Musings on Accounting Research by Steve

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Monthly Archives: August 2018

It’sssss backkkkkk – the conceptual framework

While I Knew in principal that both FASB and IASB were playing around again with a ( they like to call it THE – that is a socially constructed notion) conceptual framework I did not know they were taking themselves so seriously. In a speech to the American Accounting Association Christine Botosan (CPA, CA the hidden Canadian on FASB ) gave a talk at the plenary session on the moves Being made toward a new internally consistent deductive conceptual framework to guide standard setting. If she said it once she said it four time “internally consistent deductive framework” would almost solve all ills and that relevant information had to have priority as relevance trumps all in decision making.

First, there is no behavioural evidence I know of that says relevance trumps every other dimension of decision making. Certainly white noise and not relevant information would at best be neutral however in financial accounting we are dealing with trade offs along degrees of relevance as it is rare that a piece of information in it the normal range considered b standard setters is clearly white noise or not relevant.

Second, is it better that each investor access future uncertainty (and here I an focusing on the classic distinction between risk and uncertainty) based on reliable information about the present state of affairs instead of having one potentially more relevant future oriented information data point provided by experts that the investor does not appreciate the degree of uncertainty about that number? The hubris around much of Accounting in this area is that it thinks we are dealing with ” risks” rather than uncertainty.

The wisdom of the crowd when accessing an uncertain future event is generally at least as good as the best expert wisdom and often better according to a long line of research. Anyhow I am ramblings but now you know it is really back!

AAA – the broom closet with no room for brooms

About a decade ago if you had held a panel session on qualitative accounting research at the AAA you could have held it in a broom closet with room left over. Today over 100 folks came to a panel discussion at the AAA on quality in qualitative research! Even better was the fact slightly less than half the room had done it and nearly 100% were interested in doing so!

Most of my readers are familiar with my views on research diversity and the need to use the most appropriate methods to identify and address practice issues. Field research enhances your engagement with the field of practice ( however you define practice). And with doctoral programs like Georgia, Illinois, UMASS Amherest all recently graduating PHD’s with this method in their toolkit, we may be on the verge of the breakthrough I have long advocated for in the USA. Further the placements of those students has been stellar Emory, WISCONSIN, Northeastern, and more.

This combined with the first qualitative interview paper being published in TAR in the last 30 years coming this fall, along with the combined survey interview research being done by Shiva Rajgopal (Columbia) and Michel Clements (Texas) and others in financial accounting published in JAE and JAR means the ” big 6″ Accounting journals ( however you define them from among TAR, CAR, AOS, JAE, CPA, JAR, MAR, AAAJ, AJPT, RAST) have all published such research in recent years – many with multiple articles!

And that’s the way I see it at the first day of work at the AAA.

The day before the deluge

Setting here in hot and muggy Washington DC after doing my first event of the AAA.  The joint journal editors/publications committee meeting.   One of the key messages is that there is a strong likelihood of a major disruptive event in academic publishing over the next X years, where X is a small number greater than 6 months and less than 60 months.  I think most editors in the room were oblivious to this trend or the potential importance of it to academic publishing. But then again, as the old saying goes “it is hard to remember the objective was to empty the swamp when you have alligators biting your butt!”  I will let you make the analogy.

What would this event be? It will be likely to be around the integration of data sets, analysis code, video technology and a change in the publishing platform of record – the traditional PDF file towards a technology that easily integrates these other aspects.  Hearing this I am glad that my current research team is working on a video version of our latest research – on audit research knowledge transfer to standard setters.  I thought it would be a good means to communicate our message to the standard setting community but it may indeed become part of the version of record of our final article if these trends move as fast as expected.  Hope to unveil the video by mid-September!!!

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