Constructing, persuading and silencing: the rhetoric of accounting standards

Accounting, Organizations and Society 28 (2003) 621–638 www.elsevier.com/locate/aos

Constructing, persuading and silencing: the rhetoric of accounting standards Joni J. Young* Anderson Schools of Management, University of New Mexico, Albuquerque, NM 87131, USA

Abstract Members of the Financial Accounting Standards Board (FASB) and its staff are continuously engaged in a variety of efforts to persuade individuals that the work of this entity is valuable, appropriate, useful and correct. In this paper, I focus upon the persuasive efforts that are employed in ‘‘official’’ accounting standards. These documents do more than simply detail new technical accounting requirements. The texts have been shaped to express a particular point of view about the significance of events and activities that occurred during the standard-setting process and contain numerous efforts to persuade readers to accept this perspective. In particular, I argue that the FASB employs rhetorical strategies in its accounting standards that construct (and attempt to persuade us) that a specific standard is ‘‘good’’, that silence alternatives and possible criticisms of the standard and that construct the FASB as a ‘‘good’’ standard-setter. These strategies help to construct standards as technical products and thereby also work to maintain the myth of accounting objectivity. # 2003 Elsevier Ltd. All rights reserved.

Accounting standard-setting is a process, an exercise in sense-making, which constructs (at least temporarily) accounting facts by including and excluding particular matters, transactions and objects within the financial statements. Through inclusion by measurement and disclosure, importance and relevance are assigned to some matters and objects; and through exclusion, immateriality and insignificance are ascribed to others. This assignment into categories of importance and unimportance is a crucial aspect of standard-setting in which reality is both ordered and constructed. This construction is controversial as items are not easily assigned to accounting categories but must instead be prodded, probed, snipped, and made to fit into these categories. Furthermore, the categories themselves are neither fixed nor immutable * Tel.: +1-505-277-0334. E-mail address: [email protected] (J.J. Young).

but are instead ambiguous and highly adaptable. With each issuance of a new standard, new items are called expense or revenue or asset or liability; new things are measured; and new things are disclosed. As these things are fitted into the old categories, the categories are stretched and perhaps twisted and are themselves altered—subtly at times and not so subtly at other times. The standard-setting process may, for some, be regarded as completed with the issuance of an accounting standard. However, standard-setting is perhaps more usefully seen as a process without end. Designating and constructing transactions and events as accounting facts or nonfacts is a process that is always incomplete and always in the making. After all, the agenda of the standardsetter is never completed. Even as one project is concluded, others remain on the standard-setting agenda and still others are added to it. Indeed, newly issued accounting standards may themselves

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generate future standard-setting projects. As these standards are implemented and filtered into the economic landscape, different transactions and different instruments may be subsequently designed and developed to test and probe the newly altered boundaries of accounting categories. Such tests and probes may result in the issuance of yet another standard that will once more alter the categories and will itself later be tested and probed with still other newly developed transactions and instruments. Given the ambiguity and indeed fluidity of accounting categories and classifications and the consequent controversy surrounding the standardsetting process, this process may be regarded as an exercise in persuasion. FASB members and staff are continuously engaged in efforts to persuade individuals located outside this entity that its work is valuable, appropriate, useful, and correct. These persuasive efforts cover a range of activities including that standard-setting action is needed in a particular instance, that proposed solutions to a perceived problem improve accounting practice, that such problems are accurately framed and of appropriate scope, and that the process followed in selecting problems and (re)solving them is legitimate and fair. These persuasive efforts occur in many forums—in the dozens of speeches given by FASB members and staff each year, in the articles prepared for accounting publications, in meetings with various groups, and in the exposure drafts, standards and other documents issued by the FASB. In this paper, I focus upon the persuasive efforts employed by the FASB in final accounting standards. Accounting standards are perhaps the most familiar textual products of the standard-setting process containing new requirements for accounting classifications, measurements and/or disclosures. While this technical guidance is the element that is most likely to be associated with accounting standards, it is only one element among several within the text. Rather than simply detailing new accounting requirements, the texts of accounting standards are artifacts that act to summarize the standard-setting process that occurred over a particular time and that engaged multiple participants. Each standard is written by members of the

FASB organization. As such, the text is shaped by a particular point of view about the significance of various events and activities that occurred during the standard-setting process and it attempts to persuade readers to accept this perspective. I have chosen to examine these standards rather than other documents for two reasons. First, published accounting standards remain as reference documents for years after their issuance. They are studied by preparers, auditors, academics and others in efforts to understand and implement the requirements of the standard; and these documents continue to be read and used after their initial publication. As these standards are read and reread, they continue the persuasive efforts of the FASB well after their original issuance. Second, each published standard contributes to the growth of an established body of work and set of accounting conventions and classifications. They are connected one to the other in their use of similar terminology and in their references to extant generally accepted accounting principles. The standards follow similar formats of presentation and are written in similar styles; each of these also have persuasive effects that build and compound one upon the other as standard after standard after standard is issued. In exploring these persuasive efforts and constructions, I examine the rhetorical strategies contained within four accounting standards—FAS 8, Accounting for the Translation of Foreign Currency Transactions and Foreign Currency Financial Statements; FAS 12, Accounting for Certain Marketable Securities; FAS 52, Foreign Currency Translation; and FAS 115, Accounting for Certain Investments in Debt and Equity Securities. I selected these standards for several reasons. First, each standard was considered quite controversial at its issuance as each impacted significant elements within the economic landscape—all entities that possess equity or equity and debt securities in the instances of FAS 12 and 115 and all entities with foreign operations in the instances of FAS 8 and 52. Second, the standards are interconnected in that FAS 52 replaced FAS 8 and FAS 115 replaced FAS 12. Finally, unlike FAS 52 and 115, FAS 8 and 12 were issued prior to the release of any of the concepts statements that form the conceptual

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framework with approximately 20 years separating the issuance of FAS 8 and 115. Each of these characteristics suggested to me the possibility of finding a rich diversity of rhetorical strategies used by the FASB in its persuasive and constructive efforts. I am not the first to consider the linkages between accounting and rhetoric. Accounting and particularly double-entry bookkeeping have been described as rhetorical resources for economics (Klamer & McCloskey, 1992), businesspeople (Carruthers & Espeland, 1991) and even morality (Lakoff, 1996). While these papers help us to understand how accounting contributes to particular ways of thinking about and acting within the world, they consider accounting as a finished product and ignore the processual aspects of accounting, particularly how accounting practices have been altered over time. In so doing, they ignore the arguments and rhetorical strategies that have been used to require and to alter the application of specific practices. Others such as Arrington and Schweiker (1992) and Mouck (1992) have explored the ways in which accounting research persuades—the rhetorical devices employed by accounting researchers to convince their readers that knowledge may be ‘‘found’’ within the pages of an academic article or book. Again, however, these authors have not considered how rhetorical practices contribute to the production and alteration of specific accounting practices. This paper addresses this omission and explores these issues in the remainder of the paper. In the next section, I briefly review my understanding(s) of rhetoric and its persuasive uses.

1. Rhetoric Within the management literature (both popular and academic), articles are often found that oppose the rhetoric employed in a particular situation with the ‘‘reality’’ of the situation.1 Here, rhetoric is limited to a consideration of the use of literary devices and wordy flourishes that are thought to prevent our understanding reality as it ‘‘really’’ is. Rhetoric, from this perspective, both detracts from and hides reality and does so through the 1

See e.g. DiLorenzo (1990) and George (1990).

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intent (malicious at worst, misguided at best) of the user. Despite the renewed efforts of rhetoricians in exploring the rhetorics used within economics, sociology, political science and other areas of academic study, rhetoric is still frequently seen as not quite ‘‘nice.’’ It is considered as something we can do without unlike the supposedly more substantive work of research that is performed when using statistics and formal experimental and/or hypothetico-deductive methodologies. Rhetoric is regarded as promoting a single perspective rather than as presenting research data ‘‘objectively.’’ Within the ‘‘better circles’’ of professions, rhetoric is a pejorative term, one that accuses the guilty party of presenting an ‘‘unobjective’’ perspective in a sneaky and even underhanded way. Indeed, ‘‘entire professions represent themselves as being above rhetoric even as they use rhetoric (in the more neutral sense) to legitimate themselves’’ (Simons, 1989, p. 3). In this paper, I reject the perspective that rhetoric is a mere addition, a flourish, a deliberate effort to fool the simple or weak-minded. Instead, I consider rhetoric to be a pervasive element within our lives as we argue with and attempt to persuade others and ourselves of the viability, credibility and plausibility of our positions, beliefs, problems, solutions and perspectives. Through persuasion, significances and meanings are established in our lives as well as in the more specialized arenas of politics and policy analysis (Dryzek, 1993; Rein & Schon, 1993; Summa, 1992; Throgmorton, 1996), science (Gross, 1996; Latour 1987), mathematics (Davis & Hersh, 1987) and economics (Cordes, Klamer, & Leonard, 1993; McCloskey, 1985, 1993). This paper also rejects the notion that any distinction between rhetoric and reality can be usefully maintained. Instead, rhetorical techniques are resources that we draw upon in our efforts to persuade others about the ‘‘correctness’’ of our particular view of reality. We use analogies, metaphors and other devices to frame issues—to select, organize and interpret a complex reality. Our frames may and often do differ and these differences contribute to the creation/perception of multiple social realities (Latour, 1987; Rein & Schon, 1993). Rhetoric is not a mode of truth nor does it provide uninhibited access to any extant reality.

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Instead, rhetoric is a ‘‘means by which we are persuaded that any mode of inquiry, including that of science, is a mode of truth’’ (Gross, 1996, p.19). Rhetoric is an art of persuasion, one that may be used to secure the adherence of others to particular perspectives (Latour, 1987; Perelman & Olbrechts-Tyteca, 1969). In studying rhetoric, we acknowledge that all texts including accounting standards are the result of conscious deliberation by knowledgeable agents. This perspective encourages us to attend to the choices made by the author(s) within a particular text that attempt to persuade us to accept its arguments, values and choices. Authors cannot absent themselves from the text. Their voices are always contained within it and are made present through the deliberate choice of particular devices (Booth, 1983) as well as the reasons given to accept (or reject) a particular position or belief (Latour, 1987). In thinking of texts as deliberately and carefully crafted products, we are also encouraged to consider why a text was written, the audience implied by its production and the actions it asks of this audience. We acknowledge that texts perform actions as they encourage certain beliefs and behaviors. The various arguments within texts are intended to modify the convictions or disposition of specific audiences through persuasive discourse rather than through an overt imposition of will or through constraint (Perelman, 1982; Perelman & Olbrechts-Tyteca, 1969). With rhetoric and argumentation, we aim to predispose audience(s) to act in particular ways such as to adopt a specific policy, to abide by a law, to accept a research result, or to implement an accounting standard. Audiences may be ‘‘found’’ or given to us, much as we are ‘‘given’’ students in our classes. These found audiences can vary considerably in their homogeneity, context and ready acceptance of various premises employed by the rhetor. However, we should not consider audiences only as found or as given to the arguer/rhetorician—they may also be constructed by her. Many textual products including scientific articles and academic research more generally are written for a ‘‘universal audience’’, one that resides in the imagination of the author (Perelman, 1982; Perelman & Olbrechts-Tyteca, 1969). This audience is carefully

chose in advance by the rhetor (Latour, 1987) who imagines that it consists of individuals who possess training and qualifications similar to those of the author. This audience is presumed to agree with the author because s/he believes that particular standards of judgment are universal and that her imagined audience adheres to these. To the extent that a text is being written for a universal audience, the arguments and values contained within it are likely to tell us much about what the rhetor believes should persuade the reader to accept a particular viewpoint or undertake particular actions. Accounting standards are ‘‘serious’’ texts, a seriousness emphasized (and amplified) by the use of lengthy sentences and formal language. Here, a reader is hard pressed to find any frivolous, unnecessary or unconventional words, phrases or sentences. As Gusfield (1990, p. 84) has commented in another context: ‘‘The style is marked by a deliberate lack of style.2 ’’ This text does not invite casual perusal by readers with only a mild interest in accounting practices. Instead, the implied audience is an ‘‘accounting expert’’, one expert in untangling the complicated phrasing and in using the highly specialized language of accounting. Even the ‘‘expert’’ will be required to read these paragraphs slowly and carefully in order to understand the rules contained within them. The ‘‘experts’’ include preparers, auditors and regulators. It is the acceptance of this audience of ‘‘experts’’ that the FASB is actively seeking. These groups must implement the standard, develop the disclosures, apply the measurement techniques, and enact the new classifications and categories. New standards create new work, requiring time and effort before the measures, categories and disclosures become routinized as simply another element of financial statement preparation. Throughout the standard-setting process, the FASB has engaged with critics and attempted to persuade them to agree to the simple plot that accounting is broken in particular ways and that this standard will fix these breaks. In preparing its 2 Although as Perelman and Olbrechts-Tyteca (1969, p. 152) note: ‘‘an absence of technique [style] can be a method; even being natural can be deliberate behavior.’’

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final case, the FASB does not simply take this audience of preparers, auditors and others as ‘‘found’’. Instead, the standard appears to be addressed to a ‘‘universal accounting expert,’’ an audience of experts that must accept the FASB’s decisions on pain of being seen as irrational. In attending to rhetoric, we also need to explore what a text asks of its readers. What are the authors trying to convince readers to accept as both true and important in their text? (Gusfield, 1990). As the FASB attempts to persuade its audience to accept its decisions, it also uses the accounting standards to enact particular constructions. These texts are both persuasive and constitutive, performing multiple functions as they attempt to construct a specific standard as ‘‘good’’ accounting and to persuade us to accept this construction as a fact. In undertaking these actions, the standard is written to silence other possible accountings as well as criticisms of the alternative promulgated by the standard-setter. Finally, each of these actions and other rhetorical strategies work to construct the FASB as a ‘‘good’’ standard-setter and to persuade us to accept this construction. To persuade us, the FASB argues from authority, calling upon reality and financial statement users to strengthen its justifications for selecting a particular method or disclosure. It connects these methods and disclosures to values such as practicality and consistency. Simultaneously, it connects criticisms and alternatives to unreality, impracticality and inconsistency in an effort to silence them and to persuade the reader that the promulgated standard is better. The FASB anticipates and reacts to possible objections and criticisms carefully attempting to guide the reader to the conclusion that this is a ‘‘good’’ standard.3 It carefully chooses words and presents us with lists, examples and an extraordinary amount of detail about its processes and deliberations. These act to persuade us that the standard was produced by a ‘‘good’’ standard setter. These devices will be explored further in subsequent sections. In choosing to focus upon rhetoric in this paper, I am not arguing that everything is words or that 3 These efforts resemble the rhetorical strategies used by technoscientific authors as described by Latour (1987).

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only words matter while material conditions are irrelevant. Obviously, structures and institutions also matter as these can preclude some from participating in various processes such as standardsetting. Furthermore, not all rhetors are created equal as they may differ greatly in the kinds and quantities of resources available to them as well as the credibility granted to them (Foss & Foss, 1999). However, words do matter. It is with our words that we construct issues and problems as well as ‘‘solutions’’ in particular ways. It is with words that we persuade others to act which points ‘‘to the power of words to change the world, giving rhetoric both philosophical and political importance by demonstrating its connections with forces that shape reality’’ (Summa 1992, p. 138).4 The remainder of the paper is organized as follows. In the next section, I briefly outline the design of a standard. The succeeding three sections then examine FASB rhetorical strategies in some detail. A section is given to considering those strategies that (construct and) attempt to persuade us that a specific standard is ‘‘good’’, those that attempt to silence alternatives and criticisms and finally those that (construct and) attempt to persuade us that the FASB is a ‘‘good’’ standard-setter. The final section contains some concluding comments.

2. The design of a standard Each accounting standard follows a similar structure. The standard opens with a summary that details briefly the requirements that are enacted with its issuance.5 This is followed by the ‘‘body’’ of the standard which commences with a brief introduction in which the FASB briefly ‘‘sets the scene’’ and outlines its perspective about the context from which the particular accounting standard emerged. Terse statements are made regarding economic events [8]6, concerns of regulators [115] 4

Also see Rich (1993). The practice of including a summary began with the issuance of FAS 23 in August 1978. 6 Throughout the remainder of the text, I employ the following citation convention: [8] references Financial Accounting Standard No. 8 while [52(2)] references Financial Accounting Standard No. 52 paragraph 2. 5

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and others [52] or the absence of ‘‘definitive guidance’’ [12(2)] and consequent diversity [8,12]. These statements are presented as ‘‘facts’’ that support the issuance of new accounting rules in response to these events and concerns. With this section, the stage is set and the audience prepared for the necessity of the rules that follow. The section entitled, ‘‘Standards of Financial Reporting,’’ is placed immediately after the introduction. Here, the new accounting rules are detailed. This section is written in highly legalistic language in which the verb ‘‘shall’’ appears repeatedly. The body of the standard with its multitude of shalls is followed by one or more appendices. Each standard contains sections entitled Background Information and Basis for Conclusions that may be combined into a single appendix or split into two separate appendices. They may be accompanied by other appendices that provide examples of disclosures or other implementation details. These constitute the bulk of the text—more than 60% of the total paragraphs in three of the four standards examined [8,52,115]. Here, facts are marshaled and arguments are presented, considered and disposed. Numerous actors grace the paragraphs of the appendix: regulators, CPA firms, task forces, more anonymous persons, opponents, constituents, financial statement readers or users, proponents, advocates, the many and other standard-setters. They are brought onto the stage of the standard— usually briefly—to make a point or argument, to present a concern or to serve as a reason to accept a position or to act. The Board is by far the most frequent actor within this section and it is the Board that is named, a monolithic entity, one that only very occasionally admits to differences among its members. The next section of the paper explores how the various textual elements of an accounting standard work to persuade us that it is a ‘‘good’’ standard.

connected with an active verb. Thus, it is the statement that ‘‘addresses,’’ ‘‘supersedes’’ and ‘‘amends’’ [115] as well as ‘‘replaces,’’ ‘‘revises,’’ and ‘‘presents’’ [52]. In the introduction to the body of the standard, the statement is again the active entity that ‘‘establishes’’ [8(2), 52(2)] or ‘‘addresses’’ [115(1)] standards of financial accounting and reporting. This way of writing constructs the statement as an active entity and imbues it with an existence and agency apart from the FASB. It is the statement rather than the FASB or any other human organization that establishes, requires, and amends. The FASB is thereby distanced (at least momentarily) from these actions, and this distancing also acts to suggest that accounting exists apart from its human creators. In establishing and requiring, the statement seemingly follows an accounting imperative rather than the dictates of human actors. It is accounting rather than a human agency enacted through standard-setting that decides (determines) the (un)acceptabilility and (in)appropriateness of particular accounting practices. While the Board may make a brief and active appearance during the two to six paragraph introduction to a standard, it disappears from the text as the section entitled Standards of Financial Reporting begins and the ‘‘shalls’’ commence to dominate it. Within this section, the reader is told how various things shall be translated, adjusted (or not), included, recorded, deferred, determined, applied, described, quantified, disclosed, grouped, considered, treated, combined (or not), transferred, retained, conformed, consolidated, written down, restated (or not), remeasured, removed, reported, accounted for, computed, deferred (or not), allocated, classified or excluded. As the length of this list implies, shall appears very frequently in this section of the accounting pronouncement—almost as often as once per paragraph with some paragraphs displaying its use more than once. For example, consider its frequent appearance in FAS 115 para. 15 (emphasis added):

3. A ‘‘good’’ standard The persuasive/constructive work in a standard begins with the opening summary. Here, the text adopts a convention in which the subject, ‘‘the statement’’ (as in the accounting standard), is

‘‘The transfer of a security between categories of investments shall be accounted for at fair value. At the date of the transfer, the security’s unrealized holding gain or loss shall be accounted for as follows:

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a. For a security transferred from the trading category, the unrealized holding gain or loss at the date of the transfer will have already been recognized in earnings and shall not be reversed. b. For a security transferred into the trading category, the unrealized holding gain or loss at the date of the transfer shall be recognized in earnings immediately. c. For a debt security transferred into the available-for-sale category from the heldto-maturity category, the unrealized holding gain or loss at the date of the transfer shall be recognized in a separate component of shareholders’ equity. . .. As illustrated here, the term ‘‘shall’’ is one used ‘‘to express a command or exhortation’’ as well as one ‘‘used in laws, regulations, or directives to express what is mandatory’’ (Webster’s New Collegiate Dictionary, 1976). It appears in ‘‘legalistic sentences’’ to suggest duty or obligation. By using this term repeatedly, the FASB helps to construct the notion that ‘‘laws’’ of practice rather than suggestions for practice are contained within these paragraphs. The sense that laws are being enacted within the standard is reinforced by another convention adopted by the FASB—that of numbering each paragraph. US penal codes and legal systems as well as professional codes of ethics are also numbered (or lettered) by paragraph in order to facilitate ease of referencing (as well as the insertion of subsequent amendments). This standardized numbering system better ensures that individuals distanced in space (and perhaps in time in the instance of recurring accounting issues for a company or auditor) may be confident that they are examining the same section even when using different formats of the same standard. By permitting otherwise distanced readers to be on the ‘‘same page’’ regardless of the text format, the FASB suggests the gravity and significance of this text. The ‘‘shalls’’ and numbering of the paragraphs, thus, impart a seriousness to the standards comparable to that accorded the rules developed by administrative agencies such as the Securities and Exchange Commission, if not similar to the gravity attached to laws enacted by legislative bodies.

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While their constructive aspects are perhaps readily apparent, the use of the imperative and the paragraph numbering convention could be interpreted to suggest the absence of a persuasive intent within this section. Indeed, the FASB organizes its texts in a fashion that explicitly posits a separation between the accounting requirements established by the standard and the justifications or persuasive efforts offered in support of these requirements. In separating the appendix that contains the basis for its conclusions from the technical requirements of the standard, the FASB attempts to persuade the reader that a sharp separation between these requirements and their justification has been (and can be) maintained. However, as discussed above, these conventions are also persuasive devices that work to suggest the gravity and seriousness of the rules outlined within the text as well as the importance and significance of obedience to them. The more explicit persuasive and constructive work begins in the appendices to an accounting standard. In its Basis for Conclusions, the Board lays out various reasons intended to justify its new requirements. Here, the FASB attempts to persuade its audience that the standard is not the result of a process that attempts to achieve some conceptual ideal. As such, justifications about the appropriateness of the various decisions contained within an accounting standard do not rely upon conceptual bases alone. A ‘‘good’’ standard is constructed as one in which the search for conceptual purity has been tempered by other considerations. For example, while the FASB may describe a specific alternative as having ‘‘the most conceptual merit,’’ it also indicates that this method accomplishes other ends such as ‘‘closely reflect[ing] economic effects’’ [52(66)]. The alternatives or approaches enacted within its standards are carefully connected to claims that they reflect reality, provide useful information, are consistent and/or are practical. In making these connections, the FASB increases the difficulty of rejecting its decisions. Connections to reality, users, consistency and the practical work in ways similar to the positive modalities discussed by Latour (1987). These modalities are sentences included in a text for the purpose of enhancing the facticity of

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another statement, and, thereby, making a desired set of consequences appear more inevitable. In the following paragraphs, I examine how the FASB calls upon reality, financial statement users, consistency and the practical to enhance the ‘‘goodness’’ of its accounting standards. 3.1. Reality as an authority Reality is frequently referenced to justify specific decisions within an accounting standard. Many accountants have argued that accounting should reflect reality rather than construct it. Indeed, the conceptual framework maintains that representational faithfulness, the correspondence between accounting and an object ‘‘out there’’, should be a characteristic of accounting information. From this perspective, reality can be thought of as an authority to which accountants must submit when selecting accounting practices and disclosures. To justify its standards, the FASB often invokes reality as an authority to support its decisions. Reality serves as an ally in its rhetorical efforts.7 Sometimes, reality is called upon to justify undertaking a project. For example, in SFAS 115, the FASB argued that accounting changes were needed as ‘‘Current accounting . . . is based not on the characteristics of the asset’’ [115(27)] and ‘‘financial reporting is improved when earnings reflect the economic consequences of the events of the reporting enterprise (such as changes in fair value)’’ [115 (92)]. Similarly, the FASB justified its decision in FAS 52 to alter the requirements of FAS 8 by claiming that the standard ‘‘fail[ed] to recognize differences in economic substance among different foreign currency operations’’, did ‘‘not conform with the underlying economic facts’’ [52(83 and see 71)] and produced results that were ‘‘artificial and illusory’’ [52(88)]. In other words, FAS 8 failed to accord with reality. At other times, the authority of reality may be invoked as an additional justification for acceptance or rejection of a proposal. In FAS 12, the application of the lower of cost or market principle on an individual security basis could be rejec7 See Latour (1987) on the use of arguments from authority to buttress scientific papers.

ted as it was said to conflict with the reality ascribed to investments in equity securities. In particular, this approach was described as ‘‘at variance with the manner in which enterprises generally view their investment in marketable equity securities’’ [12(31)]. Reality was, thus, the authority that required the selection of a specific method of application. Reality was also significant in justifications given for the provisions of FAS 52. Because FAS 8 was said to have produced artificial results that did not accord with reality, the FASB expended considerable effort in the successor statement, FAS 52, to indicate how it would better reflect reality and, in so doing, helped to construct FAS 52 as a better, ‘‘more real’’ alternative. For example, the functional currency approach was considered better than alternatives as it ‘‘provides different accounting for significantly different economic facts’’ [52(84)] and ‘‘will most closely reflect economic effects’’ [52(66)]. The Board further argued that this approach would best maintain the integrity of consolidated financial statements as it would ‘‘portray the best information about the enterprise’’ by ‘‘preserving the actual indicators of performance and financial condition of each component entity’’ [52(98), emphasis added]. The Board also claimed that because of their ‘‘different economic nature’’ or reality [52(121)], foreign currency transactions required a different accounting treatment than did translation adjustments. Reality may also be called upon to dictate the types of accounting changes that are considered permissible once an accounting standard is implemented [52(45)]. In FAS 115, the FASB carefully described its perception of the reality captured by fair value: ‘‘fair value portrays the market’s estimate of the present value of the net future cash flows’’ [115(40)] and it is ‘‘the amount available to cover an enterprise’s obligations’’ [115(41)]. Fair value was depicted as a better measure than the alternative, amortized cost, because ‘‘it reflects the effects of management’s decision to buy a financial asset . . . and then continue to hold it’’ [115(78)]. The move to fair value accounting was further buttressed by arguments about how ‘‘trading and sales practices [i.e. reality] were inconsistent with the amortized cost method’’ [115(31)], its alternative. Furthermore,

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nonfinancial institutions could not be exempted from the fair value requirements of FAS 115 as financial assets ‘‘have the same future economic benefits’’ whether held by financial institutions or some other organization [115(104)]. Similar realities in the nature of such benefits required similar accountings. 3.2. Users as authority Because the objective of financial statements is described as the provision of information that will be useful to investors, creditors and others, these users serve as another rhetorical resource for the FASB. Throughout the Basis for Conclusions, the FASB speaks for the assumed audience of financial statements including, and especially, investors and creditors. Users of financial statements are shadowy figures within the paragraphs of financial accounting standards. They haunt these texts, lurking off-page, until the FASB claims to speak for them. Then, they are ushered briefly onto the page to serve as an additional justification for changing existing accounting requirements. Even though users are rarely presented as actively seeking information or as being consulted by the FASB, they act as another source of authority for the FASB in its standard-setting process. Within these standards, the Board presents itself as the spokesperson for this heterogeneous group and makes assertions on their behalf such as ‘‘the Board believes that users of financial statements are best served by . . .’’ [8(198); 52(125)], that the ‘‘interests of users would best be served by . . .’’ [12(41)], or ‘‘that, in the Board’s view, [x] would not be useful to users of financial statements’’ [115(68)]. Enacted disclosures are those that ‘‘assist users of financial statements’’ in making various assessments [12(32)] as well as in understanding the financial effects of currency rate changes [8(224)]. Mute users are also ushered briefly onto the standard-setting stage through FASB references to the usefulness and/or relevance of specific information. After all, accounting information is supposed to be ‘‘capable of making a difference in a decision. . .’’ by users (FASB, 1980, para. 47). Disclosures are justified by indicating they may be ‘‘useful in evalu-

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ating and comparing reported results of operations’’ [52(141); 8(215)]. New disclosures are claimed to ‘‘inform’’ users [12(31)] and to provide them with ‘‘useful information . . . for purposes of comparing financial data’’ [8(240)]. In speaking for users,8 the FASB rejects proposals that it regards as a ‘‘retreat rather than an advance toward more useful financial reporting’’ [52(62)]. In justifying its proposals, the Board has argued that its favored approach ‘‘preserves [the] most relevant information’’ [52(92)] (and is therefore good) and ‘‘that the changes required by [a] statement will provide more relevant, reliable and useful information’’ than was available before [115(56)]. It may argue for an exception to the use of an accounting measure such as fair value when an alternative ‘‘is most likely to be relevant for a class of transactions’’ [115(58)] even as it simultaneously maintains the relevance of fair value in remaining situations and illustrates its position with examples [115(78)]. While other respondents may question the relevance of an FASB proposal, the Board supposes that it has the best grasp of what information will be useful to financial statement users and may reject a possible approach to a particular accounting situation given that the information ‘‘in the Board’s view, would not be useful to users of financial statements’’ [115(68)]. Relevance and usefulness are rarely connected to any discussion of how users of financial statements employ accounting information in their decisions. As suggested by the above examples, these information qualities tend to be asserted rather than illustrated and are used as general notions that describe a preferred state (Summa, 1992). Relevance and usefulness are seldom connected to any demonstration of how user decisions would be altered by the new information. They have been decoupled from any specific situation in which specific information may impact a specific decision, and instead, act as an indicator of the possibility that the information required by this 8 Only occasionally are others allowed to speak for users. For example, in stating that it was the ‘‘Board’s intention is to encourage disclosure of that kind if, in the opinion of management, they provide useful information’’ [8(223)], the FASB was allowing management to decide what information was useful to financial statement readers.

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standard may have such effects. The assertion of usefulness or relevance is considered as a reasonable justification for a new measure or disclosure, one that acts to stop criticism. 3.3. Claims to consistency Numerous references to consistency and/or inconsistency appear within accounting standards. When invoked as a value, consistency is construed as a desirable end, while inconsistency is undesirable. Given this valuation, an ‘‘inconsistent literature’’ [1l5(27a)] or ‘‘guidance’’ [115(32)] and its elimination [115(97)] as well as the elimination of ‘‘disparity [or inconsistency] in practice’’ [12(38)] are deemed acceptable reasons to justify undertaking a new standard-setting project. The need to eliminate such disparity is considered to be obvious and the reasons that underlie its unacceptability seemingly require no explanation. Standards must also be constructed as internally consistent. In pursuing this type of consistency, the FASB indicates that it rejects those practices construed as inconsistent with an asserted premise or definition. For example, the following explanation appears in SFAS 115: The Board rejected that approach as being inconsistent with the premise underlying the use of amortized cost—that management intends to hold all such securities to maturity (69).9 Similarly, it may reject methods because they are seen as ‘‘inconsistent with the Board’s decision’’ [52(146)] within a specific accounting standard. Finally, accounting standards must be consistent with what has gone before. Even as some elements of existing accounting practice are altered, the FASB tethers these changes to previously issued opinions, standards, research bulletins, and interpretations as well as to more vague references to existing practice. Such connections are forged through explicit references to various accounting documents within the text of the new standard. References to prior GAAP serve

9

Also see 115(76) and 12(33) for additional examples.

a purpose similar to that of citations within an academic paper. In using citations and references, the scientist connects and tethers her work to results that have already been accepted within a particular research community. S/he is thereby to be seen as building upon a foundation laid by others. This strategy demonstrates the writer’s familiarity with her field of research and grants her an authority that might otherwise be withheld. Similarly, references to prior GAAP evidence the familiarity of the FASB with the field of GAAP as formulated prior to the issuance of this standard. Further, as Latour (1987) claims, before the skeptical reader of a scientific report can cast doubt upon its results, s/he must chip away at these results and at the various references and footnotes used to buttress them. In contrast, ‘‘A paper that does not have references is like a child without an escort walking at night in a big city it does not know: isolated, lost, anything may happen to it’’ Latour (1987, p. 33). In calling upon past promulgations and invoking current practice, the Board provides its actions with additional justifications as well as gives its new requirements a weight borrowed from previous practices that might otherwise be lacking. Sometimes, this tethering to the past has the effect of suggesting that a new standard should not be considered a radical departure from the practices which are being replaced (or supplanted). Instead, the new standard is to be considered an incremental change, an element in the natural progression of accounting change and improvement. In making this connection, the Board may remind readers that the statement ‘‘does not change current practice’’ in some particulars [115(90)], that it is ‘‘consistent with present accounting’’ [115(91)] or that it listened to criticisms of respondents by adopting ‘‘a method of reporting currently in use’’ [115(94)]. It may argue that the adopted approach is appropriate because it ‘‘is built upon existing practice’’ [115(54, also see 58)] or that it ‘‘is consistent with accrual accounting’’ generally [52(124)] or with specifically identified existing standards [115(112), 52(134,139), 8(88,94,239)]. The standard may be justified because it ‘‘retains the [typical] timing’’ [8(99)] of recognition of gains and losses under present GAAP. Methods can also be

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rejected for their inconsistency with GAAP. By indicating that a method ‘‘produces results not in conformity with GAAP [8(93), also see 8(134)], or are ‘‘unacceptable’’ [8(149)] or ‘‘departs from’’ GAAP [8(156), also see 105(176,183)], it can be dismissed from further consideration. The Board may also use references to ‘‘considerable support in current practice’’ as a justification for not requiring certain changes [12(29)] or to limit the scope of change within a new standard [115(56)]. 3.4. Invoking the practical Although reality is an important consideration in standard-setting, it can be sacrificed to other values such as that of practicality. Consider that the problem of foreign currency translation was ‘‘complicated by the fact that foreign operations differ greatly in structure and substance’’ [52(67)]. As such, the FASB ‘‘agreed that these variations in economic facts and circumstances should be recognized to the degree it is practical to do so’’ [52(68)]. At other times, reality has been said to complicate the implementation of a more preferable accounting with the result that another approach was adopted [115(51)]. Furthermore, the FASB may decide not to adopt a method that ‘‘is compatible with the expected economic effects of a rate change’’ [8(96)] because this would require ‘‘major changes in the present accounting model’’ [8(97)] with the implication that such a major undertaking is not practical within the parameters of a limited scope project. In a sense, reality is recognized within financial statements only to ‘‘the degree it is practical to do so’’ [52(68)]. More explicit references to difficulties or costs are used to limit the possibilities that the Board may enact in establishing new accounting standards as well as to check the demands of respondents.10 For example, ‘‘significant valuation problems’’ [115(47)] may be referenced to justify limitations in the scope of a specific standard and practical aspects of implementation are considered in deciding how to apply a new accounting standard

10 See the section on silencing for the uses of practicalities to limit the demands of respondents.

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as well as the disclosures that will be required by it [8(158,240,241)]. The Board may limit its search for solutions among those alternatives that can be labeled ‘‘practical’’ [52(66); also see 12(33)]. Disclosures may be considered and rejected given ‘‘the perceived difficulties of developing the information, and the impracticality of providing meaningful guidelines’’ [52(144)] or required to be presented by entities only ‘‘if practicable’’ [8(220,223,225), 52(143)]. Accounting requirements may differ from those adopted in previous standards in recognition of circumstances ‘‘which makes it more practical and less costly to require use of a fair value approach’’ than was considered to be true in a different set of circumstances [115(113)]. The Board may reference the practical aspects of a situation in responding to comments by respondents and maintain that it decided for ‘‘practical reasons’’ to alter a proposal [115(66); also see 8(158)] as well as in deciding what to classify or name a particular transaction [52(130,133)]. The FASB may reject a proposal when ‘‘there are apt to be problems in applying [a] set of criteria’’ in a particular circumstance [8(146)] because ‘‘it may be difficult or impossible under most circumstances’’ to use [8(107), also see 8(120,193)]. Earlier, I noted how practical considerations may impinge upon the realities that may be portrayed within financial statements; conceptual purity may also be sacrificed to these practicalities. The Board may reject what it has termed a preferable conceptual analysis in instances where no ‘‘unacceptably complex or permissive’’ application method can be found [115(51)]. Similarly, an approach identified as the candidate that best served the objectives of the FASB proposal may be rejected on ‘‘practical grounds’’ [52(99)] with the ‘‘practical alternative recommended by many respondents’’ [52(107)] accepted and justified by describing it as a ‘‘pragmatic decision’’ [52(107]. References to practicality serve to suggest that the Board is amenable to various sorts of arguments rather than blindly insisting upon conceptual purity. Such references help to construct standards as practical rather than academic responses to accounting issues as well as to construct the Board as a practical rather than academic organization—an entity that is aware of the difficulties of achieving con-

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ceptual purity and is willing to balance such purity and/or its strivings for ‘‘accurate’’ reflections of reality with methods that can be construed as practically possible. The FASB, through its references to the practical, constructs itself as well as the accountings it requires and creates as ‘‘in and of the world’’ rather than being found in an academic tower. In doing so, accounting is firmly connected to a practical reality rather than to a conceptual ideal. 3.5. Summary What is a ‘‘good’’ accounting standard as articulated in the texts of accounting standards? Conceptual purity is not the only consideration at work in constructing an accounting standard. Instead, adherence to basic concepts of accounting is intertwined with other emphases. Because financial reporting is maintained to reflect reality, reality is constructed and used as an agency or authority that helps the FASB to select the best accountings and disclosures. Reality is seen as ‘‘out there’’ waiting to be brought ‘‘in here’’ within the financial statements through the efforts of the FASB. To the extent that we can bring reality ‘‘in here’’ to reflect economic results and, thereby, possibly impact decisions, then accounting is useful and relevant as is the new standard. This usefulness and relevance is asserted by the FASB as it speaks for the supposed users of financial statements who otherwise remain silent. These mute users act as another authority on whose behalf the FASB speaks. A ‘‘good’’ standard is also one that is consistent–consistent with reality, consistent with what has gone before, and internally consistent. Finally, a good standard is practical. Within the appendices, the FASB is persuading us that the new standard is the best possible given that it ‘‘must reflect reality,’’ be useful and meet the constraints of consistency and practicality. Yet, these elements alone are not sufficient. To persuade us that the standard is the ‘‘best possible’’, other possible accountings and disclosures must also be considered and rejected as must criticisms of the FASB proposal. The ways in which the FASB silences other possibilities and criticisms is considered in the following section.

4. Silencing alternatives Silencing is one of the many actions that a particular text may perform. It has the effect of making the ‘‘rendering of other texts more difficult’’ (Blair, 1999, p. 44). The Basis for Conclusions section of each accounting standard works not only to persuade but also to silence opposition to a standard (with more or less effectiveness). Within this section, the FASB discusses the issues and criticisms raised by respondents to exposure drafts or discussion memorandums that were circulated during the standard-setting process and examines alternative accounting approaches that might have been adopted in lieu of its preferred method. In doing so, the Board briefly outlines either a specific criticism or comment of respondents or an alternative garnered from existing practices or other sources. This is immediately followed by its reasons for agreeing or disagreeing with these criticisms, comments and alternatives. The FASB raises criticisms and objections and immediately works to reduce their validity and importance. In this way, it carefully labors to control its critics moves. Armed with information gained from comment letters, public hearings and other fora, the FASB can readily respond to actual and possible criticisms within the paragraphs of its standards. On occasion, the Board will indicate that its decisions were revised in light of the criticisms and concerns raised by respondents [52(106), 115(85,94)] or respondent explanations regarding the structuring of and reasons for a particular transaction [115(66)]. However, more frequently, the criticisms of respondents and possible alternatives are presented only to be disposed of and thereby silenced. They are highlighted momentarily only to be erased from further consideration. In this section, I explore some of the more frequent techniques employed by the FASB to silence criticisms of a specific standard. As we saw in the previous section, the FASB embeds its preferred disclosures and methods in positive modalities such as adherence to reality, usefulness, consistency and practicality. In silencing alternatives, objections and criticisms are placed within negative modalities (Latour, 1987). They are labeled impractical, not in keeping with reality and/or inconsistent.

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If a ‘‘good’’ accounting standard is practical, then labeling constituent comments and criticisms as impractical lessens their critical punch. In silencing alternatives, the Board often maintains their impracticality. Such claims are regarded as of sufficient importance to reject both suggestions offered by respondents [8(107,188)] and alternative objectives or approaches that were considered by the Board [8(90); 52(62)]. The Board may dismiss respondent concerns by describing the difficulties inherent in a proposal such as how it is ‘‘difficult to isolate [those consequences] from the effects of other events’’ [115(100)]. At times, the FASB may assert that an approach involves ‘‘unreasonable effort’’ [8(188)] or refer to its ‘‘practical and conceptual problems’’ [8(143)]. Approaches may be labeled ‘‘impractical’’ [52(125)] or ‘‘exceedingly complex, if not impractical’’ [8(194)]. Sometimes, these claims about impracticality are supported by examples or explanations [8(90–93)] and, other times, a blunt reference is made to the ‘‘formidable clerical task’’ posed by a particular alternative [52(62)]. To buttress the acceptability of its preferred approach, the Board may contrast it with others asserting that the preferred approach offers ‘‘more practical implementation’’ [8(162)], or is ‘‘a practical approach’’ [8(212)]. Failure to accord with reality or facts is frequently given as a reason for rejecting alternative proposals. Respondents have forwarded alternative conceptions of reality in which fair value accounting was said to result in ‘‘unrepresentative volatility’’ [115(55)] or ‘‘inappropriate volatility’’ [115(57)] of earnings and was ‘‘unrepresentative of both the way they manage their business and the impact of economic events upon the overall enterprise’’ [115(93)]. The FASB responded by maintaining that such volatility is the fact or reality that needed to be reflected in financial statements. Similarly, claims that a FASB proposal would ‘‘distort reported net income’’ [8(196)] were rejected by the FASB which held that ‘‘past rate changes are historical facts’’ [8(198)] that should impact net income. As another example, consider that the FASB posited the reality of trading securities as predicated upon the fact that ‘‘trading generally reflects active and frequent buying and selling’’ [115(80)]. The Board then drew upon this reality

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to dismiss respondent suggestions that could be described as ‘‘inconsistent with the character of trading securities’’ [115(81)]. The Board has also rejected approaches that might ‘‘obscure the reporting of discrete investments’’ [115(68)], or ‘‘obscure the fact’’ [52(75,86)] and produce ‘‘profit margins and earnings fluctuations that do not synchronize with the economic events that affect an entity’s operations’’ [52(86)]. The approaches or measures adopted by the FASB must conform with its reality and so those that do ‘‘not accord with relevant economic facts’’ [52(75)], that ‘‘cannot be described as an accurate measure’’ [8(98)], that would place ‘‘the enterprise in the anomalous position’’ [8(195)], that ‘‘introduce a bias into the translated statements’’ [8(152)], that ignore ‘‘material effects of rate changes’’ [8(165)] or that would misstate operating results ‘‘simply through errors in forecasting’’ [8(192)] can be rejected. Furthermore, exceptions to promulgated rules are allowed only when ‘‘supported by evidence’’ [115(72)]—that is, by a differing reality. Also rejected are approaches said to ignore ‘‘historical facts’’ [52(125)], to ‘‘not accord with relevant economic facts’’ [52(75)], or that ‘‘fail to reflect the effects of possibly very significant economic events at the time they occurred’’ [52(62)] as well as ‘‘the underlying economic reality of many foreign operations’’ [52(63)]. Furthermore, views that ‘‘place emphasis on the balance sheet classification or settlement date rather than on the economic effect of the exchange rate movement’’ [52(126)] could also be dismissed for ignoring reality. Suggested methods that ‘‘mask the economic difference’’ [8(181)], or result in an ‘‘artificial process’’ [8(198)] could be rejected as could measures that ‘‘do not, except by coincidence, represent reasonable measure of replacement cost or selling price. . .’’ [8(134, also 156)] or could ‘‘not be described as an accurate measure’’ [8(98)]. The FASB, at times, lays out the assumptions underlying an alternative proposal only to indicate that reality ‘‘is more complex than that’’ [8(106)]. Occasionally respondents may argue that a FASB proposal is inconsistent with an aspect GAAP [52(89)] or in certain presumptions [8(210)] or that it may ‘‘result in an inconsistent application’’ [115(88)]. Such assertions seldom result in

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change and may be said to be ‘‘without merit’’ [52(89)]. While inconsistency is apparently not a charge that respondents may usefully level against FASB proposals, such allegations can be raised against respondent proposals. Some proposals are silenced by reference to their ‘‘inconsistency . . . under present GAAP’’ [8(118)]; and others are labeled as ‘‘inconsistent in concept and result’’ [52(65)] or inconsistent with particular views [8(136)]. Still others are claimed to produce ‘‘unwarranted inconsistencies in translation’’ [8(190, also see 191)]. By indicating that a method ‘‘produces results not in conformity with GAAP [8(93), also see 8[134]), ‘‘conflict[s] with GAAP’’ [8(98)], is ‘‘unacceptable’’ [8(149)] or ‘‘departs from’’ GAAP [8(156), also see 105(176,183)], it can be dismissed from further consideration. An inconsistent proposal or method may be easily silenced. While the FASB proposals are not constructed as good based solely upon their adherence to some idea of conceptual purity, the perceived absence of a conceptual basis can be used to reject alternative proposals. As such, a proposal may be rejected because it ‘‘is not a general cure for the cited deficiencies and it has little or no conceptual basis’’ [52(64)]. At other times, the Board may ‘‘reject the proposal on both conceptual and practical grounds’’ [52(125, also 126)] or argue that a proposal would ‘‘involve unreasonable effort to make a distinction . . . for which the Board sees no theoretical justification’’ [8(188)]. In claiming that other proposals are impractical, conflict with reality, or are inconsistent, the FASB sets up a situation in which its preferred alternative is favorably contrasted with these others. With this contrast, the preferred approach is seen as superior and a ‘‘good’’ standard that is more practical, more in tune with reality and more consistent than alternatives. This demonstration also increases the difficulty of continuing to argue in favor of a rejected alternative and thereby acts to help silence it. In anticipating criticisms and objections, the FASB attempts to guide the reader of the accounting standard to the conclusion that the standard is a good one. Finally, the recitation of alternatives and criticisms and reasons for their rejection (or occasional acceptance) also works to help construct the FASB as a ‘‘good’’ standardsetter. In listing and responding to these, the

Board suggests an openness to the standard-setting process and its willingness to listen to the comments of others. In the next section, I consider other methods that are used in an effort to construct the FASB as a ‘‘good’’ standard-setter.

5. A ‘‘good’’ standard-setter The Board removes itself from some sections of a standard and portrays itself as an active presence in others. Its appearance within the main body of a standard are limited to the Introduction. Here, the Board may be described as adding ‘‘to its agenda a project’’ [52(l)] or depicted as concluding that certain ‘‘questions . . . require resolution as soon as possible’’ [12(3)]. While the Board appears briefly and performs actions such as adding or concluding, its presence is still a strangely passive one. The FASB is portrayed as responding to the ‘‘concerns’’ [115(2)] or ‘‘requests’’ [12(2), also see 52(1)] of other parties or to economic events that have ‘‘highlighted problems’’ [8(1)] in specific accounting practices that require solutions. Such statements are again presented as evidence, this time to persuade the readers of the statement that the FASB did not initiate the project that later resulted in this standard but was pressed for action. This seeming passivity continues within the appendix that provides Background Information. In this section, the FASB expands upon the information provided in the Introduction in an effort to continue to ‘‘set the scene’’ from which the standard emerged. Changing economic conditions, diversity in practice, inconsistent guidance and/or the absence of authoritative pronouncements are again cited as justifications for the issuance of a standard (8,12,52,115). In addition, the shortcomings of previous standards in reflecting ‘‘underlying economic reality’’ [52(153)] or in encouraging undesirable practices (e.g. ‘‘gains trading’’; 115(31)) may be cited. While more detailed than the Introduction, the scene is still necessarily incomplete with only the barest of outlines provided. Few details are offered and these are depicted as events and concerns that originated outside the organizational boundaries of the FASB but later impinged upon it and its work.

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Within the appendix, the FASB again portrays itself as being urged by others to undertake this work. It presents a ‘‘network’’ of events and actors that have ‘‘enrolled’’ (Latour, 1987) the FASB into agreeing that standard-setting action is appropriate (Young, 1994). Thus, the FASB issues an invitation to comment in response to recommendations by a committee and is ‘‘convinced’’ by respondents that a reconsideration of FAS 8 is necessary [52(151–152)]. A litany of concerns voiced by various actors and the ineffectual or inappropriate actions taken by others are presented as a network that relentlessly and inevitably draws the Board into it and results in the addition of a standard-setting project [115(30–35)]. The network of events, inadequate guidance and regulatory concerns can be presented to impart a sense of urgency, one that impelled the FASB to act [12(26)] and one that shaped the scope of a project [12(27)]. The press of events, the actions and concerns of regulators and the inability of other groups to cope with the matter or their contributions to the problem are presented as though this web of actors and events left the Board with little choice but to undertake this project. In presenting these networks, the Board is seemingly persuading us of its status as a ‘‘good’’ standard-setter in that it listens to concerns and takes action only when necessary—it is constructed as a reluctant participant in the standard-setting process and one that does not act independently of external events and actors. The Background Information is also used as a site from which to recite the procedures that were followed during the process of establishing a standard. The Board maintains that it provides an open forum in which others are invited to participate as members of task forces, to write comment letters, or to present at public hearings. In its Facts about FASB, the Board states that: It is essential that the Board’s decision-making process be evenhanded. Accordingly, its Rules of Procedure require the FASB to follow an extensive ‘‘due process’’ that is open to public observation and participation. This process was modeled on the Federal Administrative Procedure Act and in several respects is more demanding.

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To support this claim, the steps taken by the Board are detailed carefully including the dates on which exposure documents were issued, the length of the comment period and the number of comments received in response to each document; whether a public hearing was held and the number of presentations heard; parties consulted during the project and the appointment, if any, of a task force to help consider these issues. Through this means, the Board communicates its adherence to a ‘‘demanding’’ level of due process and thereby suggests (and claims) its status as a ‘‘good’’ standard-setter. This adherence is again used to suggest to/persuade the reader that the FASB is a ‘‘good’’ standard-setter. While a good standardsetter is reluctant to act, its actions are carefully planned and predictable, and this predictability provides interested parties with an opportunity to comment upon its activities. The FASB is also careful to indicate that its information gathering activities are not restricted to this legalistic process. Instead, it attempts to persuade us that it actively seeks information from others in developing its projects. Thus, the FASB will state that it met with selected others in order ‘‘to better understand’’ [115(36)] the issues involved in particular project or indicate that it consulted with various groups [115(36)] including ‘‘representative organizations of users of financial statements’’ [115(119)] and task forces [52,115]. Sometimes, it references ‘‘significant input’’ [52(41)] from outside sources and other times refers to ‘‘obtained information’’ [12(41), also see 115(98)] as justifications for its decisions. These references work to locate the FASB within the world rather than as isolated within an office building. They suggest that the Board does not operate within a vacuum but rather considers and even seeks information from outside its organizational boundaries. Again, the FASB is carefully placed within a network of actors from which it seeks information prior to establishing an accounting standard.11 11 Unsurprisingly, SFAS 115 contains far more references to consulting with others than did the earlier standards examined here. This greater attention is seemingly related to criticisms of the FASB and its work that have arisen in almost three decades of standard-setting work.

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The comprehensiveness of FASB deliberations are also referenced and illustrated within this section. This comprehensiveness encompasses both the quantity of approaches, comments and alternatives considered as well as the previously mentioned efforts to gain information from outside the organization. To persuade us that all reasonable alternatives have been considered the Board provides copious lists of ‘‘types’’ [8(66)] or ‘‘stages’’ of transactions [8(67)]; ‘‘distinction[s] among various . . . methods’’ [8(121)]; ‘‘alternative answers considered and rejected’’ [8(163), also see 52(60)]; ‘‘criteria’’ [8(184)]; ‘‘factors’’ [12(38)] or reasons [115(60)]; ‘‘questions’’ [12(25)] or ‘‘problems’’ for resolution [115(27)]; arguments opposed [115(42– 43)]; ‘‘techniques’’ available [115(111)]; uses for disclosed information [115(119)]; and ‘‘salient economic factors’’ [52(42)]. While the number of lists varies from one standard to another, they convey a sense of exhaustiveness in deliberation— of attending carefully to detail. This accumulation of detail works to demonstrate the thoroughness of the FASB’s deliberations as well as the depth of its understanding of the issues involved in a specific project. Detail helps the Board to silence alternatives to its proposal. The number and weight of lists, examples, and information gathered protect the text [and the FASB] from objections that readers might otherwise raise. The lists and examples work to suggest that the Board has a greater appreciation for and understanding of the issues than any other participant.12 In so doing, they accord the FASB an authority based upon its in depth understanding and knowledge and suggest we should accept its decisions. The Board not only presents itself as gathering information widely but also as carefully and deliberately pondering it. Consider the FASB’s use of the following phrases and/or verbs: ‘‘is mindful of the fact’’ [12(27)]; ‘‘took into account the fact’’ [12(29)]; ‘‘for these reasons, the Board concluded’’ [12(41)]; ‘‘deliberately chose’’ [115(59)], ‘‘reasoned’’ [8(217)], ‘‘determined’’ [8(78)] and ‘‘endeavors to

determine’’ [115(96)]. In reading the Basis for Conclusions, one finds a Board that concludes or acts only with consideration or deliberation: after considering ‘‘factors’’ [8(54)], ‘‘alternatives’’ [8(82)], ‘‘basic choices’’ [52(60), ‘‘factors’’[12(31)], ‘‘reasons’’ [12(41)] or ‘‘information that it received’’ [52(144)]. It considers ‘‘in significant detail’’ [115(49)] or believes ‘‘based on extensive study and due process’’ [52(69)]. These phrases construct the FASB as in possession of the necessary facts, reasons, and details that are required to write a good accounting standard and thereby also work to construct it as a ‘‘good’’ standard-setter. The verbs used to depict its activities are also suggestive/constructive of a good standard-setter persona. The more frequently used verbs include conclude, consider, reject, decide, agree, believe, recognize and note. Consider, conclude and decide are verbs that serve to portray the FASB as involved in a rational deliberative process—one in which information is carefully used as conclusions are reached and decisions are made. Reject, agree, note and recognize are used to further indicate that this process occurs with input from others as the Board highlights the comments it rejected or agreed with during its deliberations. The absence of certain verbs is also significant. Within an accounting standard, the FASB very rarely requires13and never establishes. Instead, the statement or previously issued pronouncements require and establish these new accounting practices. This suggests a situation in which the Board decides and concludes subject to the dictates of ‘‘good’’ accounting. The FASB does not urge, suggest, criticize, oppose, or argue. Instead, respondents, regulators and various other actors engage in these activities. The absence of these verbs eliminates the connection of the FASB with advocacy. In other words, the FASB does not urge adoption of an accounting practice because of its preferences but concludes that adoption is appropriate as a result of its deliberative, rational processes and the dictates of accounting.

12 This also helps the Board to silence the alternatives to its proposal. The numbers and weight of lists. examples and information gathered also increase the difficulty of arguing against the FASB position.

13 Indeed, this verb was connected to the Board only once in the four standards examined.

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6. Concluding comments What images of accounting standards emerge from their pages? Standards as connected closely in various ways to a perceived reality. Standards as practical. Standards as written cautiously in a dull, monotonous, legalistic language. Standards as products of an organization that follows a specified process. Standards as texts in which the detailed ‘‘shoulds’’ are separated from more explicitly persuasive appeals. With these images and others, we are being asked to accept that good standards adhere to reality and are more practical, more consistent, more useful, and more relevant than alternative possibilities. Similarly, we are asked to accept that a ‘‘good’’ standard-setter is passive with respect to undertaking action, follows a set process, gathers information widely, and deliberates carefully and comprehensively. It does not advocate a position but reaches decisions through a slow, deliberate process. Standards and accounting practices are to be seen as emergent from a rational process that separates the technical and political rather than as the result of the desires or wants of a particular agent or a process of accommodation. As each of these images helps to construct standards as being a particular type of product, they also work to maintain the myth of accounting objectivity. They suggest that accounting can be and is divorced from imperatives other than the demands of economic reality including cost/benefit analyses (one way of interpreting an insistence upon the practical). Within the texts of accounting standards, we observe the FASB acting as a gatekeeper as it also helps to maintain the myth of accounting objectivity. The Board defines the types of arguments that are considered pertinent in constructing accounting standards and attempts to silence those that are construed as irrelevant. Criticisms of a proposal that relate to its possible consequences are ruled to be outside the consideration of the FASB in its standard-setting processes, and consequently as outside the domain of accounting. In communicating its reasons for adopting a particular standard, the FASB attempts to persuade us to accept this standard as good accounting and, perhaps more significantly, that framing the problem

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as ‘‘simply’’ an accounting problem to the exclusion of other possibilities is a valid and acceptable basis from which to establish accounting standards. As we accept a standard as good accounting, we are implicitly accepting that good accounting can be acontextual. We are implicitly accepting the universality of accounting, that it somehow exists outside the particular but that it can still be readily applied to any context. However, in examining the textual, we observe the persuasive elements contained in standards and to sense their silences. In observing the insistence upon the practical, we can see discrepancies between the technical process advocated and the process of compromise followed. We see that justifications based on usefulness or relevance are less often technical appeals than words that increase our difficulty in arguing against a proposal. (After all, how could we not favor the useful or relevant.) In observing claims about usefulness and relevance, we see how our attention may be pulled away from other possible effects or consequences of a particular standard. In focusing upon the rhetorical, we remember that the arguments included in the text were deliberately chosen—chosen to persuade us to accept the standard and to accept a specific and narrow construction of purposes for accounting. The practices were chosen not by an accounting imperative but by specific individuals. Recognizing that choices were made does not automatically imply the standard or standard-setting process should be rejected nor does it imply the process should be accepted without further discussion and consideration. Recognizing that choices were made does require that we evaluate not only the choices but also the values that underpin them as values enter into every argument and every choice. Do we want accounting to be considered only in terms of its practicality, consistency and perceived connections to reality? If so, to which of these values do we wish to assign primacy? If not, what values/characteristics do we believe should guide us in selecting specific accounting practices? In raising these questions, this paper adds another voice to the chorus of researchers that deny the possibility of separating accounting from the social and political and the

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