Thirdly, financial market experts like banking regulators motivate Chirac to voice against the proposed amendments in IAS 39 (Virginia law and business review, 2008, vol 3, p.299) so may be Jacques Chirac was also lobbied by the banks because they will be significantly affected by these new provisions.
Fourthly, Jacques Chirac was motivated by Continental Europe as they proclaim independence from U.K and U.S in accounting matters as France has different culture of accounting (the equivalence approach to securities regulation, May 2006, p.43).
Lastly, Jacques Chirac believed that with the adoption of the proposed amendment in the IAS 39 derivative accounting standard led to nefarious consequences on the financial stability of the firms throughout the Europe and affecting the economy as well (Despite uproar, European investors favour global accounting standards, October 2006, P.1). So may be he was lobbied by the corporations which was largely affected with the introduction of these new provisions in the IAS 39.
QUESTION 2 – 3.22
- Public interest theory of regulation explains the actions of the Sir David Tweedie. Public interest theory reflects that regulation should benefit the society as whole not just vested groups. In this case also these reforms are made for the benefit of the public in order to save the society from the financial losses due to corporate collapses. It is assumed that economic markets are subject to series of market imperfection and if unattended this will result in inefficient and inequitable outcomes like corporate collapses. As it is shown in the article that the zeal for reform is followed by the collapse of various big companies like HIH, Enron, WorldCom and Onetel. So these collapses are the results of market imperfections and these standards work as regulators for them. Tweedie even say that he will not come under the pressure of the big businesses to change the standards unless he proved wrong. So he is making standards to save them from the financial losses as a result of manipulations by the companies.
- Economic interest theory of regulation appears in that case to show the lobbying efforts of the European banks. European banks are the form of group which wants to protect their interests. Even in this article it is mentioned that they had made a group under the banner of the European Banking Federation and are trying to lobby the IASB to gain the preferential benefits. They are lobbying the IASB to make standards according to their economic benefits and succeed in their purpose. IASB proposed to use a cash flow hedge accounting to account for the derivatives. They opposed this proposal as they believe it creates an artificial volatility in their reported equity and therefore affects their financial stability.
- Economic interest theory of regulation appears to explain the lobbying efforts of the European insurance companies. As they see that Europeans Banks had succeed in winning concessions from the IASB, they also formed a group of chief executives of the European insurance companies to change the standard on the financial instruments for which the banks had fought over. Insurance companies are worried about their own businesses that this standard also add volatility to their financial reports and affects their profitability as standard needs to show the profits and losses from these investment assets on the profit and loss account. Moreover, in this theory of regulation groups are in conflict with each other and the most powerful groups from them will win by lobbying the government to gain a preferential benefit. In this case also Insurance companies are in conflict with the banks.
- No, the actions of the Ruth Picker do not appear to be consistent with the view that she has been captured by the business organisations. Ruth Picker is negotiating with the IASB for the easier transition to the new rules on valuing the internally generate intangibles as she was compelled to do so for the benefit of the Australian economy. This statement clearly indicates that she was acting in the best interest of the society and the corporations, as the wiping of $ 40 billion from Australia’s balance sheet is not in the best interest of the Australia’s economy. Her action appears to reflect the public interest theory. She still supported the new standards as she believed that their adoption will bring long term benefits to the economy because with the harmonisation of accounting standards, overseas investors encouraged to invest in the Australian companies as it enhanced comparison. So her actions are still for the welfare of the economy.
References
Accountancy age, IAS, who’s who – setting the Pace, 03 November 2003, viewed 6 April 2009.
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Craig Deegan, 2008, Financial accounting theory, Mc Graw- hill, Australia.
Drever M, Stanton P, Mc Gowan S, 2007, Contemporary issues in accounting, Wiley, Queensland.
Hal S, Scott and Howell Jackson, the equivalence approach to securities regulation, May 2006, p.43, viewed 7 April 2009. <>
Kennard S. Brackney and Philip R. Witmer, The European Union’s Role in International Standards Setting, November 2005, viewed 6 April 2009. <>
Stanford Graduate School of business, Despite uproar, European investors favour global accounting standards, October 2006, viewed 6 April 2009. <>
Virginia law and business review, 2008, vol 3, p.299, viewed 7 April 2009
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