From “reliability” to “faithful representation”

Enron Texas
The accounting scandals of the early 21st century, starting with the collapse of Enron and of the most well-known audit firm in the world, Arthur Andersen, started an effort to improve the conceptual framework for financial accounting and reporting. This building was the former headquarters of Enron. Photo: Wikipedia
PhD Defence

1 December 2017 11:07

From “reliability” to “faithful representation”

On Friday 15 December 2017 Hilde Kinserdal will hold a trial lecture on a prescribed topic and defend her thesis for the PhD degree at NHH.

Prescribed topic for the trial lecture: 

"Is the spesification of information qualities a viable basis for the development and justification of financial accounting?"

Trial lecture:

December 15   10:15 in Karl Borch Auditorium, NHH

Title of the thesis:

From “reliability” to “faithful representation”- more than a change of wordings?

Summary:

The thesis "From ‘reliability’ to ‘faithful representation’- more than a change of wordings?" is a monograph. It examines the collaborative effort of the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in the US to develop an improved conceptual framework for financial accounting and reporting.

Hilde I Kinserdal
PhD Candidate Hilde Kinserdal, Department of Accounting, Auditing and Law, NHH.

The FASB/IASB-collaboration to produce an improved conceptual framework was prompted by the accounting scandals of the early 21st century, starting with the collapse of Enron and of the most well-known audit firm in the world, Arthur Andersen.  In the first draft of the converged framework, the FASB/IASB proposed to replace the term “reliability” as a qualitative characteristic of useful information by the term “faithful representation.” Despite widespread opposition among the FASB/IASB`s constituents, the change was made.  The FASB/IASB tried to assure its constituents by stating that “it is just a change of wordings”.

The thesis investigates whether this claim is correct. It uses the method of conceptual enquiry that has its theoretical underpinning in Ludwig Wittgenstein`s view of language. This investigation demonstrates that the claim is not correct. There is a change in concepts and not just in wordings. 

Concepts are developed to meet needs, they do not just happen. The debate about qualitative characteristics is precisely a debate about what qualities are wanted from financial reporting and which underpin standard setting. The qualitative characteristics are, like the objectives, developed by thinking about what makes information useful for decision-making.  The thesis reveals what is actually happening with this change. In fact, there is an attempt to alter what is wanted from standard-setting in an attempt to reinvent financial accounting and reporting. The thesis identifies and analyses fundamental questions about conceptual frameworks and about financial reporting.

Defense:

December 15    12:15 in Karl Borch Auditorium, NHH

Members of the evaluation committee:

Professor Hanne Nørreklit (leader of the committee), NHH (adjunct prof.) and Aarhus University

Professor Christoph Pelger, Universität Innsbruck

Professor Falconer Mitchell, Edinburgh University

Supervisors:

Professor Frøystein Gjesdal (main supervisor), Department of Accounting, Auditing and Law, NHH

Doctor Ian Dennis, Oxford Brookes University

The trial lecture and thesis defence will be open to the public. Copies of the thesis will be available from presse@nhh.no.