Practices of Standard-Setting : An Analysis of the IASB's and FASB's Process of Identifying the Objective of Financial Reporting

In their revised conceptual frameworks, the IASB and FASB pronounce that in their view valuation usefulness is the single objective of financial reporting. The present paper addresses the question how this decision was made by the boards and why stewardship was not identified as a separate objective. Drawing on Flyvbjerg's work on rationality and power, the paper analyses the practices of standard-setting in the specific case of the framework revision. The qualitative empirical study is based on the material which is publicly available from the due process of the IASB and FASB and also builds on interviews with board members, staff members and constituents. This paper finds that the decision usefulness programme, developed in the US in the 1970s, was the body of knowledge which primarily shaped and limited the debates during the framework revision. While decision usefulness was taken for granted by all participants, even by those who were arguing for a separate stewardship objective, no alternative rationality or programme associated with stewardship was discussed in the standard-setting arena. The paper also shows that a “mundane” organisational structure put the staff in a crucial position to influence board debates and sheds light on how disciplinary and self-disciplinary techniques affected board members' decision-making in the framework project