The European Union's Foreign Economic Policies: A Principal-Agent Perspective by Andreas Dur & Andreas Dür & Manfred Elsig

Author:Andreas Dur & Andreas Dür & Manfred Elsig [Dur, Andreas & Dür, Andreas & Elsig, Manfred]
Language: eng
Format: epub
Tags: Political Science, International Relations, General, Political Economy
ISBN: 9780415667210
Google: CTkKTwEACAAJ
Goodreads: 13131233
Publisher: Routledge
Published: 2011-09-02T00:00:00+00:00

Accounting Standards

Of the three cases discussed here, accounting standards are clearly the area in which EU member states’ agents enjoy the highest profile. Paradoxically, and discussed in detail below, these agents’ discretion and influence stems from the lack of European stakeholders’ influence over accounting standards themselves, which are – barring rare exceptions – set by the International Accounting Standards Board (IASB) (cf. Leblond 2011). The relative homogeneity of principals’ preferences, compared to the two preceding cases, made it easy for member states to delegate authority in this domain. And the pre-existence of the IASB meant that European governance structures were set up to take heed of the extra-European dimension of accounting standard setting.

A brief sketch of accounting standards-setting in Europe helps to elucidate the paradox of the EU’s strength in this domain (Dewing and Russell 2004). In the 1990s, EU member states still required domestic corporations to use national accounting rules (Nobes and Parker 2000). The internationalization of capital markets in that decade, and the emergence of Wall Street as their undisputed epicentre, enticed many multinational corporations to seek listings on US stock exchanges, forcing them to comply with US accounting rules as well. Lest these firms be doubly burdened, EU governments slowly began to accept the so-called US Generally Accepted Accounting Principles (US GAAP) as a template for reporting duties at home (Haller 2002). In short, the rise of US stock markets threatened to enshrine US rules as the de facto global standard. This situation pitted US authorities against EU member states, regardless of differing substantive preferences among the latter. Even though member states’ substantive preferences differed, they were united in their attempt to establish at least a modicum of European influence in global accounting standard-setting.

Instead of developing its own standards, the Commission won member state support for an alternative strategy: throwing the EU’s weight behind the International Accounting Standards Committee (IASC, the precursor to the IASB). This private initiative by accounting professionals had set out decades earlier to develop a new, ‘pure’ set of accounting rules that would bear the imprint of expertise and best practice rather than national idiosyncrasies and historical accidents (Camfferman and Zeff 2007). Hitherto, its efforts to convince governments to swap their own rules for those of the IASC had mostly been futile, certainly among OECD countries. EU endorsement was to prove crucial to the international success of International Accounting Standards (IAS, later rechristened International Financial Reporting Standards). Though EU efforts to win US support for IAS initially failed, the EU itself formally adopted IAS in 2002 and mandated firms listed on European stock exchanges to use the accounting rules starting in 2005 (Dewing and Russell 2004).

From the PA perspective, the arrangement in accounting standards is complicated as two agents make policy on EU member states’ behalf (for a PA take on the US set-up, see Mattli and Buthe [2005]). The setting of the standards themselves has been delegated to the IASB. Formally, the IASB is fully independent and hence enjoys tremendous discretion (Donnelly 2007).

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