A Non‐Market Demand‐Based Approach to the Selection of Financial Reporting Standards

As Gonedes and Dopuch point out, there are many alternative approaches to the allocation of financial accounting information which might be viewed as competitors to ASC, FASB and other extant processes. Even if one begins with the ethical premise that “individual preferences are to count” and it is assumed that some sort of regulatory approach is needed, there are still at least three basic types of standards‐setting processes worthy of consideration: (1) “representative or expert body” processes; (2) “voting” processes; and (3) “demand‐based” (i.e. “willingness‐to‐pay”) processes. While the first type relies on the delegation of decision making authority to a body of “representative” or “expert” parties, the latter two types base their respective decisions on ordinal preference and demand information elicited directly from the affected parties themselves.