Now that due process is successfully embedded as the route to standard setting, the IASB’s legitimacy is assured
I have agreed with this statement that now that due process is successfully embedded as the route to standard setting, the IASB’s legitimacy is assured. As a consequence, the IASB should be benefit on the all parts of the participants based on legal process and professional body.
(1) positive side
The theory of public interest argues that accounting rules are created to correct market failure. In this theory, accounting standards bodies or framers are presumed to be altruistic, trying to maximize social welfare through regulation. Therefore, the accounting standard setting behavior is considered as the tradeoff between the development of cost and the social benefits brought by the improvement of information asymmetry. This theory shows the accounting standards formulated by the ideal goal, but there are some obstacles to guide the practice, on the one hand, because of the complexity of the accounting information, standard-setters is difficult to determine the appropriate to meet the needs of the public regulation number due to the existence of the economic consequences on the other hand, there are differences between the motivation of accounting standard setters, and in the social public and the legislature cannot be effectively supervision and accounting standards setting bodies to act in the public interest, it may form a kind of accounting standard setting bodies will be on the basis of their own interests rather than according to the guidelines for public interests. The limitation of public interest theory leads to the emergence of interest group theory (Larson, & Kenny,2011).
Interest group theory, a kind of industry is run under the existence of various interest groups, these interests will be for the number of different accounting standards, type, nature and degree of lobbying to standard setting bodies, they constitute criterion of demanders. The theory is that accounting standards is a commodity, it has both demand and supply and demand in a variety of circumstances, it can only be allocated to those who the most politically can effectively persuade provide the interests of the control group, the theory can well explain and predict the west on the basis of the formulation process. However, it simplifies the supplier of accounting standards to an interest group, that is, the formulation of accounting standards is a supply monopoly model for a supplier of multiple needs. As a matter of fact, whether it is a domestic or international accounting standards, its makers are not only a kind of sound, different interest groups or constitute different standard-setting institutions directly, either in the same standard setting bodies, but actively seeking control of standard setting. In terms of the game of international accounting standards, at different stages of development, the above two situatio