Accounting elite and accounting policy making — The Swedish case

Accounting elite and accounting policy making — The Swedish case

Accounting Elite and Accounting Policy Making - The Swedish Case sterl J&lson Based on the assumption that the accounting policy formation proc...
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Accounting

Elite and Accounting

Policy Making

-

The

Swedish

Case sterl J&lson Based on the assumption that the accounting

policy formation process in-

creasingly recognizes the legitimacy of several interest groups, this paper describes standard setting in Sweden. The accounting and the development

cluded that the more institutionalized bility for influential producer

attitude

elite is identified

of new norms is described in three cases. It is conthe process the greater the responsi-

people to initiate and maintain towards the annual

Sweden with academics

a public debate. A

report is the dominating

and business journalists

one in

showing a consumer

orientation.

The Pmblem It has often been said that accounting the Trueblood

is a social system (e.g.

report) and as such it evolves by adapting

environment.

Sometimes

have been emphasized

its mathematical

(Pacioli,

1494, Mattessich,

it has also been viewed as a system comparable Galileo and Newton (Sombart, 1975).

Nowadays,

1964) but to those of

1924) and as a language

it seems fair to say, accounting

(Ijiri,

is consid-

ered to be a social artifact which relates to ongoing life. Littleton

to its

characteristics

forms of

(1981) sees two kinds of relativity in accounting;

the first its power to contribute is this evolution

in response

to current

solutions,

to “forces current

the other

at the time”

(p. 362). It is, however, by no means

clear how and to what extent

it should and does adapt in order to fulfill various mands.

Logically,

have taken modifications inflation

changes

place should of traditional

accounting

flation accounting

in the business have already accounting

that

lead to far reaching towards for example,

or social accounting. and social accounting

The models for inthat have been sug-

gested have, however, hardly affected accounting all, while, for instance

new de-

environment

the funds statement

practice

at

has been fully ac-

cepted quite rapidly as a valuable complement

to traditional

reports. It is also fairly clear that new user groups of financial @ 1984 Scandinavian Journal ofAh+mmt August 1984

Studies

ports are recognized tendency

as legitimate.

re-

It is true that in the US the

is to point out the investor as the main legitimate

user (cf the Ti-ueblood

report,

1973) but in other countries 3

STE:N JiiNSSON (e.g.

Canada

and the UK)

the legitimacy

(Stamp

of the information

1980, ASSC

In Sweden ment,

it has been natural

of other

groups

1975).

this recognition

has taken the form of a state-

in the bill proposing

a new Accounting

1976:125),

that the chartered

statements

on accounting

organized

needs

to recognize

accountants,

standards

Act (SFS

who have made

since 1949 (and in more

forms since 1966), being an interest group them-

selves, cannot rent parties

be expected

to weigh the demands

in an unbiased

Standards

Board to promote

instituted.

The members

way Therefore “good accounting

of this Board

the same time they represent auditors,

different

big and small businesses,

from diffe-

an Accounting practice”

are “experts” interest

academia,

was

but at

groups (like

tax authorities,

unions etc.). This Board has decided only to take unanimous decisions

on statements

with rational elaborate

-

they have to convince

arguments.

exposure

organizations

draft procedure

are represented

this results in statements Nonetheless

since the most important

on the Board. Most of the time

being compromises

to theory as well as practice practices.

where the links

may be hard to detect.

it is desirable

to promote

good accounting

In order to achieve this objective

(1) agree on a statement accepted.

the Board has to

and (2) get the statement

Since Statements

have to be developed

each other

It has also decided not to have any

generally

do not have the status oflaws they

in interaction

with practice

to gain ac-

ceptance. As for the contribution is obscure.

Some

from theory, its relation to practice

authors

state that theoretical

e.g. Watts & Zimmerman

backing

for standards

(1979)

is generated

after

the fact and that it is too easy to supply. Still the efforts to erect conceptual

frameworks

for accounting

standards

have not

been too successful. The

debate

on accounting

issues is confusing

fused?) lacking a general theory of accounting. general This

agreement

on what criteria

might be explained

what accounting accounting different

distinguishes

(“classical “, “usefulness”

record,

formation

system, commodity).

descriptor

of current

three

and “informa-

in a particular

economic

that one

to an accounting

issue

image and the AAA committee

says that no one of the approaches

seems to be sufficiently

to be able to handle all the demands

by users and environment.

reality, in-

Davis et al conclude

should be aware that one’s approach

4

of

while Davis et al (1982) present four images

(historical

embracing

should satisfy

is seem to exist. The AAA report (1977) on

approaches

is grounded

a theory

by the fact that several images

theory and theory acceptance

tion economics”)

(and con-

We even lack

all-

put forward

It is too early for theory closure.

ACCOUNTING Anyone

interested

in accounting

theory

ried. Choices

have to be made.

the legitimate

user, a deductive approach

and conceptual

framework

nize the legitimacy

must use information

to theory formation

in different

ways then the method natural

erally accepted

accounting

and spread spontaneously

principles

has to be regulated

and promoted

large. The codification

of good accounting

which

of conditions

quest

on disclosure

for control

the demand

for is

flexibility, making

for the recognition industries.

for comparability

is in turn matched

of the dif-

On the other

across

industries

by the need of management

for

it possible to present the unique features of

company.

efforts to persuade the defensive

This

has been

the develop-

of the disclosed phenomenon

in different

is demand

the individual

development to direct

practices.

on measurement

there

that

for rules by itself not least from the profes-

activated and there is a demand ferences

with good princi-

for the benefit of society at

efforts

sion. Once there is a statement

hand

gen-

as a form of language

of spontaneous

by interventionist

statements

to regard

Now they are seen by many as something

creates a demand

to

theory is no longer obvious.

that prospered,

ment

be wor-

seems to follow. But if you recog-

Not so many years ago it seemed

substituted

should

If you choose the investor as

of several user groups, which by definition

develop accounting

ples surviving.

ELITE

The auditor finds rules useful in his

management

to adopt new practices

uses should not be underestimated.

and

It is, after

all, easier to refer to a firm rule than to argue about what is a “truer” ingly

and “fairer”

satisfied.

counting

The

procedures

The complexity

view. And the demands

booklets

containing

are growing

of the collections

pass the complexity

are increas-

statements

on ac-

in size in most countries. of rules might possibly sur-

of the accounting

problems

they are sup-

posed to solve. The need for theory to create order and logic in the rule complexes the development tive approach

is feasible.

how accounting for theory

frameworks

Even if it were possible

how accounting

in accounting

practice

The study about to be reported latter, descriptive, practice

whether

through

a deducto deduce

should be done that way, there still is a need

concerning

how changes

grows. It may be questioned

of conceptual

purpose.

usually

is done and

emerge.

here was designed

for this

It does not deal with accounting

per se but with accounting

policy formation.

If it is right to suppose that there is a trend towards an activist approach

from

good accounting are the processes

whereby

How is the interplay (Littleton

standard

practices;

setting

who become accounting

between

1981 p 362) regulated

“forces

bodies

in promoting

involved and what norms

are formed?

current

at the time”

by authoritative

accounting

STEN JilhiSSON bodies and who takes part? The case to be reported on is Sweden in the early eighties.

The Approach; an Elite in an Imtitutionul Framework In order for society to gain some measure own development

an institutional

to regulate human accounting Gerth

interaction.

area. There

& Mills

tionalization

1946,

dynamics attempt (Gerth

structure

has been erected

This has happened

are dangers procedures

in terms

of charisma

and

consequences

It will, with increasing detecting

not intended

complexity

and ra-

of historical

routinization

of unintended

is an

consequences”

& Mills op tit p. 54). The regulation

consequences.

(see e.g.

against the sovereign-

man. In fact his “construction

to answer the paradox

will generate

also in the

in this, Weber

1981) pits the mechanization

of institutional

ty of charismatic

of control over its

of rulemaking

by the rule makers.

be more difficult to forsee

It might not be possible to design methods

possible consequences

but it is important

of

to gain an

insight into the way rules are made. This

study aimed

elite, i.e. a group

at the identification

of charismatic

of an accounting

leaders

in the accounting

area, and the study of their activities within the institutional structure Such

which

constitutes

the accounting

a study would give insights

exists and to how accounting

policy

to whether

standards

are set.

This article will report on how the accounting den was identified,

what observations

terviews with elite members studied through

elite in Swe-

were made during in-

and how the elite in action was

case studies.

If, as is said above, there are several legitimate interest in accounting opinion

tion of accounting professional accounting current events. opinion

be chosen to take

policy. policy is seen as an issue to be dealt with by

experts,

such experts will probably

principles

discussion

by definition

have

of their interest group in the formula-

debate and policy formation.

on accounting

groups of

policy, those groups will probably

leaders. Such leaders will probably

part as representatives If accounting

setting.

such an elite

does not take an active part in the

of accounting

means

take part in

Even if an authority

matters,

that influence

Even silence is interpreted

having

authority,

is exerted on the chain of as a position

taken.

Such

leaders and authorities

will constitute

an accounting

seem to be differences

in perspective

between diffe-

elite. There

rent professional

groups in the accounting

It was therefore

necessary

to ensure

elite would reach the different 6

area (Hicks

1978).

that the search for the

groups. It was also difficult to

I&A&g

the Elite

ACCOUNTING

ELITE

estimate the size of the elite; should 10, 100 or 1.000 people be included?

Finally

the main problem

was how to study what

the elite does when it exerts its influence. When

searching

for a method

to identify

the elite it was

found useful to take a closer look at the studies of community power

structures

undertaken

studies were considered approach.

in the USA.

Before

we had eliminated

It can be argued that the standard

dure is to a large extent institutionalized fluential

setting proce-

today. Therefore

people are likely to be found in institutional

tions. It can also be argued that the professional interest

groups

those positions

will probably

choose

would,

that there are authorities in institutional

rived elite members

groups and

members.

to do then would be to search the institutional a search

on accounting

structure

Some

for

the fact

who decline partici-

There

are also newly ar-

who have not yet found a position

there are persons who have retired from an institutional tion but maintain

in

The thing

however, disregard

procedures.

inposi-

to be represented

by their most respected

the elite. Such pation

the US

an institutional

and posi-

their influence.

sampling

technique

had to be used and it was im-

portant to search in a biased way (it was after all the most subjectively

respected

study) without

people we wanted

to be included

in the

the final sample being biased.

Ever since the study of the power structure

in two Ameri-

can towns by Hunter

(1953) there has been a controversy

on

methodology

political scientists

so-

ciologists.

among

For us the arguments

“pluralists”

put forward by “elitists” and

are of interest.

According

to the “elitist” viewpoint

ing elite have most accepted

as well as among

of the power.

it is natural

the members

to think in terms

and to use a relatively

of a rul-

If such a perspective

static approach.

the persons who make up the “Ruling

is

of power structures Attention

is drawn to

Class” and their char-

acteristics. If on the other hand the “pluralist” ed, different groups or individuals rent degree of influence

on different

situation

and the problem

attention

on the process whereby

point of view is accept-

are thought to have a diffeissues depending

decisions

are reached

to try to describe who took part and what influence ed on that particular Methodologically choices

the two viewpoints

confirmation

problems.

identify

was exert-

lead

to different

But both tend to lead to

of the point of view in question.

the first case, the “elitist” approach, ple of the population

and

issue.

and to different

automatic

on the

at hand. It is then natural to focus

you ask a random

about which people are influential.

In

samYou

the powerful by what is called the reputation&method. 7

Sl‘EN JijNSSON Hunter

(1953) used this method.

this method

A problem

here is that with

it is not possible to distinguish

real power and having a reputation also tends to overemphasize

between

having

as powerful. The method

the stability of the power struc-

ture and it tends to favour economic

power (the rich) before

political power. The pluralist approach

pays more attention

to how power

is exercised than to its sources. It is then quite natural that influence and power are studied in relation

to important

deci-

sions. You use thedecirional method and make case studies of the processes

by which

method

important

was used by Dahl

decisions

(1961). The

are

made.

problems

method are, first that it is difficult to find objective what is to be considered

an important

criteria for

decision

that you can’t very well study decisions used to prevent

issues from reaching

This

with this and second

where influence the decision

was

stage or

even the agenda. Schultze (1957) f ound that the two methods should be used in combination. his arguments making

Presthus include

processes

(1964) is of the same opinion a statement

ones. When Hussein

policy making

It was therefore norms

process standards

found necessary

elitist and pluralist compared

in many ways effect present

(1981) and Kelly Newton (1981) describe

models and clearly accounting

accounting

approaches.

they use sequential are interdependent!

to use a combination seemed

to be rather

of the accounting

The

counting

controversies

policy by different

sources,

It was therefore

policy formula-

of demands

on ac-

interest groups. It is also possible standard

i.e. being influential

acteristics.

that an important

on accounting

of the legitimacy

that the ability to influence

until after

and interviewed.

study is based on an assumption

tion is the recognition

easy

elite and the

choice of which cases to study could be postponed the elite had been identified

of

To do case studies on how

are developed

to the identification

factor in current

and

decision

involve several stages and also a recogni-

tion of the fact that past decisions the accounting

that political

setting can have several

can be based on different judged

fluential people in several categories.

necessary

char-

to look for in-

The following ones were

used at the start. Accountants (financial

directors

Auditors category

-

those who produce

reports

and, possibly, some top executives).

etc. -

could

accounting

chartered

also include

accountants consultants

mainly, on PR

but this and other

advisers on reporting. Opinion

leaders -

those who analyse and write about re-

ports and those that teach and write on financial

8

accounting.

7’h procedure

ACCOUNTING

Rule makers members

those that codify accounting

of rule making

New users -

standards e.g.

bodies.

this category was included to cover those that

have other training as representatives

than the professional

accountants

etc. for new user groups. Union

tatives are thought mentalists

of primarily

of this category

tives of unions Sampling

but public officials,

on the Accounting

was carried

Standards

Board.)

out in stages. First it was necessary

tials. In order to accomplish

this a number

a good overview

of the accounting

team thought

area in Sweden.

found that only 8 interviews were necessary 145 prospective

panel members.

interview we had a subjective

Already

the list. The 8 people interviewed nancial

executives

the categories

above

respondents sentatives.

without

in the 6th and 7th

useful.

policy bodies and fiThey However

different

exception

sa-

for names of possible panel

companies.

seemed

“new users” was considered

It was

to collect a list of

added no new names to

of accounting

in major

had

feeling that we had reached

since the last two interviews were members

the influen-

of interviews were

out with people who the research

members

environ-

was that there are representa-

to find the panel that would be asked to nominate

turation

but act represen-

etc. could also be included here. (The main reason

for inclusion

carried

ELITE

about

union

in the accounting

but function

on another

basis than the other

was therefore

decided to take out this category

rate study with the same descriptive

that

the category

from the others.

thought

Those are not professionals

cofirmed

The reprefield

categories.

It

and do a sepa-

purpose on the account-

ing elite of the unions. When

asked for estimates

entials on accounting between

of the size of the group of influ-

practice the respondents

gave numbers

10 och 40.

The panel consisted ed into categories

of 145 persons.

according

They could be classifi-

to the following table.

frequency Accountants

45

Auditors

51

Opinion Rule

leaders

makers

25 24 145

Table I. Dtitribution of panel members. The second step was to send the panel a questionaire they were asked to give names of influential categories.

There

where

people in the four

was room for nine names in each category. 9

S-I-EN JONSSON Respondents

tended to give 2 -

4 names

in each category

One person gave more than 9 names in one category, respondents

left some categories

Out of the 145 there were 76 usable answers. dents returned

some

blank.

the questionnaire

declining

Five respon-

to participate.

In

view of the fact that the giving of names might be considered delicate the number

of usable answers is reasonable.

sponse rate was distributed

The re-

evenly between categories

and no

reason has been found to suspect that those that respoonded differ in any significant The

questionaires

Those

names

way from those that did not. gave us a total of about

were

ranked

according

200 names.

to the

number

“votes” they got. In order to attain better differentiation emphasize

reputational

aspects

all persons

of and

that were men-

tioned among the three first in each category by a respondent were awarded the weight 3 for every such vote. Weighting not in any significant

way effect the ranking

from the table below. If all persons votes are included

did

as can be seen

who got more than five

the elite consists of 39 members.

As can be seen from table 2 (next page), there is a group of five persons that comes out on top. They are highly visible on the accounting categories.

scene in Sweden

and collect votes in all

The person in rank 6 is the leading business jour-

nalist. In rank 7 is a jurist who became he managed

the final preparations

new Company ranks

lo-14

a public figure when

and introductions

Act (1975) and the Accounting are four financial

executives

of the

Act (1976). In

of major

compa-

nies, two of them have been active in the public debate accounting

issues and two of them

Accounting

Standards

The

table contains

Board

39 influentials

votes, classify in the categories

Accountants Auditors Opinion

hold/held

previously

leaders

Rule Makers

on

seats in the

mentioned.

who, according

to the

in the following way:

9

23 %

12

31 %

12

31 %

6

15 %

39 Table 3. Th elite cluss$ied into categories. Among

the persons

classified

demics,

5 journalists

and one employee

ciation.

The

rule makers

as opinion

are 2 jurists,

tant, 1 employee of an industrial

10

of the list indicated

are 6 aca-

1 chartered

association,

the chief officer of the Accounting Inspection

leaders

of an industrial

Standards

asso-

accoun-

1 academic

and

Board.

no significant

surprises.

The Elite

ACCOUNTING

Numbers Rank

Initial

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

PH HE

Accountant

8(6) 2(l)

Opinion leader

Rule Maker

Total

Weighted total

39(34)

20(17)

33(29)

98(86)

29(26)

lO(8) 39(34)

28(16)

67(51) 61(52) 58(44) 49(34) 29(20) 28(18) 21(14) 24(12) 15(12) 15(11) 15(10)

270 169 165 146 117 69 64 49 48 39 37 35 28 27 26 24 24 23 22 22 22 21 20 19 18 16 16 16 16 14 14 14 14 12 11 9 8 7 6

w

15(12)

BC SC SIS

W) l(l)

4(4) 26(2 1) -

SL RR SS .fk” AS AR LE BC KR SB RR NH LH SN y: RF Lij OH LL LS LE BO gR BE UG GK TPF LEF BD

In parenthesis

l(1) l(l) 15(12) 15(11) 15(10)

l(1) 19(12) 2(O)

-

1 l(7) 4(3) -

-

3(2)

8(7)

-

8(5)

-

-

l(1) 5(3)

l(1) 6(4) 6(4)

4(2) 5(l) -

-

l(O) the number

27(17) -

3(2)

2(O) l(0)

l(O) 3(27) 3(O) 2(O) lO(6) l(1)

5(2) 7(7)

2(2) 4(3)

-

l(1) 18(9) -

5(4) 38(34) 17(10)

-

l(1)

-

8(4) 5(2) 29(20) -

-

lO(8) lO(8) -

-

of votes in category

Auditor

SEJ

JR

ELITE

lO(5) l(0) 8(5) 4(3) l(1) 8(4) 5(4) 8(3) -

2(17) 9(6) 8(3) -

4(3)

-

l(1)

-

4(O) 6(l) l(0) 2(O)

-

2(l) 2(l) 3(l) 5(O) 4(O)

12(8) 11(8) 12(7) lO(7) 12(6) 13(5) lO(6) 8(7) lO(6) 7(7) lO(5) 9(5) 8(5) 6(5) 6(5) 8(4) 6(5) 8(3) 6(4) 6(4) 6(4) 6(3) 7(2) 7(l) 6(l) 7(O) 6(O)

of votes on the first three lines are given

Table 2. The accounting elite in Sweden (1980) person, Sweden’s most respected chartered accountant, recieved 98 votes from 76 people. Some respondents have put his name in several categories. He is an auditor, rule maker and an opinion leader. The instructions explicitly allowed the same name to be mentioned in more than one category.

As can be seen the first ranked

11

SI‘EN

J6NSSON

The mailing list for the questionnaire elite members.

There

contained

was a suspicion

though

36 of the 39 that the elite

might really be as small as the top five. Since there are no objective criteria to determine

the size of the elite it was decided

to keep the list and interview

all 39.

Intemiewing the Accounting Elite All the interviews with the influential conducted about

by the author

accounting

and the typical

1.5 hours and was taped. Summaries

were typed and comprise used. It consisted

people were

interview

lasted

of the interviews

471 pages. An interview

guide was

of 6 sections:

(1) The respondent’s career. (2) Definitions of ‘practice’ and ‘good practice’, etc. (3) Comments on the institutional structure and how

opin-

ion is formed.

(4) Sources of change in accounting practice. (5) Questions on relations within the elite. (6) Current problems and expected future development accounting When

possible

categories

the interview

suitable

material

for presentation

was that several of the respondents accountant.

in the accounting The

typical

experience

has been coded into

in tables. One interview

was added to the original 39 making a chartered

of

practice.

the total 40. The reason expressed

respect for BF,

It is obvious that he is an authority

field.

respondent

has had 20 years of professional

careus

and he (they are all men!) tr working in Stockholm

(32 of the 40 interviews

were conducted

many as 14 did not have accounting university.

The most frequent

in Stockholm).

As

as their main subject at

reason given for the choice of

profession

was that the interest for accounting

a teacher

at the university.

Some

was aroused by

(11) knew in advance

they were aiming

at a career

in the accounting

often in auditing).

For the financial

that

field (most

executives (accountant)

seems as if most of them got really interested

it

in accounting

issues (and a take off in their career) when taking part in development

projects

ment control

in their companies

concerning

manage-

systems.

As many as 16 of the 40 have had only one employer. is perhaps less remarkable of chartered

accountants

to stay in the same firm. Nine out

of these 16 worked in auditing Accountants -

The important

firms. accounting

people in indus-

try seem to flock to the reference

group for accounting

set up by the Swedish Federation

of Industries.

12

This

than it sounds given the tendency

issues

Of the nine fi-

Institutional Pmitiom

ACCOUNTING nancial

executives

on the list, six are members

ence group. Four of the nine are members bers of the Accounting Auditors -

Standards

All in this category

Board

(ASB).

have had or have seats in the

committees

(FAR).

Seven of them have been chairmen

of the chartered

most of the chairmen

no further

comments.

papers are represented with the financial

association

of the FAR;

this

of the last 20 years. journalists’

position

de-

The two main national

news-

and three of the five journalists

come

from one of the business journals. member

accountants’

Th e b usiness

Opinion leaders mands

of that refer-

or deputy mem-

central

represents

ELITE

analysts’

They all have close contact

association

and one has been a

of the jury for the best annual report competition

for

many years. The academics side academia.

do not have any significant

One

accounting

School

of Economics

impact

on the development

professor

is an exception.

panies

statement

quoted

also chairman

of Swedish

of the Stockholm

accounting

on accounting

on the Stockholm

out-

He has had a decisive

for a long time. He worked on a committee very important

positions

Stock

practice

that produced

a

standards

for com-

Exchange.

He was

of the jury for the best annual report competi-

tion during its first 11 years. Rule m&m ters around

This is the least homogeneous

the Accounting

Standards

Most

of the

rule makers have a base in some of the organisations

tied to

the accounting

the in-

dustrial

policy formation

associations,

To sum up: The good anchorage counting

process

the Stockholm accounting

formation

during

poorly

organised

structure

process.

accounting

tradition.

tion had German this century. connection

professors

The regulation between Since

German

structure

of their company. by the

Academic

accounting

educa-

from the start early

of accounting

by law and a close

law and tax law is a heritage of accounting

the sixties, however,

ence has dominated

are

influenced

that explains much of the structure in Sweden.

executives

was mainly in charge

company

from

do not act as a profes-

sional group, but as representatives German

Representatives Financial

They

Up to the sixties Sweden

has a very

involved in ac-

position even if it has im-

the last few years. in Sweden.

of Economics).

elite in Sweden

have a weak institutional

proved

(like FAR,

School

in the institutional

policy

business

The Institutional Structure

group. It cen-

Board.

even today

the American

and there is kind of a mixture with an American

influ-

of a basic

decision-oriented

out-

look. The legislator counting Accounting

practice act

is still important

for the development

but since both the Company refer

to

good

accounting

of ac-

act and the practice’

(i.e. 13

STEN JijNSSON GAAP)

the fine tuning

of accounting

through

the establishment

practice

of ‘good accounting

takes place

practice’. The

main instruments

for this, now that the ‘spontaneous’

tion is no longer

deemed

sufficient

in many

evolu-

quarters,

are

FAR and ASB. FAR is the Swedish equivalent has about 850 members ments

Committee.

today. State-

are worked

as an exposure

It is then accepted

tion by the Board.

accountants)

practice

out by the

When the Board of FAR has accept-

ed a draft it is submitted comments.

in the US, it

(chartered

on good accounting

Accounting

to the AICPA

Finally

draft to members

as a proposed

for

recommenda-

after some time (depending

on

how fast practice adapts to the proposed recommendation)

it

is given the status of a recommendation. It is the common in contact portant

opinion

of all persons that we have been

during this study, that FAR is by far the most im-

organization

had no rival. That dards Board,

in the accounting

field. Up to 1976 it

year a state agency, the Accounting

was instituted

in connection

counting

Act (1976) to make pronouncements

counting

practice”.

senting

interest

state owned enterprises, ties) in the accounting oping procedures due to members’ presentatives

groups auditors,

status of recommendation

comment.

devel-

earlier

put on one or

seem to have settled. The ASB

of standards

which have a formal

in spite of the fact that there is a

belief that it is empowered

to interpret

the law

as elsewhere).

above the ASB

and it does not formally

The ASB pronounces

well as on financial

only makes unanisubmit its drafts for

on bookkeeping

matters

as

accounting.

FAR is represented

on the ASB and the relations

the two were discussed majority

universi-

initially. Partly this was

stress members

(which the courts do in Sweden mous decisions

trade,

difficulties with being experts as well as re-

a number

As mentioned

industry,

tax authorities,

and work agenda

the other. Lately procedures

widespread

(unions,

experts repre-

field. The ASB had difficulties

and the varying

has produced

on “good ac-

It is a Board of accounting

different

Stan-

with the new Ac-

extensively

between

during the interviews.

A

of those who made a statement

on the issue think

that there will also be two complementary

bodies in the fu-

ture. A minority

thought that we can only afford one body in

the long run due to a lack of financial

resources

as well as

qualified people willing to take on the duties involved in standard setting. Out of the other state agencies a collective term, were considered the

ministries

sources 14

are

of influence.

considered

only the tax authorities, important.

Parliament

as “channels”

Of the other

institutional

rather factors

as and

than the

ACCOUNTING

Federation increased

of Swedish Industries activity during

tion of finance troversial

ELITE

should be mentioned

for its

the last few years and the associa-

analysts because

pronouncements

it has made a couple of con-

e.g. on how P/E ratios should be

calculated. Sources of 1n@enc~s on Accounting Practice

The best way to influence was considered published

opinion

on accounting

matters

to be articles in Buhm, the monthly F inancial

by FAR.

executives,

journal

who have a tenden-

cy not to take part in the public debate on accounting state their opinion

through

The main impression views on sources practice and

their annual

of the statements

of influences

evolves in response

institutional

standards

change.

is problematic

related to that market the Swedish

The international

for many companies.

system with allocations

statement

balance

sheet. Therefore

conditions

that international

seem to have problems

income

accounting

business

It is expected

will grow more important.

tal market

made in the inter-

is that Swedish

to emerging

issues,

report.

understanding

for tax purposes

and the resulting

untaxed

the bottom

capi-

The analysts in the

reserves in the

line of the income

state-

ment should not be used since it is not a true and fair statement of profit. It is just the profit figure that results after taxes have been deducted Explaining

from the income

this to analysts

It follows that the influence practice

is considerable.

that are deducted purposes.

for taxation

of tax legislation

The principle

in the annual

on accounting

is that only those costs

report are deductable

The elite as a group is undecided

towards this coupling

purposes.

is difficult.

for tax

about its position

between tax legislation

and accounting

practice. On the one hand it creates the above mentioned when the income

statement

is explained

trouble

to the international

capital market while on the other hans it offers opportunities for consolidation since untaxed

that

are openly

losses it could for practical equity.

Whether

than the benefits personal

disclosed.

Furthermore

reserves are usually dissolved only to balance

There

be considered

of explanation

of consolidation

experiences.

favour of severing

purposes

the trouble

part of

weighs heavier

is probably

a function

of

are as many elite members

in

the bond between

tax legislation

and the

annual report as those against but the largest group is the undecided

one.

Unions

are represented

on company

industrial

democracy

accounts.

They are also represented

dards Board. fluence however,

Therefore

on accounting thought

have complete

boards

on the Accounting

they might be expected practice.

that unions

and, under

access to the company

None

Stan-

to exert in-

of the respondents,

had exerted

such influence 15

S-I-EN JijNSSON neither

were unions thought

to have any policy on account-

ing issues. The natural way for unions to exert their influence seems to be through

the legislative

process.

In Sweden financial executives do not take part in the public debate

on the development

explanation

of accounting

zation of significance,

another

that accountants

pected to speak for their companies are, with few exceptions, Some

respondents

ture. Finance something

practice.

is that they do not have any professional

presidents

in accounting

issues.

are reticent

by na-

said that accountants

executives

are not ex-

and company

not interested

in the elite said that when they have

to say they say it through

the annual report. This

might point to the possibility

that there is an accounting

among

network of relations.

firms with a separate

there seemed to be general agreement been passive in the general Probably and influence

have

issues.

part of the interviews

to detect patterns

elite

E sum up,

that accountants

debate on accounting

the most interesting

the elite was designed

One

organi-

with

of communication

within the elite.

Respondents

were asked whom they respect professionally

and whom they often consult with. There were also questions on whether

there are “schools”

what criteria

the accounting

Before presenting

of thought

some of the measures

ed on the coded interview statements

cerning

the communication

the concept

Hussein

that

should be clarified,

process

another

con-

of power.

(1981) p resented

from Zaltman

to

that could be bas-

some assumptions

will help the reader evaluate the measures one concerning

and according

field could be subdivided.

the following

et al 1973) o f accounting

model

innovation

(adopted in the US:

lfgiggFigure 1. Th accounting innovation process (Hussein 1981)

16

Meamre~ of the Accounting Fbwpr structure

A<:COUNTING This model reflects the assumptions ting process that constitutes As the interviewing

about the standard

a background

more

Interpersonal

commu-

should be present in all three boxes on the top. The

important

interpersonal

significance

is awarded

influentials.

Furthermore

most important tention

communication

to communication

Opinion general

patterns

The

formation

awareness

in the emergence

of a need for change

in the initiation Standards

norms that influence a proposed

the formation

PH,

the first ranking

“Personally know, when it. There is the ultimate A statement

ASSC

(Brittish of

of attitudes in relation to Finally, when an indi-

he might even function

process.

the

the role of profes-

are also promoters

solution (e.g. in hearings).

in the legitimation

of a

or in spreading

of the Brittish

1981.)) They

vidual is highly respected,

as

be contingent

respect each other.

are instrumental

word that a solution is available. (Compare Accounting

the

of attitudes

will, to a great extent,

those communicating

leaders

sor Stamp

among

whom you respect is obviously

to those you respect.

upon whether

is, the more

relation in an elite. You listen with special at-

well as the legitimation

about

obvious that

aspects do not seem to be as impor-

tant in Sweden as the figure indicates. nication

set-

to the interviews.

went on it, however, became

the mass communication

ELITE

One

as arbiter

of the respondents

said

elite member:

I don’t have much contact with him. You you ask him about a matter of principle that’s nothing to add to his pronouncement. He is authority.”

like this illustrates

the potential

insight into the

standard

setting process that could be gained by mapping

structure

of relations

of respect among

Since the standard to influence concept

elite members.

setting process is justified

practice in the promotion

a

by its ability

of good accounting

the

of power has to be dealt with. In the case of standard

setting it is a complex

issue.

If men of good will develop maxims

for theirs actions of a

character

that makes it desirable

to turn them into general

law (Kant

1964) it is reasonable

to work for a general use of

such maxims. to influence

Some might hesitate on ethical grounds others

concerning

attitudes

toward

to try

right

and

wrong. Others might feel that the essence of social life is to influence

and be influenced.

Norms

in the form of custom

unless they change must

do not cause any reflection

while norms in the form of prescriptions

have a source.

Such

a source

must

make them visible. They thus manifest ulgator. Furthermore,

“promulgate”

in order to be effective, sanctions

be related to them. Therefore

to

the will of the prommust

power in some form has to be 17

ST-EN JijNSSON

present.

Power is a difficult

concept

sional field where arguments, posed to be factual/rational.

especially

in a profes-

almost by definition, In a professional

are sup-

field conflicts of

interest are supposed to be less pronounced

than in political

life where they are institutionalized. The intuitive meaning

of “power” is that power is exerted

when person A makes person B do something otherwise

do. Here behaviour

flicts of interest. This Baratz

he would not

is focused and there are con-

This is typical of the pluralistic

conception

of power can be critizized

1970, Lukas

1974). Non decision

viewpoint. (Bachrach

making

&

is a form of

power. It is possible to limit actual decisions

to “safe” issues

by manipulation

institutions

procedures.

of values, myths,

political

To see to it that controversial

and

issues are avoided

is also the exertion of power. Lukes (1974) goes further saying that the creation

of preferences

rant of his “real” interests There interests,

are two kinds of sanctions of certain

can be described to use influence

between

through

or to punish or reWhen

situation

the situation

it is more suitable

the parties involved influence

rewards,

the authority

can

of expertise

or

collegial loyalty. A scale can be drawn with conflict

to the left and maximum Conflict

alternatives.

as a consensus

of power.

instead of power. If there are no major con-

flicts of interests be exerted

a person igno-

when there is conflict of

to limit the possible alternatives

ward the choice

through

and keeping

is also the exertion

consensus

on the right.

of interests

Consensus

Power

Influence

/\

/I\

Coercion

Reward

Reward/

expert

collegial

punishment Figure 2. Power and inJwnce. The

institutional

will position chartered

forms under

themselves

accountants

which norms

diffenrently

are developed

on the scale. When

work in their accounting

committee

the it

is hardly relevant to talk of power. They will be on the right side of the figure. When working members

chances

the Accounting

same time as they are experts. will also determine

different

Obviously

is

interests at the

the issue at hand

where on the scale a given process will

occur. If different groups in the accounting

18

Board

are that they will be on the left side since

are supposed to represent

icant differences

Standards

profession

have signif-

of interests it would be possible to subdivide

ACCOUNTING

the accounting thought”,

field along

professional

certain

domains,

divisions

could not be found

indicates

that the Swedish

dimensions, industries.

through

standard

ELITE

“schools

of

However,

such

the interviews.

This

setting process is taking

place largely to the right on the scale. Since looked

there

are no pronounced

at themselves

schools

as free agents

the respondents

able to take a stand on

issues on their merits. On the other hand the elite is small and most of its members Communication

have personal

the elite are frequent. ly disturbed Board

or professional

is dense and meetings

relations.

between members

of

The group is stable and only marginal-

by the emergence

and the reference

of the Accounting

group of the Swedish

Standards

Federation

of

Industries. The typical respondent

would mention

six respected

persons

and most of the time it was names on the list (table 2). Out of the 237 times names of respected (note

that a generally

respected

many times) only 46 indicated cases but three, persons

persons were mentioned

person

persons

will be mentioned not on the list. In all

not on the list were mentioned

once. Two persons not on the list were mentioned third person was mentioned

by six respondents

cided to add him to the list. He became

only

twice. The

and it was de-

the 40:th member

of

the elite. Most of the time respondents

said they respected

on the list. (At the time of the interviews not know who was on the list.) When somebody professional spondents

professionally

did

you say you respect

the criterion

competence.

persons

the respondents

you use is most likely

A simple count

of how many

re-

that respect each person on the list resulted in a top

group of nine persons that is respected

by more than five per-

sons on the list. (three persons on the list were not mentioned by anyone as respected

persons.).

votes

votes

SEJ

30

8

PH

28

HE

21

BC

6

RR

16

BF

6

SC

8

Table 4. Th

7

most respected author&s.

Five of these nine persons are chartered thus the dominant ic, one financial zation official.

professional executive,

Comparing

accountants

group. There

one rule maker this ranking

which is

is one academand one organi-

with the ranking

in

19

STE:N JiiNSSON

table 2 one finds some differences by the fact that visibiblity

which might be explained

has a greater effect on the former.

As can be seen from the count of most respected persons the elite seems to be rather centered

around

a few leading

sons. The next step was to try to design some measures hierarchical

structure

per-

on the

among the elite. The basis for measur-

ing is a 40 x 40 matrix of the elite members if a person respects another

where “1” marks

person. If, in the attitude forma-

tion phase, you have access to people willing to listen, you are better

able to exert influence

access.

than

if you don’t have such

You listen to those you respect.

who is respected

by many,

access, will be influential. influence

through

Therefore

a person

i.e. have good opinion

leader

It is also possible to exert indirect

persons who in their turn are respected by

others, A measure

of opinion

leader

based on the respect relations

access

could

in the matrix.

be designed

For every mem-

ber of the elite (“focal person”) the persons respecting

him are

counted.

respect-

For every one of these in turn the number

ing him is counted

etc.

A

B

/\LD C

I\

//I\

E

FGH

1

H

Figure 3. Opinion leader o_ccm. The focal person, A, is respected respected

access will be indicative have greater variations

by B, C and D. B in turn is

by E, F, G, H etc. A measure of influence.

weight than indirect

on opinion

leader

Direct

access should

one. There

could also be

in degree a respect. To allow for this the inverview

tapes were analyzed

to establish in what order respected

sons were mentioned.

per-

An index was chosen that gives weight

1 to scores on the direct access level and 0,5, 0,33 and 0,25 to the 3 indirect levels below. As to scoring it was decided to give score “2” to persons four respected respondent

that were mentioned

persons (including

among

the first

people outside the list) by a

and score “1” for persons

mentioned

later than

fourth. Many alernative

ways to calculate an opinion leader access

index can be thought of’. The reason for this particular simply that the new ranking 20

according

one is

to this index seemed

Hierarchy

ACCOUNTING

right intuitively. Reordering

ELITE

among the top 20 was moderate.

The top persons on the original list remained

close to the top

on the new one. Out of the top 20 on the new list 13 were among the top 20 on the original list. It is not possible to publish the new list since it is possible to deduce information relations

between individuals

the calculation

from it. An interesting

sition on the new list. This is accounted subjective

effect of

of this index was that a person who had a posi-

tion on the lower half of the original list advanced is respected

on

to a top po-

for by the fact that he

by persons who in turn are respected evaluation

by many

of the new list in comparison

old one is that professional

competence

is rewarded

A

with the at the ex-

pense of public exposure.

Profesional Groups

When elite

the matrix

members

based

was

groups (see categories of relations The

on relations

subdivided

of respect

according

between

to professional

in table 1) it was found that the density

varies over groups.

highest

density

was found

actual relations accounted lowest density

among

auditors,

where

for .24 of possible relations and the

was found among

rule makers.

Accountants

also had low density .ll while opinion leaders (journalists academics) found

had .18. The

among

highest

the top 5 persons

density

and

of all groups was

on the list. Their

density

figure was .65. The density measure

used (the number

in the group divided by the number not a very good measure lections

rule

makers

looked

it still shows that auditors

professional

group

while financial

do not. Journalists

at as a rather

relations)

since it is based on subjective

and does not reflect any qualitative

these reservations coherent

of actual relations

of possible

coherent

and group

aspects.

recolGiven

tend to form a executives

academics (with

is

could

and be

a user orien-

tation?). From the matrix it could also be seen in what direction professional

groups are oriented.

here is the strong orientation

the

The most striking outcome

of rule makers and accountants

towards authority

in the form of the top 5. The group of rule

makers

expressed

a total of 35 relations

outside

the group of which 20 were towards the top 5. The

accountants

of respect to persons

had 22 relations to persons outside the group;

17

towards the top 5. The auditors have, as was mentioned of internal relations.

above, a high density

As to the external ones they seem to have

a special eye for academics. The business journalists dency to respect financial It is also possible prestige

as a group show the strongest tenexecutives.

to use the matrix

load to institutions.

to calculate

a sort of

(If mr X who is a member

of 21

Sl‘EN JiiNSSON ASB

is respected

ASB).

by 10 persons

award 10 prestige

In this way FAR (the chartered

greatest

load followed by the ASB,

Economics tance.

and the Federation

(If a person

points to

accountants)

the Stockholm

gets the School

of Swedish Industry

belongs

to two institutions

awarded all of his points.) Further studies were made

of the subgroup

top 20 on the new list based

on the opinion

of

at a disboth

are

forming

the

leader

access

index. It was thought

that among

these professionally

most re-

spected persons it would be possible to find the sources of new solutions

and the agents of change.

mutually

respect

such groups might constitute The

If groups of persons that

each other could be found it is likely that important

top 20 on the new list include

tants 5 opinion leaders,

coalitions. 10 chartered

tive. Out of the top 10 there are 8 chartered higher than for the whole group;

It

of respect is

0,22 versus 0,12.

When the matrix was inspected

for pairs and other conlig-

of persons who mutually

lowing was found among

execu-

accountants.

should also be noted that the density of relations

urations

accoun-

4 rule makers and 1 financial

respect each other the fol-

the top 20:

pairs with mutual

respect

triplets quadruples

that form

who relates

to C who relates

rings

A, without

C relating

(i.e.

A relates

to B

to D who relates

to A and B relating

to

to C)

rings with 5 persons ring with 6 persons. These configurations FAR

and

counting

Standards

The Accounting extremely

contain mainly people representing

the Stockholm Board

School

The

Ac-

of FAR on the other hand is

well knit into these groups. There

is no accountant

more than two persons.

first phase of the research

project

The elite had been identified

was thereby

con-

and its structure

indi-

cated. The next phase was to try to grasp the dynamics accounting

policy process by conducting

studies on how new accounting

Ca.w of Nom The collection

a number

of the of case

norms are produced.

Formation of data was mainly

In some instances

done through

interviews.

it was possible to study documents

uced at various stages of the process. 22

the

The

is poorly represented.

Committee

in any of the groups containing cluded.

of Economics.

prod-

This is particularly

the

Creative Coalition?

ACCOUNTING

case with the Accounting scussion protocols.

Standards

Board

The FAR Accounting

other hand does not have any records

ELITE

which keeps di-

Committee

on the

of this kind.

A case study would typically start by interviewing

persons

we knew were heavily involved in the case. All through the series of interviews had

argued

we would try to collect information

for different

opportunities

approaches

to cross check

etc.

interviews.

give clues that would be followed

on who

This

provided

Interviews

would

up in subsequent

inter-

views. When separate

saturation

was reached

concerning

data on the case

reports were written for the cases. Different

conducted

persons

the studies of the three cases. Special attention

given to the participation

of elite members.

was

It was found that

they play major roles in all cases. The choice of cases to study is of course crucial.

Since only three cases have been studied

the cases as such can not be used as firm evidence sions regarding

the standard

setting

process.

for conclu-

On the other

hand there are not very many cases to study during any given period and the cases point in much the same direction. The cases were “indirect currency

problem”

companies”.

material

(supplies)“,

“the foreign

and “state grants and conditional

loans to

The first is a small and relatively uncontroversial

case but interesting

because

it involved all the institutional

actors. It resulted in a statement

late in 1980. The second case

is big, difficult and controversial

The process is still going on.

Some

major companies

to something

are holding

out waiting for a return

like FAS 8 in the US. The third case illustrates

how industrial

policy in parliament

creates accounting

prob-

lems that take some time to settle. Indirect Material

The issue in the first case was whether capitalized

or written off as a cost in the year of acguisition.

A change in tax legislation rulings being challenged Committee statement

supplies should be

resulted in a number

around

tried to take the initiative

by producing

very quickly. Tax courts consulted

Standards

Board

of tax court

1975. The FAR Accounting

on what is good accounting

pratice.

Board could not agree on what was the prevailing indirect material. of Swedish that practice There

A survey was conducted

Industries

by the Federation

at the reguest of the Board.

It showed

was hardly any public debate in this case but the ar-

gumentation tled through

in the Board was animated. accepted

practice.

the survey the discussion

to be used in the statement

short discussion Board

The

practice on

varies.

what was the generally nology

a draft

the Accounting

on principles

issued its statement

First it focused on When

centered

this was seton the termi-

and finally there was a

(materiality).

Late in 1980 the

which did not differ very much 23

Sl’EN JtiNSSON from the draft from the Accounting

Committee

which was

then withdrawn. The case involves persons on the top of the elite list as main actors. A couple of them may have improved their position on the list through represent

the public exposure.

The organizations

can all point to some partial victory

the first issue that the Swedish

Federation

they

It seems to be

of Industries

in-

volvcd itself in when it came to producing

a statement.

The second case, the foreign currency

issue, developed

parallel to the debate in the US and UK. den

was perhaps

unrealized

more

concentrated

to the allocation

losses on foreign loans over the remaining

the loan than in those countries.

companies

lead the opposition.

Committee allowing

for its exposure

tried

Com-

from the start and

draft on this point.

In a new exposure

to accomodate

for set off between

some

allow for this it was however necessary

Large

draft the

of the criticism

unrealized

of

life of

The FAR Accounting

mittee was firmly against such allocations received criticism

in

The focus in Swe-

by

gains and losses. To to change

the Com-

pany Act. The Committee

found this could probably

be accomplish-

ed more quickly if the change was proposed ing Standards

by the Account-

Board which is a state agency. The matter was

turned over to the Board which set up a proposal in line with the FAR position and submitted The proposal was submitted stitutions

and organizations

it to the Ministry

by the Ministry for comments.

1979 and many of the respondents (the new US statement before

action

was taken.

dish Industries

right to allocate currency understanding

time

counting

Committee

with the of Swe-

wanted the

losses over the remaining

years of

decided to “shelve” the poposal with the Standards

Board

should

of the process when time was ripe. Dur-

of 1982 the matter

it was decided,

agreed

Federation

of Commerce

that the Accounting

initiate a resumption ing the Spring

Association,

that FAS5.2

should be awaited

A large majority

and the Chambers

loans. The Ministry

This was in early

recommended

on this problem)

proposal but the Employers’

of Justice.

to about 30 in-

was taken up again. This

by agreement

between

and the Accounting

the FAR

Standards

Ac-

Board,

to divide the work so that the Committee

would pronounce

on translation

and the Board

valuation

for consolidation

purposes

on

of assets and liabilities.

An interesting

aspect of this case is how the standard

sett-

ing process got stuck when a legislative process was initiated. Whether

this was a good thing can be discussed.

also great variations dustry depending

on the expected

mcnt. The company 24

in excitement

There

were

over the proposals

in in-

effect on the income

state-

leading the opposition

has large produc-

Foreign Currency

ACCOUNTING tion facilities in South America

financed

ELITE

by loans in US dol-

lars. Again several of the major actors were persons on the list even if there were a larger number

of financial

executives and

bank people taking part in the public debate State Grants

The

third

conditional solution

to restructuring

steel.

in activities

problems here

“Orderly”

amounts

of unemployment.

financial

support.

Due

conditional

During

and

the late

aimed at an orderly

in some industries,

refers

to

socia.lly

nota-

acceptable

Some of these activities received

to international

could not be used. Instead project

of grants

loans by the state to companies.

seventies the state engaged bly

than usual.

case deals with the treatment

agreements

grants

a form of loans with repayment

on successful

completion

of the restructuring

was given.

The bankruptcy legislation

section of the Companies

kind of loans.

A company

money wiIl balance ceedings

Act and the tax

put auditors in difficult situations concerning

these

with large debts which is losing

close to the limits where bankruptcy

pro-

will have to be initiated.

To begin with, the reaction was muted by the political pressure to save large parts of the nation from destructive ployment

problems.

than financial

are more

important

of 1979 an investigation

of the Parliament

that this investigation

was initiated.

produced

by the auditing

The

described

memorandum

the process where-

by the first big loan of this kind (to Uddeholm) pointed

out that the accounting

accordance charged

with generally a couple

being properly ing Standards

treatment

accepted

principles.

committees

about the consequences

with

on future decisions

the Accounting

tiated work on a statement

of this kind.

Standards

on the treatment

Board had ini-

of state loans and

investigation

by the Parliament fairly complex

was carried out, but the decision

gave it extra impetus.

The statement

is a

one but what it says is that loans should be

as loans and grants as grants.

A further

committee

to investigate

was initiated

tions mentioned

by the Ministry

the tax legislation

loans and grants. It has produced

in relation

of Fito these

a report based on observa-

above and proposed changes in legislation

clear out the accounting action

produced

so far. The work was well under way when the

parliamentary

nance

not

of their de-

grants. It seems to be the most successful statement by the Board

It

decided to consult with the Account-

Board

In the meantime

was given and of it was not in

accounting

of parliamentary

informed

cision. The parliament

treated

unem-

problems

accounting!

In September office

There

in the industrial

disorder

created by innovative

to

state

policy area.

This case illustrates the fact that there are important

social 25

SI‘EN

.J6NSSON

goals

the Parliament

accounts.

will set above the keeping

After the disturbances

innovations

the process

was set in motion.

of reestablishing

Board

by these

accounting

order

First the political way was cleared by the

audit office of Parliament.

Then

and the tax authorities

ganization

of orderly

had been created

the Accounting

Standards

could go to work. FAR as or-

was never involved in this case and probably

not have acted

otherwise.

Leading

chartered

could

accountants

were involved as auditors in some of the companies

concern-

ed with these loans. Again persons on the top of the elite list were major actors together with representatives agencies

and the auditing

Some common (again

caution,

of some state

office of Parliament.

features of the cases chould be pointed out due to the fact that it is only three

should be observed!).

cases,

It seems like people with high ranking

on the list have been involved in all cases. On the other hand the institutionalization tive standard other processes. institutional public

of the process is striking.

setting

is limited.

between

institutional

comodation leadership teraction

Therefore

between

There

arenas

there is not much

of those influentials.

have

a forum

for an ac-

people and the charismatic The consequence

might be that the standard

of this in-

setting process is closed

to access except for those few established There

persons

seems to be an interaction

providing

influential

like most

debate beside the

at least not until the leading

worked out their positions.

The legisla-

has to be managed

The room for spontaneous

arenas

debate,

process

influentials.

were different

front lines between interest groups in

the three cases. Mainly

industry tended to be on one side and

representatives

of state agencies

while chartered

accountants

they can create a majority. tle in standard

Academics

It seems like the discussion

other

seek to maintain

my own opinion.

ing observation

above state-

.

on the one hand, one the The

most respected

and as such they should

but the keen defence as well.

elite

This might not be a very surprisof independence

by the top of the elite is strikingly

terview material

alternabelow the

a position

have the role of arbiters

avoid showing partisanship. integrity

lit-

to do that is to structure

articles etc. into the format

members

26

for or against different

One of the strategies

hand,

seem to participate

mainly by persons immediately

top while the top persons ments,

on the other,

setting.

tives is conducted factions.

and unions

are in a middle position where

and

evident in the in-

Results Of the (3~ studies

ACCOUNTING

ELITE

Conclusion3 The study which has been reported

here was conducted

be-

tween 1980 and 1983 and to a certain extent the conclusions it suggests are confined

to the situation

during that time pe-

riod. On the other hand, things do not change in accounting more

very rapidly

as our case studies show (all of them covered

than five years).

Conclusions

of a general

character

seem to be possible even if they can not be given in statistical terms.

A number

material

of checks

for internal

have shown that conclusions

and who participates certainty

consistency

in the

as to who is influential

can be drawn with confidence

is a little greater

for central

even if

actors than peripheral

ones. There

is always the risk of course that the interview mate-

rial may be unreliable give an example, quality

in some instances.

It is obviously,

difficult to get comparable

evidence

of the respect relations.

First it can be concluded has been identified. ria for members

that the accounting

elite can and

It is not possible to set any defining

or non-members

must be considered

There

that follows by definition

cannot be any sharp demarca-

tions between the “haves” and the “have not?

of elite status.

The elite seems to have a rather large “twilight tential participants.

Therefore

around

process. At the centre is a small number

the policy making

of respected

that seem to get involved in most issues. They tional positions and a personal

The next layer contains

attitude that favours indepen-

In Sweden

this group currently

represent

setting

persons

interest

that have a partial influ-

groups in the process of stan-

and tend to argue

for the viewpoints

group, while the top group tend to reason principles.

This “partial”

setting process is oriented

and confined

to certain

in the

toward particular

issues

periods.

The third layer in the elite, which include

arguments

board. It amplifies those arguments situation

more,

and serve as a sounding which are “in tune” with

and muffles others. As such this group

is indispensable

as a feed back mechanism

setting

It is also indispensable

process.

approximately

and possibly

as active observers of the process. They lis-

ten to and transmit the present

would consist

participation

the lower half of our list of influentials could be described

of that

more in terms of

group of influentials

of about 15 persons in our sample. Their standard

persons

have institu-

of five persons.

ence. They dard

zone” of po-

the elite should rather be look-

ed upon as a set of layers centered

dence and professionalism.

crite-

of the elite. This, however,

to be a problem

from the elite concept.

consists

to

on the

for the standard as a carrier

of the 27

STEN JijNSSON message

when

through

a new

persuasion

standard

standard

has

to gain

which will be more

acceptance

frequent

the more

setting bodies take an activist approach.

Given these layers it is a matter of taste where you draw the line between the elite and its constituency. top twenty might be considered fact it does not matter

very much

since it seems to function

The top live or the

to be the elite proper but in how you define the elite

differently

at different

levels. To-

gether these layers seem to fit into a model of the innovation process like the one attended The vast majority

to previously

of the respondents

(Hussein

1981).

thought that the elite

is stable even if there were variations.

Some thought that the

top is stable but the base is unstable,

which might be in line

with the reasoning

above. There

was also agreement

respondents

that too few participate

accounting

issues. Some rule makers

the tendency

to accept statements

culty of getting a response The

picture

harmony.

an institutional

and in standard to happen

is one of stability

and relative

policy process is well anchored

for their professional

accountants

over

drafts.

setting which in turn is inhabited

who are respected chartered

even complained

literally and over the dish-

to exposure

that emerges

The accounting

among

in the public debate on

are the dominant

setting for financial

competence. professional

accounting,

in

by people The group,

events seem

in Stockholm.

The way to influence

attitudes towards new solutions is to

write articles in professional ed by the chartered

journals

accountants.

chiefly the one publish-

But it is also necessary

to

follow up on articles to create a debate which is not very easy if almost everyone

agrees.

The case studies confirm

the image of a stable elite the top

of which is involved in most issues. Whilst reservations

about the inevitable

study, it seems like the standard spicuous dure

institutional

seems

More through further

setting procedure

characteristic

to be completely

studies

as to the

there should be

bias in the choice of cases to in Sweden.

institutionalized

creative

has a conThe

proce-

nowadays.

contributions

by firms

their annual reports should be done before anything can be said here.

It seems possible to do more detailed studies on the process of standard

setting where measurements

spect are matched

with material

are however ethical problems tually impossible

to report

on relations

of re-

from the case studies. There

in these kind of studies; it is viron case studies without

readers

being able to identify main actors. In this study that problem did not materialize conflicts

in any difficult

of any significance

have been of the type industry 28

form since no personal

have been detected; vs tax authorities

arguments rather than

ACCOUNTING

personal

and the development

has been

ELITE

relatively

harmo-

nious.

Dimmion The material

produced

tions on themes Re$m.wntativeus Expert

in the study give raise to some reflec-

of special interest.

One of the recurring

themes is whether the actor sees him-

self as an accounting

expert or as a representative

group.

The

repmentatiue sees himself

group.

His responsibility

of some

as a spokesman

is to further

for his

the interest

of that

group. Even if he does not believe that he will convince his opponents with his arguments

it is important

to be seen arguing

for his group (not at least by that group). He is in his turn not likely to be persuaded representative

by the arguments

is lighting

are working

against.

legitimation

of differences

counting

of the other side. The

for a good cause which the others

Appointing

representatives

between

policy and of “political”

interest

means

groups

argumentation

the

in ac-

in the stan-

dard setting process. An arpert looks at himself as somebody en because

he is competent.

who has been chos-

He is trusted

petence

and common

anxious

to defend his right to independent

to use his com-

sense to find good solutions.

willing to be persuaded

by factual arguments.

tative sees the world from a conflictual to well defined

perspektive

problems).

sentatives

and experts

confusion

will result. The representatives’

to promote

in the same

(we-they) perspective

If you put repre-

standard

setting

body,

political behaviour

a good cause will be contagious.

likely to be good politicians

but is

The represen-

while the expert sees the world from a consensual (good solutions

He is

judgement

Experts

at the beginning

are un-

but they will

soon catch up. Power realtions will be visible and proper procedure

will suffer. To maintain

standard

setting

keep politics under control Institutionalizationz?TChartim

Another Weberian

factors

(cf Gerth discussed

tendency

mechanization grace”).

& Mills,

of life

to bureaucratization bureaucratic

of institutional

1981) analysis

process.

institutionalization

of his works.

A

seems relevant.

The

och

bureaucratic

every day life. These routines are institu-

petrified.

The sovereignty

leadership

is the mixture

in the policy formation

in many

routinizes and

to to

rationalization,

bureaucratization tionalized

approach

an extra effort is needed

by all parties involved.

theme that emerges

and charismatic Weber

a professional

in accounting

The is

balancing

“charisma”

of charismatic

(in its pathological

can create movement process is impersonal

concept (meaning

to this “gift

of

men is the antidote sense). Charismatic

and innovation. the charismatic

While

the

is person-

29

STEN JiiNSSON al and relational, breaks patterns.

the former follows patterns But the leadership

vinism and therefore

while the latter

of Calvin

turns into Cal-

there must be new leaders with new vi-

sions. Th e process of standard

setting

where

institutional

action.

The more institutionalized

more

patterns

pronounced

fluent&

is an interactive

are

changed

process

by charismatic

the process becomes

the

of our accounting

in-

the responsibility

to see to it that the debate on the issues is kept alive

and that new ideas are heard. This is not easily accomplished. Maybe

more

chairmen

than one forum

should be appointed

Throughout

of the accounting

the start respondents

tablished

field in Sweden.

background

to professional

there were not very large differences dichotomy

were nuances materializes.

accounting

policy.

These

orientations

were asked about

That

factor

is es-

1978) but in our case

in views between profes-

but not much

It seems

have either a producer

groups.

is a distinguishing

by some research (e.g. Hicks,

sions. There

From

tended to say that the best division into

would be according

professional

Maybe

the study there has been a search for schools of

thought or patterns categories

is a good thing.

for limited terms.

more.

Instead

that respondents

or user attitude when they talk about were most visible when

the future

development.

mon worry (16 out of 40) among what could be expected

respondents

The

elite members

in the future

most comconcerning

was the tendency

overload the annual report with details. Accommodating demands

a

tend to

from different

parties for information

to the

is producing

a situation where the reader of the annual report may lose his overview. This, it is suggested, is a consequence ration of rules. The increased the belief in some quarters squeezed

number

that there is a “truth”

out of management

producer

to its solution

orientation

orientation

(23 out of 40) from persons recognized

their solution was to demand

information etc.)

of this problem

that distinguished

as

those with a

those with user

(13 out of 40).

While user oriented overload,

that can be

with the help of more detailed

rules. It was not so much the recognition the approach

of the prolife-

of rules is a function

(on markets,

as if to develop

products,

a general

details could be interpreted.

the problem

with

more future oriented

competition,

framework

problems

against

which

It was also the user oriented per-

sons that tended to talk in terms of “true and fair”. Producer

oriented

attitudes tended to mean more concern

for the overload problem read by very many producing 30

information

as such. The annual reports are not

share holders

anyway

and the cost of

on details is not balanced

by benefits.

Users us Produen

ACCOUNTING

The

user oriented

the journalist oriented

group

chartered (1978)

group coincides

and academic mainly

consists

accountants.

regarding

with present

perfectly

of financial

executives

of accounting

innovation.

quality

with

while the producer

This fits the results obtained

the attitude

ward accounting

almost

professions

ELITE

and

by Hicks

professions

to-

Both groups were quite satsified

of Swedish

annual

reports

in interna-

tional comparison. The importance the-world)

of the images (or if you will, theories-of-

for the development

theory has been discussed

of accounting

recently (Tinker

thought

and

et al, 1982; Davis

et al, 1982). It is said that there are some basic beliefs or belief systems that determine

the direction

If you view accounting

of accounting

as a historical

thought.

record you are likely

to base your position on policy issues on what Littleton calls transaction

analysis.

the transactions

which

counting

is another

reports

(What

accounting

are the facts.

Interpretation

of ac-

matter.)

If, on the other hand, you view accounting

as an informa-

tion system you will be likely to stress the usefulness mation.

It is therefore

(1933)

does is to record

necessary

to define

of infor-

a primary

user

group, the investors, and evaluate annual reports accordning to their usefulness While

to that group.

admitting

that the material

ther than prudence

permits,

is stretched

a little fur-

it still seems reasonable

the producer

perspective

as a historical

record in Davis et al, op tit) while the user per-

spective approach counting

to a transactional

to link

basis (accounting

could be linked to a “usefulness” means

basis.

The latter

that stress is laid on the usefulness

information

of ac-

and a true and fair view of the com-

pany. It is the output of the accounting

process in the form of

useful reports that counts, not the input in the form of transactions.

The

user

of accounting

should take this approach counting producer reports

reports

quite

when demanding

naturally

changes

in ac-

policy, but he should also realize that the “facts” the of the reports has to start with in producing are the transactions.

This

has not changed

these since

Pacioli! Today through

demands

for accounting

change

different bodies. Thereby

legitimate

source constitutes

sources. The producer

are

channeled

the transmission

from one

“noise” for messages from other

of accounting

reports, being unable to

satisfy all, is likely to revert to his “facts”

and stick to his

transactions. The number ers of demands Sweden

of user groups recognized for accounting

as well as elsewhere.

as legitimate

change has increased The

mands seems to be the accounting

moderator

send-

lately in

of these de-

elite which, inside an insti31

ST-EN JoNSSON tutionalized procedure, falters away the most “unreasonable” demands. As such it serves an evolutionary cause (Which the author

This

finds reasonable

and a proper function

study has had a descriptive

making

any normative

objectives

or nature

purpose.

statements

for an elite).

We have avoided

or assumptions

of accounting

information

as to the

at the start.

The aim was to identify the driving forces behind accounting change and the mechanisms

of such change.

the methods used seem appropriate ing theory made codification laborious.

The

able and quite through

method

even if the lack of a guid-

of the interview

used to identify

efficient.

the interviews

The

checks

influentials

material

quite

the elite seems reli-

that have been made

and the case studies indicate

first sample was a good one. Measurements between

To that purpose

could be developed

analyses of cases. The coarse measures

that the

on the relations

and used for further used in this study gave

some interesting

insights.

Ways must be found to report on

these relational

measures

that the author

has been aware of is a constant

without

the intrusion

on privacy problem

this kind of studies. On the other hand, the accounting process

serves the benefit

of society

actors have a great responsibility selves be scrutinized

in

policy

at large and its main

which includes letting them-

by inquisitive

researchers.

The process is very much in the hands of a relatively small elite. The

data that this study has produced

impression

give a distinct

that this elite has not been put in the positions

holds for other

reasons

than

respect

it

for their professional

competence. Several

elite members

complained

about

the lack of re-

search resources

in support of standard

where academic

research might be useful. On the other hand

setting bodies. This

there is always the risk of getting involved in controversy. it is now academics perhaps

play a passive role in standard

they are too keen to remain

part in the politics of regulating

aloof, to avoid taking

the rules.

On the other hand the accounting cess has not yet been politicized been tendencies

on the task to correct Parliament question

“professional”

32

Standards

some accounting

standard

pro-

Board

during

elite has even been able to take

in its zeal for innovation whether

policy formation

in Sweden even if there have

in the Accounting

its first years. The accounting

As

setting,

setting

is still unsettled

problems

in industrial will turn

in Sweden.

created by policy. The

“political”

or

ACCOUNTING

ELITE

Refuences Littleton,

The Accounting Act SFS

1976

1976:125

1981

Stockholm.

Accounting Theoy and Theory Acceptance. Sarasota, 1977

FL;

AAA.

Bachrach, 1978

P., and M.

S. Baratz.

Beaver,

University

Cliffs,

NJ:

Prentice

Power: A Radical View. London:

1964

London:

1980

1973 CO:

Yale University

“The

images

theory”.

that have shaped

New

Presthus, 1964

H. H., and C. W. Mills

From Max Weba Essays in Sociology Oxford:

Schultze,

Oxford

1958

Hemberg, 1964

W., and 0.

Hicks,

(Eds.) (original

1946).

Accounting

“An examination

1924

of accounting

perception

interest

of innovation”.

groups’

Accounting

Stamp, 1980

Tinker,

F.

Community Awer Stnccture, Chapel1 University

Hussein,

of North

Carolina

Hill NC:

1982

dominants

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Amen&n Sociological Review, pp 3-9.

W.

Kapitalismus. Miinchen:

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B. D. Meiono,

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M. E.

1981

R. 0. “Economic

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Rxiuew, pp 371-388. 1953

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1978

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1981

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accounting

Accounting Organizations and So&g, pp

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standards

process

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in financial

accounting

Accounting Organizations and

Watts,

R.

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“Towards

L., and J. L. Zimmerman. a positive

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standards.”

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of

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pp 112-134.

Y.

Theory ofAccountin8 Meaturmt.

Sarasota

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AAA.

Watts,

R.

1979

“The

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I.

Newton

& Row.

van Wright,

L.

1963

Accounting Fblicy Formulation. Reading, and E. Stamps

1963

Leach,

R.,

1981

British Accounting Standanir. The First IO Ears. Cambridge:

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