n d i c a t e d that the a g e n d a c r i t e r i o n , g e n e r a l a c c e p t a n c e of a solution, was n o t m e t (FASB, 1 9 8 4 b ) . T h r o u g h these m e e t i n g s , the FASB accomp l i s h e d m u c h m o r e t h a n a s i m p l e refusal to add a p r o j e c t to its t e c h n i c a l agenda. T h e Board also c o m m u n i c a t e d that a n " i m p r o v e m e n t " i n lease a c c o u n t i n g w o u l d b e defined as capitalizing m o r e leases. ( T h e n o capitalization alternative was n o t discussed at the S e p t e m b e r 1984 Board m e e t i n g . ) A m e m b e r d e s c r i b e d the Board's a c t i o n as follows: we frequently are urged to reconsider a standard and people have an answer that they want in mind. When we put it on the agenda and come to a different answer, then they're horrified. In effect, that was all we were trying to do in that case ... [b,lO-11]. T h r o u g h this e x t e n d e d discussion, t h e FASB p r e v i e w e d t h e likely a n s w e r that w o u l d e m e r g e from a r e c o n s i d e r a t i o n of FAS 13. Despite its t h e o r e t i c a l "purity", this a n s w e r was n o t p r e f e r r e d b y m a n y of the FASB's c o n s t i t u e n t s ) ° As o n e i n d i v i d u a l c o m m e n t e d :

Constructing inaction as appropriate I n F e b r u a r y 1984, t h e FASB staff r e c o m m e n d e d t h e Board add a p r o j e c t to its a g e n d a to r e c o n s i d e r leases. Paul LePage, FASB p r o j e c t manager, i n d i c a t e d : " . . . it's a v e r y c o n t r o v e r s i a l i t e m a n d t h e r e ' s a q u e s t i o n as to w h e t h e r t h e Board n e e d s m o r e c o n t r o v e r s y " ( q u o t e d in Berton, 1984). T h e Board d e c l i n e d to add t h e p r o j e c t to its a g e n d a b u t r e q u e s t e d that the staff o u t l i n e t h e full r a n g e o f c o n c e p t u a l a n d i m p l e m e n t a t i o n issues to b e a d d r e s s e d in a r e c o n s i d e r a t i o n of FAS 13 (FASB, 1984d). I n S e p t e m b e r 1984, t h e Board again discussed w h e t h e r to u n d e r t a k e a p r o j e c t to r e c o n s i d e r lessee a c c o u n t i n g . At this m e e t i n g , t h e FASB staff r e v i e w e d t h e p r o b l e m s associated w i t h lessee accounting including complexity concerns and lessee a v o i d a n c e of t h e arbitrary rules c o n t a i n e d

... we've learned to live with [FAS 13] and we're not sure that if they [the FASB]undertook to relook at the whole thing that they would come out with anything better short of capitalizing all leases which at least gets away from the arbitrary threshold ideas. Capitalize all leasehold fights no matter what the nature of the lease. Nobody, preparers at least, are very happy with that [d,6--7]. Although the FASB indicated that " i m p r o v e m e n t " m e a n t capitalize m o r e leases, t h e e x t e n d e d p r o c e s s also raised q u e s t i o n s a b o u t h o w m u c h i m p r o v e m e n t to financial a c c o u n t i n g a n d r e p o r t i n g c o u l d b e e x p e c t e d to arise from this c h a n g e i n a c c o u n t i n g practices. T h r o u g h these m e e t i n g s a n d discussions w i t h participants, t h e FASB formally a c k n o w l e d g e d that the p r e v i o u s s o l u t i o n to the p r o b l e m of

lo Survey respondents (including preparers, loan officers and auditors) had prc~iously revealed strong negativ©attitudes toward capitalizing all leases (Abdel-IOtalik~ 1981, p. 109).

OUTLINING REGULATORY SPACE a c c o u n t i n g for leases, FAS 13, c o u l d itself b e c o n s t r u c t e d as a n a c c o u n t i n g p r o b l e m . Thus, t h e FASB d e m o n s t r a t e d r e s p o n s i v e n e s s t o t h e v a r i o u s c r i t i c i s m s o f FAS 13 t h a t h a d b e e n d o c u m e n t e d in studies, r e p o r t s , a r t i c l e s a n d discussions. T h e FASB e x h i b i t e d its a w a r e n e s s o f t h e c o n c e r n s o f t h e a c t o r s in r e g u l a t o r y space. T h e FASB also w o r k e d t o e s t a b l i s h t h a t t h e i m a g i n a b l e a l t e r n a t i v e s t o FAS 13 w e r e u n l i k e l y to improve accounting substantially from the p e r s p e c t i v e o f m a n y p a r t i c i p a n t s in r e g u l a t o r y s p a c e o r t o gain t h e g e n e r a l a c c e p t a n c e o f t h e s e participants. Some Board members, including FASB c h a i r m a n D o n a l d Kirk ( S c h i l d n e c k & B e r t o n , 1983), w e r e s k e p t i c a l w h e t h e r t h e FASB could develop an answer that would improve u p o n t h e a n s w e r in FAS 13. A FASB m e m b e r recalled:

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I n a c c o u n t i n g for leases, p a r t i c i p a n t s c r o w d e d t h e r e g u l a t o r y s p a c e a n d s p u r r e d t h e FASB t o act in d e v e l o p i n g a r a t i o n a l e for inaction. At t h e o u t s e t , t h e s p a c e w a s c r o w d e d Jay p a r t i c i p a n t s with conflicting perspectives about the description of the problem and conflicting expectations about an acceptable solution to the problem. T h e FASB c a l l e d u p o n still o t h e r a c t o r s to enter the space and to heighten further the i n t r a c t a b i l i t y o f t h e p r o b l e m in t e r m s o f finding an a c c e p t a b l e solution. N e i t h e r o f t h e s o l u t i o n s d i s c u s s e d w a s likely t o r e c o n c i l e t h e conflicting p e r s p e c t i v e s . Thus, t h e s e c o n f l i c t i n g p e r s p e c tives w e r e e m p l o y e d t o c o n s t r u c t i n a c t i o n as appropriate.

DEPRECIATION AND C O N T R I B U T I O N A C C O U N T I N G FOR N O N P R O F I T ORGANIZATIONS

... the [members who were on the Board when FAS 13 was issued] were vehemently against 13 being reconsidered. Because they didn't believe that in the Constructing nonprofit accounting as a final analysis you would do anything but rehash a lot of problem the old issues that were essentiallyuuresolvable the first The Committee on Accounting Practices and time [e2,5]. t h e A c c o u n t i n g P r i n c i p l e s Board, p r e d e c e s s o r s T h e B o a r d h i g h l i g h t e d t h e i n c o m p a t i b i l i t y o f t h e FASB, d i r e c t e d n o n e o f t h e i r s t a n d a r d o f t h e o v e r l o a d a n d t o o little c a p i t a l i z a t i o n s e t t i n g efforts t o w a r d e s t a b l i s h i n g a c c o u n t i n g c o n c e r n s a n d c o n s t r u c t e d a c c o u n t i n g for leases g u i d a n c e for t h e n o n p r o f i t sector. Instead, v a r i o u s a s s o c i a t i o n s a n d a g e n c i e s s u c h as t h e as an i n t r a c t a b l e p r o b l e m . In e s t a b l i s h i n g t h e M u n i c i p a l F i n a n c e Officers A s s o c i a t i o n a n d p r o b l e m as i n t r a c t a b l e , t h e FASB c o u l d r e f u s e American Hospital Association independently t o " w a s t e " its t i m e b y u n d e r t a k i n g a p r o j e c t o n e s t a b l i s h e d a c c o u n t i n g g u i d a n c e for t h e i r lease a c c o u n t i n g . T h e f o l l o w i n g c o m m e n t s specific t y p e s o f o r g a n i z a t i o n s ( A m e r i c a n u n d e r s c o r e this p o i n t : A c c o u n t i n g Association, 1971, p. 84). I n 1975, t h e C o m m i ~ i o n on Private ... We have a line and some leases are capitalized and and Public Needs ( Filer some are not and [we] probably [will] never go to P h i l a n t h r o p y capitalize every single lease ... It's a question of maybe C o m m i s s i o n ) , a c o m m i t t e e f o r m e d b y a capitalizing some more. And it just doesn't seem to be g r o u p o f p r i v a t e citizens, i s s u e d a s t u d y o f the best use of our resources [bfl6]. p h i l a n t h r o p i c g i v i n g in t h e U.S. T w o a c c o u n t i n g ... the reaction against putting it [accounting for leases] p r o p o s a l s w e r e i n c l u d e d a m o n g t h e r e c o m on [the agenda] is that you, first going into saying yes to m e n d e d w a y s t o s t r e n g t h e n t h e n o n p r o f i t s e c t o r it, have to accept that you will either capitalizeessentially a n d t h e p r a c t i c e o f p r i v a t e giving. First, t h e all leases or no leases. If you're not willing to admit that C o m m i s s i o n r e c o m m e n d e d i n c r e a s e d a c c o u n t then you must be only talkltag about moving the line a a b i l i t y for N P O s t h r o u g h t h e d i s t r i b u t i o n o f little bit. And a lot of us thought that moving the line is not cost-beneficial. There is nothing really dramatically d e t a i l e d a n n u a l r e p o r t s t h a t w o u l d d o c u m e n t going to improve the reporting by changing an arbitrary finances, p r o g r a m s a n d priorities. S e c o n d , t h e line from one point to another and the Board will incur c o m m i s s i o n u r g e d t h e a d o p t i o n o f u n i f o r m incredible costs [e2,5]. a c c o u n t i n g m e a s u r e s b y c o m p a r a b l e N P O s to

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improve accountability (Commission on Private Philanthropy, 1975, p. 165): One obstacle in the path of accountability is the tangle of accounting definitions and principles that are in effect among nonprofit organizations which makes examination of any particular organization's basic finances often difficult ff not impossible, especially for nonexperts, and compounds the problems of comparing one organization with another .... greater uniformity, at least among comparable types of organizations, is clearly possible and desirable. Diversity in accounting definitions and principles was v i e w e d as an obstacle to understanding the accounting reports of NPOs. The c o m m i t t e e ' s position suggested that NPOs should w o r k to eliminate this diversity. However, several c o m m i t t e e m e m b e r s objected to the v i e w that NPOs could accomplish this task and called for outside initiative to improve NPO accounting: "Further progress [in accounting] is d e p e n d e n t on the readiness of the AICPA and the FASB to m o v e ahead - - not alone o n the agencies which have heretofore taken the initiative" (Commission on Private Philanthropy, p. 213). While the Frier Commission questioned the accounting practices of NPOs, major U.S. cities such as N e w York City, Cleveland, and Chicago faced fiscal crises. The financial crises of these cities and particularly N e w York City raised questions about the adequacy of the accounting practices and accounting reports of municipalities (Klapper, 1978a). Congressmen, accountants, and regulators discussed the inadequacies of municipal accounting practices and the need for change. For example, a 1978 Coopers and Lybrand study concluded that municipal accounting practices failed to m e e t the needs of taxpayers and investors (Klapper, 197813). These concerns about the accounting practices of municipalities led several actors to suggest that an authoritative entity b e established to provide accounting guidance to state and municipal organizations. In linking uniform accounting measures for comparable organizations with i m p r o v e d financial accountability of NPOs, the Filer

Commission established a link b e t w e e n accounting standard-setting and m o r e general concerns about the financial viability of the nonprofit sector. This linkage, coupled with the concerns about the accounting practices of N e w York City and other mum'cipalities, constructed accounting in the nonprofit area as a p r o b l e m and o n c e again centered the p r o b l e m around the issue o f diversity in practice. However, this was a process of p r o b l e m construction in which the FASB was apparently not a participant. The Filer Commission r e p o r t and the discussions about municipal accounting suggest the sense that the accounting and reporting practices of municipalities and nonprofit organizations had failed to provide sufficient information to assist in the allocation of resources to these organizations. The concerns of participants in regul,4tory space w e r e vague and general but suggested that efforts were needed to get the accounting "right". While the AICPA, FASB and other organizations had ignored accounting by NPOs, these organizations began to attend to the area after the reports of the Filer commission and the wide publicity arising from the near bankruptcy o f N e w York City. The MCPA ended its traditional disinterest in nonprofit accounting by appointing a c o m m i t t e e to establish accounting guidance n a statement o f position covering the accounting practices of nonprofit organizations such as churches and museums. In addition, U.S. Congressional m e m b e r s considered nonprofit solicitation activities and p r o p o s e d at least two bills to govern these activities. Each bill w o u l d have likely resulted in a g o v e r n m e n t agency to establish accounting rules for nonprofit organizations ( Gross, 1977 ). Other m e m b e r s of Congress p r o p o s e d forming a c o m m i t t e e to establish disclosure and accounting rules for municipalities issuing bonds. Sen. Harrison Williams circulated several bills in Congress designed to grant the SEC the authority to establish accounting practices for municipalities that issued bonds or to create a private institution to establish accounting standards for state and local governments. The regulatory space was thus b e c o m i n g c r o w d e d with groups and organizations proposing alternative

OUTLINING REGULATORYSPACE ways to provide nonprofit entities.

accounting guidance for

Is FASB action appropriate? Regulatory space shrinks While the AICPA had b e g u n to act and certain Congressional members were also trying to act u p o n NPO accounting practices, the FASB, the organization designated by the AICPA, Financial Analysts Federation, Financial Executives Institute, National Association of Accountants and American Accounting Association and the SEC as the entity responsible for improving financial accounting and reporting, had failed to act. However, participants in regulatory space w e r e working to construct NPO accounting practices as appropriate for FASB action. In this respect, the FASB was being drawn into the space and FASB action was being constructed as appropriate b y those w h o had already entered the regulatory space. Although a n u m b e r of reasons might explain the FASB's inaction on NPOs, for example the intractable nature o f the "problem" or a lack o f interest in nonprofit accounting, the FASB was nevertheless drawn into the regulatory space. This reinforces the necessity for analyzing the agenda process within a wider context as other participants may construct appropriateness and thereby define the role o f the FASB within a particular regulatory space. Yet other conditions must be considered to penetrate the complexity o f the FASB's position o n NPOs. For example, in 1977 the Financial Accounting Foundation Structure Committee published its evaluation of the operations of the FASB and r e c o m m e n d e d several structural changes.ll Among its many recommendations, the Structure Committee included its belief that "the Board must deal with municipal accounting" (Financial Accounting Foundation,

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1977, p. 27). The Structure Committee accepted as a fact that municipal accounting was an accounting problem and encouraged the FASB to address this problem. The Structure Committee urged the FASB to leverage its w o r k in this and other areas to avoid delays in undertaking and completing projects as "abstinence invites other standard-setting bodies into the act" (p. 26). Similarly, the Study on Establishment of Accounting Principles (AICPA, 1972, p. 72) had r e c o m m e n d e d "financial accounting standards be in only one set of h a n d s . . . " These committees asserted that only one standard-setting group was required and that the FASB should be the standard-setter. Others also urged the FASB to establish accounting standards for municipalities. In noting that municipal accounting practices failed to meet user needs, Coopers and Lybrand called for FASB action (Klapper, 1978b). A former N e w York City deputy mayor for finance also urged the FASB to act (Axelson, 1977). Thus, more and more participants encouraged the FASB to define NPO accounting as an appropriate arena for action. However, in the above cases, the rationales were not c o u c h e d only in terms o f getting the accounting "right", but rather were apparently c o n c e r n e d with occupying regulatory space. It was a c o n c e r n not so m u c h with defining N [ ~ accounting as a problem but with defLn_ing regulatory space itself. As such, the Structure Committee's call for action was tinged with concerns that the newly organized FASB w o u l d be supplanted by other organizations in establishing guidance for NPOs. In 1977, the FASB responded to these expectations and announced its intention to study the entire area of nonprofit accounting. The Board commissioned Robert Anthony of Harvard University to study the objectives and

~The structure committee was composed of six FinancialAccountingFoundationtrustees. The Foundation is responsible for selecting the members of the FASB,funding their activities and exercising general oversight (except with regard to the FASB'sresolution of technical issues) (FASB, 1990). The committee report was prepared in part due to the interest of two congressionalcommittees ill the work of the FASBand their concern about whether the FASBwas the appropriate entity to establish accounting rules.

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c o n d u c t lengthy discussions with the Financial Accounting Foundation about an "appropriate" entity to establish accounting rules for government entities. In part, this resistance arose from the conflicting views of FASB There is growing concern regarding the relevance members and state and local officials. The FASB and reliability of financial reports of nonbusiness members believed that NPOs differed little from organizations and this concern has been expressed in for-profit organizations and that many of the legislation proposed in both houses of Congress. Against accounting differences between NPOs and forthis backdrop, persons representing a wide range of interests have called upon the FASBto become involved profits should be eliminated. State and local officials argued that their entities pursued in the nonbusiness sector (Different Rules, 1978). fundamentally different objectives and that the It should be noted that, rather than elevating accounting for government entities should NPO accounting to the status of an agenda item reflect these differences. The members of other immediately, the Anthony study delayed the nonprofit entities such as hospitals, museums FASB's decision on this matter while allowing it and churches offered no resistance to the role of the FASB as standard-setter and remained out to be seen as active. The FASB's entry into regulatory space was of regulatory space during the jurisdiction still tentative. Although the FASB began to enter discussions. 12 In light of this ongoing jurisregulatory space, not all entities accepted its dictional dispute, the FASB members agreed authority as the accounting standard-setter nor unanimously in May 1978 to defer any decisions shared expectations that the FASB should be about undertaking projects to develop specific the standard-setter for all reporting entities. accounting standards for NPOs and in doing so Regulatory space was contested. This juris- withdrew itself from the contested domain. The dictional matter was open to debate as those decision to withdraw was described as an urging the FASB to establish accounting rules "apparent bid to avoid controversy, particularly were acting u p o n an absence of an "official" in the government sector" (Accounting Panel, 1978). Rather than being seen to completely mandate. Because there were no restrictions to prevent the FASB from establishing accounting capitulate, the Board added to its agenda a standards for NPOs, those calling for action had project to address selected conceptual issues. The negotiations between the Financial assumed the existence of an implicit mandate (see for example Anthony, 1978). Those calling Accounting Foundation and state and local for action by the FASB in the nonprofit area government officials ended in 1981. The assumed or at least intended that the FASB Financial Accounting Foundation approved a should be the entity to establish accounting proposal to establish a second standard-setting rules for both for-profit and nonprofit organiza- body, the Governmental Accounting Standards tions. However, state and local g o v e r n m e n t Board (GASB), to promulgate accounting officials resisted the efforts of the FASB and standards for state and local government officials denied the authority of the Board to establish (FAF Position, 1981). FASB members opposed accounting standards for governmental entities this decision. The FASB chairman charged: (Mautz, 1981). These officials vigorously "multiple accounting standard-setting bodies opposed FASB standard-setting efforts (Klapper, will be costly, inefficient, conflicting, confusing 1978a; Accounting Panel, 1978; FASAC minutes, and therefore unfair to external users" April 1979; FASB Head, 1978) and began to (Chairman Presents, 1981). Ignoring this

basic concepts underlying financial accounting and reporting for NPOs. Chairman Donald Kirk later explained the FASB decision to address accounting for NPOs:

12W'hether the lack of resistance arose from passive acceptance of FASBjurisdiction, lack of awareness of FASBintentions, or other reasons is unknown.

OUTIJNINGREGULATORYSPACE oplx~tior~ the F~landal A c c o u n f l ~ Foundation action in effect established a separate r e ~ d a t o ~ space for state and local government accounting practices. By establt~tng the GASB, the Financial Accounting Four~_ ~on removed the accounting practices o f g n v e m m e n t a l entities from the jurisdiction o f the FASB and the regulatory space In w h i c h it operated. Ironical~, this action also r e m o v e d those actors w h o had forcefully challenged the FASB's authority In the domain o f the NPO and as w e shall see cleared the way for the FASB to act in providin4g guidance for o t h e r NPOs.

Action in the absence o f controversy During and after the jurisdiction controversies, the FASB continued to examine conceptual issues relating to accounting and reporting for N I ~ and to delay undertaidng projects to establish specific accounting standards (FASB, 1981). Althoush t h e Board agreed that specific standards should focus o n pervasive accounting issues affecting all ~ , the Board also decided it w o u l d develop standards only In situations w h e r e an immediate need for a project was demonstrated (FASB Minutes, 23 September 1981). A FASB m e m b e r later c o m m e n t e d : did concepts statement 4 and then there was quite a I~itof premmt for tm to 8o into standard-setltn8 at that point. But we decided instead to incorporate the ~ into concepts statement 3. And the board felt that tmUlyou get the concepts laid out you have difficulty with mandards. We decided that it was more important We

t o establish that a n asset is an asset w h e t h e r it's a nonlm~fit o r s o o n . . . [ b l S ~

The role o f the concepts statements and o t h e r strategi¢~ such as commissions are Interesting in that they permitted the FASB to remain active o n the fringes o f regulatory space without fully committing itself to a project o n accounting for

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NPOs. As w e shall see, this presence allowed the FASB to reactivate itself w h e n the conditions within the regulatory space turned in its favor. The FASB finally issued Concepts Statement No. 6 In D e c e m b e r 1985. After its completion, the FASB added to its agenda in March 1986 a project to develop specific accounting standards o n depreciation and contributions for NPOs. In selecting projects for accounting standards, the Board returned to those areas of accounting practice that its staff had identified in 1981 as requiring standards w o r k Very little external "pressure" was placed on the FASB to undertake these standards projects in 1986, n o r was there m u c h opposition to these projects at the outset, z3 The earlier concerns expressed by members o f Congress and others had subsided and cased and few individuals or entities outside the Board were interested in the project. In the annual FASAC questionnaire on projects and priorities, FASAC members consistently assigned a lower priority to the development of NPO financial reporting concepts than to other major projects. A FASB m e m b e r commented: CPAswere the only ones p ~ g the Board to addr~ the imue,. Nonprofitmgantzatiomprovided no impetus for change. Theywere content with the way thinp were and perceived no problems with cliff~.~-ic~ [8,3] Another individual stated: There is a wide divergence of practice with respect to nonprofits [but] I don't know where the hu©and cry [for these projects] came from [r,7]. Despite the relative lack of interest in the project, the FASB continued its w o r k and followed along the course the Board had charted initially in the late 1970s and early 1980s. In discussing the Board's decision to c o n t i n u e working in the nonprofit area, an Individual painted a picture o f inertia:

t3 Lair, regulatory space became highly contested again. The depreciation project reopened the jumdictton issue for "indurates" (such as colleges and universities) which have both private and i~emmemal orgauizaUonL The contrilmttom proje~ generated ~gntficant c o n ~ over the "appropriate" accounting for museum collectiom and other items.

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Until [the New York City bankruptcy], the FASBhad very little to do with nonprofit& And then there was a lot of pressure on them to get involved in the governmental side. The government sector s u c ~ avoided the FASB jurisdiction and got their own board set up. Meanwhile, the nonprofit thing had started. They had done concepts statement 4 and that Just carried forwartg ... So I think it was just that momentum of getting involved initially [ 1,4]. I n c o n t r a s t t o o t h e r p r o j e c t s , FASB m e m b e r s did not discuss an urgent need to address t h e s e issues. Instead, m e m b e r s d i s c u s s e d t h e d e c i s i o n in t e r m s o f r e s p o n s i b i l i t y , c o m m i t m e n t a n d e m b a r r a s s m e n t at t h e s l o w p r o g r e s s in

estab]ishLtlg standards: 14 But the Board has always felt a responsibility for it because it was a real problem and a real neecLSo despite the kind of FASACattitude, [the Board] just kept #owing along and figured they had a responsibility and has continued to pursue it [b,21]. We knew that GASBmight start dealing with R but we were really underway with it before that became an lmmc.I think in part it was frustration that we had decided to do this issue well before [in 1977~ We decided that we needed to deal with this issue which had been stepchild within the institute [AICPA] in a way. We needed to deal with it. ... So we were committed. After all those years, it was an embarrassment that we hadn't done anything yet. So I think that probably was the blsgest issue. We weren't going to drop it from the

agenda [o,lc1. Note the emphasis on commitment, a commitm e n t t o b e t h e s t a n d a r d s e t t e r for all organizations within the jurisdiction of the FASB. Initially, t h e FASB b e g a n w o r k w i t h i n regulatory space amid an environment of concern about the accounting practices of NPOs includi n g g o v e r n m e n t units. T h e FASB h a d b e e n u r g e d t o b e t h e s t a n d a r d - s e t t e r (AICPA, 1972; FAF, 1977, 1 9 7 9 ) a n d a c t e d as t h e "official" s t a n d a r d s e t t e r as it b e g a n t o s t u d y h o w t o " i m p r o v e " t h e a c c o u n t i n g p r a c t i c e s o f NPOs. Thus, t h e FASB l i s t e n e d t o a n d a c t e d u p o n t h e

e x p e c t a t i o n s v o i c e d b y t h o s e in r e g u l a t o r y space. H o w e v e r , it w a s d i s c o v e r e d t h a t t h e s e w e r e n o t t h e o n l y a c t o r s in r e g u l a t o r y s p a c e as s t a t e a n d l o c a l g o v e r n m e n t officials b e g a n t o c o n t e s t w h e t h e r t h e FASB a c t i o n s w e r e " a p p r o p r i a m " a n d w h e t h e r t h e FASB h a d j u r i s d i c a t i o n o v e r t h e a c c o u n t i n g f o r g o v e r n m e n t a l entities. While the arguments about the jurisdiction of t h e r e g u l a t o r y s p a c e in w h i c h t h e FASB o p e r a t e d c o n t i n u e d , t h e FASB f o c u s s e d its a t t e n t i o n upon developing accounting concepts. Because a c c o u n t i n g c o n c e p t s h a v e little i m m e d i a t e i m p a c t u p o n a c c o u n t i n g p r a c t i c e s , t h e s e efforts delayed standard-setting while permitting the FASB t o e s t a b l i s h its p r e s e n c e in t h e a r e a a n d t o i n c o r p o r a t e a c c o u n t i n g issues for nongovemment NPOs within the regulatory s p a c e in w h i c h t h e FASB o p e r a t e s . By f o c u s s i n g o n i t e m s w i t h little i m m e d i a t e i m p a c t , t h e FASB c o u l d a v o i d f u r t h e r p r o v o k i n g state a n d l o c a l officials w i t h a c t i o n a n d a v o i d a n n o y i n g t h e o t h e r i n t e r e s t e d p a r t i e s b y FASB inaction. These jurisdictional debates ended by e s t a b l i s h i n g t h a t t h e FASB w a s n o t t h e s t a n d a r d s e t t e r for g o v e r n m e n t entities. This a c t i o n removed the contentions state and local g o v e r n m e n t officials f r o m t h e r e g u l a t o r y s p a c e in w h i c h t h e FASB o p e r a t e s . By default, t h e s e debates and the concepts work completed by t h e FASB c o n s t r u c t e d FASB a c t i o n s o n t h e accounting practices of other nonprofit entities as " a p p r o p r i a t e " . T h e FASB e v e n t u a l l y a c t e d u p o n this c o n s t r u c t i o n o f " a p p r o p r i a t e " behavior and began standard-setting projects on d e p r e c i a t i o n a n d c o n t r i b u t i o n a c c o u n t i n g . It w a s n o l o n g e r a n issue as t o w h e t h e r t h e FASB should act but became a responsibility of the FASB t o a c t a n d a s o u r c e o f " e m b a r r a s s m e n t " t h a t a c t i o n h a d n o t o c c u r r e d earlier. This s t u d y illustrates t h e c o n s t r u c t i o n o f a c t i o n as a p p r o p r i a t e a n d s u g g e s t s t h a t FASB a c t i o n s a r e b o u n d e d b y t h e e x p e c t a t i o n s o f p a r t i c i p a n t s in r e g u l a t o r y s p a c e w h o also m a y w o r k t o e s t a b l i s h t h e b o u n d a r i e s o f r e g u l a t o r y space.

t4 Several members indicated that this "slowness" resulted in part from the dflficulty of finding cpmlified individuals to staff the project.

OUTLINING REGULATORYSPACE CONCLUDING COMMENTS The studies o n loan fees, leases and nonprofit accounting suggest that accounting p r o b l e m s are not simply there. Instead, these p r o b l e m s are c o n s t r u c t e d b y the o c c u p a n t s of regulatory space. In this process, the FASB does not act alone in constructing accounting issues as problems. Instead, m a n y o t h e r actors such as the AICPA, the SEC and Congress are also involved. AICPA c o m m i t t e e s p r e p a r e issues papers, statements o f position and o t h e r d o c u m e n t s to highlight those issues that these c o m m i t t e e s p e r c e i v e as accounting "problems". Congress holds hearings and discusses accounting matters. Many actors w o r k to construct an issue as a "problem". Accounting change is not an "anything goes" process. Instead, accounting claims and c o n c e p t s o f w h a t accounting should b e and w h a t accounting should do m a y b e seen to establish b o u n d s for accounting change. Accounting claims such as relevance, reliability and representational faithfulness, are a m o n g the e l e m e n t s that construct the regulatory space and limit the issues that can b e included on the FASB technical agencla. ~5 In this paper, the rationale p r e s e n t e d for agenda formation is seen to d e p e n d heavily u p o n the p e r c e i v e d divergences b e t w e e n accounting claims and accounting practices. Constituent d e m a n d s for accounting change arise f r o m this p e r c e i v e d divergence. In each o f the three case studies, the process o f constructing accounting p r o b l e m s d e p e n d e d u p o n the p r e s e n c e and interpretations o f various participants In regulatory space. Congress, the MCPA, FASB, financial regulators and the General Accounting Office w e r e each important in the p r o c e s s o f constructing accounting for loan fees as an accounting problem. Savings and loan organizations w e r e effectively excluded f r o m regulatory space. The powerful allies

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of the FASB r e d u c e d the ability o f these organizations to l o b b y effectively and precluded t h e m from an active role in regulatory space. In this case, the FASB was seen to act decisively. AICPA c o m m i t t e e s representing small audit practitioners, preparers, bankers, analysts, FASAC, SEC, and the FASB w e r e all involved in the case of accounting for leases. Regulatory space was c r o w d e d with conflicting perspectives on the description o f the accounting p r o b l e m and with views about the constitution of "appropriate" solutions. The FASB further increased the crowding in regulatory space with its solicitation of FASAC and its invocation of the preferences o f the SEC. In this case, the FASB was seen to use delaying tactics to avoid including accounting for leases as an agenda item and thereby being forced to take action w h i c h w o u l d inevitably b e unpopular with s o m e participants. Instead, it created inaction as appropriate. In the case o f accounting for nonprofit entities, the occupants of regulatory space changed o v e r time. The Filer C o m m i ~ i o n , Congress, AICPA, FAF and auditors acted to construct accounting for nonprofit entities as "a p r o b l e m for the FASB. The FASB began reluctantly to address these p r o b l e m s at the urging of these entities. State and local g o v e r n m e n t officials later entered regulatory space to protest vigorously FASB involvement in establishing accounting guidance for their organizations. Again, faced with a contested regulatory space, the FASB withdrew. However, the FASB remained along the sidelines until the space calmed and then returned to establish accounting standards for NPOs. Congress lost interest in these matters and exited regulatory space before the FASB m a d e any noticeable progress in their resolution. With each accounting issue, the occupants of regulatory space m a y vary. Actors enter and exit regulatory space. Some actors participate in the

ts Althoush these claims are historically contingent concepts that may and probably do change over time, tracing changes in these claims is a subject for future research efforts. For the current project, the important observation lies in noting the interactions among cl21ms, practices and the social and economic environment.

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construction o f some p r o b l e m s but not others. Some actors participate in the construction o f p r o b l e m s but lose interest in their resolution. Although participation in the process is fluid and changing, s o m e actors do consistently participate in the process o f constructing accounting p r o b l e m s and resolving these problemt~ However, consistent involvement is highly institutionalized. Frequent participants tend to b e those individuals serving o n c o m m i t t e e s ( s u c h as the AICPA Accounting Standards Executive C o m m i t t e e and FASAC) or fullfilltng their e m p l o y e e roles (Le. m e m b e r s of large accounting firms). Participation occurs primarily b y individuals associated with the largest public accounting firms, large manufacturing o r service companies, Congress o r o t h e r public organizations. 16 Academics and the assumed users o f financial statements such as investors and creditors seldom o c c u p y regulatory space. T h e m e m b e r s o f the FASB and its staff o c c u p y a p r o m i n e n t position within regulatory space. T h e FASB d o e s not simply respond to pressures f r o m the participants in regulatory space. Sometimes the FASB reacts to such pressures (i.e. loan fees). Sometimes, it d o e s n o t (i.e. leases). Sometimes, the FASB acts in the absence o f such pressures (i.e. NPOs). The c o m m o n thread in these cases is the d e v e l o p m e n t o f a n e e d for standard-setting action o n an accounting p r o b l e m and an evaluation that such action is appropriate. T h e cases in the p r e c e d i n g sections suggest that the FASB e m p l o y s a logic o f appropriateness in conducting its activities in regulatory space. Instead o f evaluating the benefits and assessing the c o n s e q u e n c e s o f alternative actions in reaching a decision, the FASB appears b o t h to evaluate and to construct actively w h a t a standard-setter should d o in a specific situation. In assessing the situation, the standsrd-setter

interprets its obligation and selects an action construed as appropriate (March & Olsen, 1989, p. 160). This logic contrasts with a logic of c o n s e q u e n c e ~ The application o f this latter logic and its sole reliance u p o n assessments o f consequences in selecting actions tends to imply that the actor is separate f r o m the environment. Models o f organizational behavior that e m p l o y this logic understate the extent to w h i c h organizations are internally constituted b y a w i d e r environment that contains prescriptions regarding the types and structure of organizational actors (Meyer et aL, 1987, p. 19). Thus, these models understate the importance o f societal expectations about the role and p u r p o s e of the standard-setter to all facets o f the standard-setting process, including agenda formation. T h e cases in the preceding sections suggest that the process o f agenda formation includes interpretation b y the standard-setter a b o u t the expectations held b y participants in regulatory space o n the role and p u r p o s e o f the standardsetter. This process is m o r e than a simple response to "pressures" from various interested actors or an effort b y the FASB to p r o m o t e its organizational survival. A variety of responses b y the standard-setting organization is possible and may b e interpreted as appropriate. T h e appropriateness o f standard-setting action is inextricably linked to the d e v e l o p m e n t o f accounting problems. T h e r e is little need for standard.setter action to address issues that have not b e e n constructed as accounting problems. However, this does not exclude the FASB f r o m a role in constructing these problems. In the case of loan fees, the FASB assisted in labelling s o m e accounting practices of financial institutions as abusive and then p r o c e e d e d to act u p o n its mission statement to eliminate these abuses. T h e powerful allies o f the FASB assisted it in

t6 Whether this lilBited involvement results from the cost of attention ( March & Olsen, 1976) or from limited oppommtttes for early participation remains a subject for future researci~ However limited involvement implies that the few people primarily involved in constructing accounting issues as pm~ems are those individuals that tend to be saccessful within the existing accounting system.

OUTIJNINGREGULATORY SPACE

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overcoming the objections of S&L organizations of regulatory space occupants about its "proper" and supported the FASB efforts as appropriate role and assisting these other occupants in and "fight". In the case of leases, the FASB establishing what constitutes "appropriate" accepted the descriptions of leases as an actions. accounting problem and employed these An analysis of events or actions alone is conflicting perspectives (again with the assis- insufficient to understand the emergence tance of others in regulatory space such as of issues onto the FASB agen&L Conditions FASAC and the SEC) to establish the intract- problematize divergences between accounting ability of the problem and the appropriateness practices and accounting claims and are of inactiorL In accounting for nonprofit interpreted as requiring standard-setting action. organizations, the FASB and others attempted to General conditions interact with expectations establish the domain of regulatory space to a b o u t a c c o u n t i n g t o c o n s t r u c t a c c o u n t i n g include state and local governments and the problems. These expectations about accounting "appropriateness" of the FASB in acting to also interact with expectations about the role develop accounting standards for all entities. and purpose of the accounting standard-setter However, state and local government officials to construct an agenda project. The agenda opposed this interpretation of appropriateness process may not be dominated by assessments and successfully gained the creation of a of consequences so much as by an interpretation separate regulatory space for their accounting of expectations by the groups and individuals problems. After FASB action was established as that participate in standard-setting and occupy inappropriate for state and local government regulatory space. accounting, the FASBbegan to develop accountBaler et al. (1988, p. 157) argue that ing standards for other nonprofit entities "understanding administrative implementation and established standard-setting action as cannot be separated from understanding the appropriate for these entities. ways in which policies are made and the A duality exists. Although the FASB appears implications of the policy-making process for to employ a logic of appropriateness, FASB admires"trative action". The studies in this paper actions (if uncontested) also tend to solidify and illustrate that an understanding of accounting perpetuate those actions that will be considered standard-setting cannot be separated from an appropriate in the furore. The necessity understanding of the role of accounting claims for standard-setter interpretations does not and expectations about standard-setters that preclude a role for the standard-setter in construct a regulatory space for accounting developing and perpetuating the expectations change.

BIBLIOGRAPHY Abdel-Khalik, tL IL, The Economic Effects on Lessees o f FASB Statement N a 13, Accounting f o r Leases

(Stamfot~ FASB,1981). Abdel-Khalik, tL P~,Financial Reporting by Private Companie~ Analysis a n d Diagnosis (Stamford, CT: FASB, 1983). Accounting Panel Sets Study of Government, Institution Practices, Wall StreetJournal ( 12 May 1978 ) p. 48. Decisions, FASB Status Report (12 March 1984) p. 1. AICPA Issues Paper Sparks Anger, Dread Among Institutions, Savings Institutions (April 1984) pp. 168-170. Amettl2arl Acconnfln~g As~3dation, Report of the Committee on Accotmflng for Not-for-profit Organizations, Accounting Review (Supplement 1971) pp. 81-163. American Institute of Certified Public Accountants, Study on Establishment of Accounting Principles, Establishing Financial Accounting Standards (New York: AICPA, 1972)~

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J . J . YOUNG American Institute of Certified Public Accountants, Report of the Committee on Genorally Accepted Accounting Prlncipies for Smaller andl or Closelg Held Businesses (New York.- MCPA, August 1976). American Institute of Certified Public Accountants, Accounting for Installment Lending Activities of Financial Companies, issues paper draft (6 April 1981). American Institute of Certified Public Accountants, Accounting for Nonrefundabie Fees and Loan Acquisition Costs, issues paper draft (17 September 1982). American Institute of CL-xtified Public Accountants, Report of the Special Committee on Accounting Standards Overload (New York: AICPA, February 1983). Anthony, R. N., Financial Accounting in Nonbusiness Orgunizattons¢ An Exploratory Study of Cortceptual Issues (Stamford, CT: Financial Accounting Standards Board, 1978). Arthur D. Little, Inc., Financial Reporting Requirements of Small Publicly Owned Companies (New York.- FERF, 1983). Auerbach, R. P. & McCall, A. S., Permissive Accounting Practices Inflate Savings and Loan Industry Earnings and Net Wortl~ Issues in Bank Regulation (Snrnmer 1985) pp. 17-21. Axelson, K. S., Crisis in New York City: The Case for Municipal Accounting Reform, Journal of Contemporary Bus/ness (Winter 1977) pp. 1-17. Baler, V. E., March, J. G. & Saetren, H., Implementation and Ambiguity, Scandinavian Journal of Management Studies (May 1986), reprinted in March J. G. (ed.), Decis/ons a n d Organ/zations, pp. 150-164 (Oxford: Basil Blackweli, 1988). Baker, C. R., Leasing and the Setting of Accounting Standards: Mapping the Labyrinth, Journal of Accounting Auditin 8 and Finance (Winter 1980) pp. 197-206. Baker, T., Bad Will, Forbes (11 May 1981) pp. 90, 93. Beresfogd, D. R., How Well Does the FASB Consider the Consequences of Its Work? FinancialExecutive (March/April 1989) pp. 24-28. Berton, L, FASB to Begin Study on Changing 76 Rule for Lease Accounting, Wall Street Journal (8 February 1984) p. 8. Berton, L, Ac¢ountitlg at Thrifts Provokes Controversy as Gimmickry Motmts, Wall Street Journal (21 March 1985)p. 1. Biggart, N. W. & Hamilton, G. G., The Power of Obedience, Administrative Science Quarterly (1984) pp. 540-549. BurcheU, S., Clubb, C., Hopwood, A., Hughes, J. & Nahapiet, J., Roles of Accounting Organizations and Society, Accounting Organizations and Society (1980) pp. 5-27. Burchell, S., Clubb, C. & Hopwood, A., Accounting in Its Social Context: Towards a History of Value Added in the United Kingdom, Accoantin~ Organizations and Society (1985) pp. 381-413. Chairman Presents F ~ B ' s Views on Proposed Structure to Set Standards for Governments, Status Report (8 May 1981) pp. 1--2. C~mdler, C. H., A Busine~man's View of the Standard-setting Process, Financial Executive (March~April 1990) pp. 46-50. Commission on Private Philanthropy and Public Needs, Giving in Americct. Toward a Stronger Voluntary Sector, Report of the Commission on Private Philanthropy and Public Needs (1975). Deloitte, Haskins & Sells, FASB Chairman on Self-Regulation in a Deregulatory Environment, The Week In Review (30 October 1981 ) pp. 1-2. Different Rules for the Nonbusiness Sector?, CA Magazine (August 1978) p. 26. Dieter, R., Is Lessee Accounting Working? CPAJournal (August 1979) pp. 13-19. Dyckman, T., Credibility and the Formulation of Accountin~g Standards Under the Financial Accounting Standards Board,Journal of Accounting Literature (1988) pp. 1-30. The FAF Position on a Governmental Accounting Standards Board, Status Report (24 September 1981) pp. 3-4. FASB Head Criticizes Government Auditing, Says Rules Are Needed, Wall Street Journal (18 May 1978) p. 22. FASB Loan Fee Stance Has Dire Implications, Savings Institutions (April 1986) pp. S21-$23. FASB's Rule 13: Enough Loopholes for Everybody, Dun's Review (November 1979) p. 87. Financial Accounting Foundation, Report of the Structure Committee (Stamford, CT, April 1977)~ Financial Accounting Foundation, Report of the Structure Committee: Interim Review of the FASB and FASAC (Mimeo, May 1979). Financial AccountingStandards Advisory Committee, Summary of Responses of Council Members to the July 1983 Post.meeting f~a~stionnaire on Statement No. 13, Accounting for Leases (Mimco, 1983).

OUTLINING REGULATORY SPACE Financial Accounting Standards Board, Financial Accounting Standard N a 13, AccounOng for Leases (November 1976). Financial Accotmt~g Standards Board, Statement o f Financial Accounting Sttmdard N a 17, Accounting for Leases m Initial Direct Coats (Stamford, CT: FASB, 1977a~ Financial Accounting Standards Board, FASB Interpretation Na. 19, Lessee Guarantee of the Residual Value of Leased Property, (Stamford, CT: FASB, 1977b). Financial Accounting Standards Board, Statement o f Financial Accounting Standard N a 22, Changes in the Provisions of I _,yT_=¢eAgreements Resulting from Refimdings of Tax-Exempt Debt (Stamford, CT: FASB, 1978a). Financial Accounting Standards Board, Statement o f Financial AccountOtg Standard N a 23, Inception of the Lease (Stamford, CT: FASB, 1978b). Financial Accounting Standards Board, FASB Interpretation N a 21, Accounting for Leases in a Business Combination (Stamford, CT: FASB, 1978c). Financial Accounting Standards Board, FASB Interpretation N a 23, Leases of Certain Property Owned by a Governmental Unit or Authority (Stamford, CT: FASB, 1978d). Financial Accounting Standards Board, FASB Interpretation N a 24, Leases Involvtn~ Only Part of a Building (Stamford, CT: FASB, 1978e). Financial Accounting Standards Board, FASB Interpretation N a 26, Accounting for Purchase of Leased Asset by the Lessee during the Term of the Lease (Stamford, CT: FASB, 1978f). Financial Ao~ounflt~g Standards Board, FASB Interpretation N a 27, Accounting for a Loss on a Sublease (Stamford, CT: FASB, 19788). Financial Accounfatg Standards Board, Statement o f Financial Aocountin 8 Standard N a 26, Profit Recognition on Sales-type Leases of Real Estate (Stamford, CT: FASB, 1979a). Financial Accounl~g Standards Board, Statement ofFinancialAcoountin& StandardNa 27, Classification of Renewals or Extensions of Existing Sales-types or Direct Financing Leases (Stamford, CT: FASB, 1979b)~ Financial Accounttt~g Standards Board, Statement o f Financial Accounting Standard N a 28, Accounting for Sales with Leasebac~ (Stamford, CT: FASB, 1979c). Financial Accounting Standagds Board, Statement of Financial Accounting Standard No. 29, Determining Contingent Rentals (Stamford, CT: FASB, 1979d). Financial AccounUlng Standards Board, FASB Technical Bulletin N a 79-10, Fiscal Funding Clauses in Lease Agreements (Stamford, CT: FASB, 1979e). Financial Accounting Standards Board, FASB Technical Bulletin N a 79-11, Effect of a Penalty on the Term of a Lease (Stamford, CT: FASB, 1979f~ Financial Accounting Standards Board, FASB Technical Bulletin N a 79-12, Interest Rate Used in Calculating the Present Value of Minimum Lease Payments (Stamford, CT: 1979g~ Financial Accounting Standards Board, FASB Technical Bulletin N a 79-13, Applicability of FASBStatement No. 13 to Current Value Financial Statements (Stamford, CT: 1979h)~ Financial AccounuLqg Standaxds Board, FASB Technical Bulletin N a 79--14, Upward Adjustment of Guaranteed Residual Values (Stamford, CT: 19791~ Financial Acounting Standards Board, FASB Technical Bulletin N a 79-15, Accounting for Loes on a Sublease Not Involving the Dispoeal of a Segment (Stamford, CT: 1979j~ Financial Accounting Standards Boar~ FASB Technical Bulletin N a 79-16, Effect of a Cla~nge In Income Tax Rate on the AccounOng for Leveraged Leases (Stamford, CT: 1979k)~ Financial Accounting Standards Board, FASB Technical Bulletin N a 79-17, Reporting Cumulative Effect Adjustment from Retroactive Application of FASB Statement No. 13 (Stamford, CT: 19791). Financial Accounting Standards Board, FASB Technical B u l l e t ~ N a 79-18, Trat~tion Requirement of Certain FASB Amendments and Integpretafious of FASB Statement No. 13 (Stamford, CT: 1979m). Financial Accotmting Standat~ Board, Statement o f Financial Accounting Concepts N a 2, Qualitative Characteristics of Accounting Information (Stamford, CT: FASB, December 1980). Financial Accounting Standards Board, Action Alert No. 81-39 (1981~L Financial Accounting Standards Board, Financial Reporting by Privat~ty Ownod Companle~ Summary o f Responses to FASB Invitation to Comment (Stamford, CT: FASB, 1983a~ Financial Accotmting Standards Board, Staff Brleflng Paper f o r PASAC ~ Accountin& f o r Leases ( Mimeo, 1983b). Financial Accotmting Standards Board, Invitation to Commen~ Aocounting f o r Nonmfundable Fees a n d Costs Associated with O r l s i n ~ n 8 a n d Acqu/r/ng Loans (Stamford, CT: FASB, 1984a).

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J . J . YOUNG Financial Accounting Standards Bern-d, Board Decides Not to Reconsider i m~.e's AccounUng for Leases, Status Report (25 October 1984b) pp. 1-2. Financial Accounting Standards Board, Agenda Decisions, Stares Report (12 March 1984c) p. 1. Financial Accounting Standards Board, Agenda Decisions Made, Status Report (6 April 1984d) p. 1. Financial Accounting Standards Board, Statement of Financial Accounting Standards, Recognition of Depreciation by Not-for-profit Organizations (Stamford, CT: FASB, 1987~ Financial A c c o ~ Standar~ Board, FACTSabout FASB (Stamford, CT: FASB, 1990). F o u r , It, M., Questions of Method, I~¢= (Spring 1981) pp. 3--14. Gross, M.J., Recent Accounting and Legislative Developments Affecting Nonprofit ~ t ~ = t i o t ~ , J ~ l of Contemporary Business (Winter 1977) pp. 19-30. Hallchef, L "~" Moran, M., O l ~ i ~ i n u Regu~gory Space, in Hal~her, L & Mot&n, M. (eds), C a p t [ t a / ~ Culture and Regulation (Oxford: Clarendon Prem, 1989). Hayes, J. R., Party Pooping, Forbes (20 October 1986) pp. 97-98. ~ , B., Power, Interests and the Outcomes of Struggles, Soc/o/ogg (November 1982 ) pp. 498-511. Hindess, B., 'Interests' in Political Analysi~ in Law, J. (eeL), P ~ , Act/on and Bel/ef, pp. 112-131

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Phalen, F.,The Impact Of~AS 13 on the RetailIndnstry,F/nancta/E.xecut/ve(November 1978)pp. 52-56. Previts, G. ( e~L), Financial Reporting and Standard Settins, Symposium Proceedinss sponsored by the American Institute of Certified Public Accountants (New York: AICPA, 1991, f o ~ m i n ~ ) . If., On the Arenas of Accoum~tg Change: The Process of Translation, Account/n& Organ/zat/ons a n d Society (1991) pp 547-570. Rome, N., Governing the Soul (London: Routledge, 1990). Rudnitzky, H. & Sloan, A., Full Speed Ahead, Damn the Torpedes, Forbes (30 July 1984) pp. 34-37. S&L's Various Stgategies, Accounting Methods arc l ey~d_i~g Investors to Focus on Core Earnings, Wall StrestJournal (16 April 1984) p. 61. S c h l l d n e ~ B.J. & Berton, L, The FASB's Second Decade: A Focus on Twelve Issues [interviews with D. J. ~ J. J. Leisenrin8 and P. Pacterl, Journal of Accountancy (December 1983) pp. 94-102. Tinker, A. M., Merino, B. D. & Neimark, M. D., The Normative Origins of Positive Theories: Ideology and Accounting Thought, Accountin~ Organizations and Society (1982 ~ pp. 167-200. US. Hotl~ of Repgesentattv~ Committee on Banking, Finance and Urban Affairs, Financiallnstitutions in a Revolutionary Era (1981a). US. House of Representatives Subcommittee on Financial IlltStitntiofls, Supertq~on, aegulagiofl and hmurance, Deposit Insurance Flexibility Act (1981b). U.S. House of Representatives Committee on the Budget, BudgetlssuesforFiscal Year 1983 ( 1982a) VoL 5. U.S. House of Representatives Subcommittee on Housing and Community Development, Housing and Urban-Rural Recovery Act of 1982 (1982b) Part 2. US. Hotlse Subcommittee on Oversight arid Investi~Jotls, SECand Corporate Audits Part I (Washington, DC: Government Printing Office, 1985a). U.S. House Subcommittee on Oversight and Investigations, SECand CorpcwateAudits Part 4 (Washinston, DC: Government Printing Office, 1985b)~ US. House subcommittee off Oversight and Investigations, SECand CorpofateAudits Part5 (Washington, DC: Government Prinl~ 8 Office, 1986). US. Senate Committee off Banking, Housing and Urban ,Affairs,Financial Institutionj Restructuring and Services Act of1981 (1981a)Parts 1 and 2. US. Senate Committee on Bauldl~ Housing and Urban jtffairs, Competitfon and Conditions in the Financial System (1981b) Parts 1 and 2. U~S. Senate Subcommittee Oll Financial Institutions supervision, Regulation and Insurance, International Bank Lending (1983a). US. Senate Committee Off B a l ~ Housing and Urban jtffairS, Moratorium Legislation and Financial Inst/tut/ons ~ t / o n (1983b~ US. Senate, Banking Regulators'Report on CapitalStandards, Hearing before the Committee on B a n k t ~ H o n s i ~ and Urban Affairs (1990). Watts, R. & Zimmerman, J., The Demand for and supply of Accounting Theories: The Market for Excuses, Accountfn& Review (April 1979) pp. 273-3O5. White, L, The S&L Debacte (New York: Oxford University Press, 1991 Zefl~ S., The Rise of Economic Consequences, Journal of Accountancy (December 1978) pp. 56-63.

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