1

● CFO良师益友，一个旨在鼓励资深CFO/财务总监去帮助其他财务人员快速成长的公益项目。由美国国际高管导师协会的高级副总裁余道江先生倡议，并快速得到全球多位业界顶尖CFO认同与支持。

● CFO良师益友公益平台已经聚集近9000名全球大公司的CFO/财务总监，平台专业财务会员已达到20万人，开

展的公益活动有：

–管理会计大讲坛

–500强公司CFO校园行

–CFO导师一对一结对

–组织各类线上线下分享

CFO良师益友简介

欢迎扫码关注：您可以成为导师， 帮助他人；您也可以成为学生， 接受他人的帮助；您更可以成为传播者， 为平台添一份力！

Accounting Concepts, Practice, and Regulation:

Comments on the U.S. Experience

Jonathan Glover James L. Dohr Professor of Accounting

Columbia University

3

Outline

●Conceptual Frameworks of Financial Reporting

●Understanding Financial Reporting Practice using Information Economics

●Accounting Regulation and Financial Reporting Culture

4

Financial Reporting Standard Setters in the U.S.

●Financial Reporting Standard Setters in the U.S. (all overseen by the U.S. Securities and Exchange Commission):

–Committee on Accounting Procedure (CAP) from 1939 to 1959

–Accounting Principles Board (APB) from 1959 to 1973

–Financial Accounting Standards Board (FASB) from 1973 onwards

5

Conceptual Frameworks

Pre-FASB (before 1973) – The era of accounting theories by accounting academics:

–Hatfield’s Modern Accounting (1909)–Paton’s Accounting Theory (1922)–AAA’s A Tentative Statement of Accounting Principles

Underlying Corporate Financial Statements (1936)–Sanders, Hatfield, and Moore (1938)–Paton and Littleton (1940)–Edwards and Bell’s Business Income (1961) –Moonitz (1961) and Sprouse and Moonitz (1962)–AAA’s A Statement of Basic Accounting Theory (1966)

6

Conceptual Frameworks

●As Reed Storey wrote, Sanders, Hatfield, and Moore (1938) was “the first relatively complete statement of accounting principles and the only complete statement reflecting the school of thought that accounting principles are found in what accountants do—the school which emphasizes the accepted part of ‘generally accepted accounting principles’.” It was the “first major building block in the structure of accounting principles.”

7

Conceptual Frameworks

●Wheat Committee Report (1972) led to the creation of the FASB, the first full-time board to set accounting standards in the U.S.

●Trueblood Committee Report. Objectives of Financial Statements. American Institute of Certified Public Accountants, New York, 1973.–Largely adopted by the FASB in their conceptual

framework in the late 1970s.–Emphasized the decision-usefulness perspective, based

on leading accounting theories of the day.–No strategic interactions (e.g., moral hazard and

adverse selection).

8

Conceptual Frameworks

●The Wheat Committee Report advocated the FASB involve academics in their work on its conceptual framework—advice largely ignored in recent years.

●The formation of the FASB can be seen as the point at which standard setters and accounting academics traded places in their normative vs. positive orientations (Glover, 2014; Macve, 2014; Zeff, 2014).

●Appeals to economic theories in the FASB’s deliberations on their Conceptual Framework are mostly to theories of perfect and complete markets in which there is no demand for accounting. Accounting from (not for) markets!

Conceptual FrameworksYuji Ijiri, Theory of Accounting Measurement (1975):●The situation changes completely if the person invests someone else’s money in a business. He has contractual (or at a minimum moral) obligations to account for how the money was spent and how it was earned.

●Accountability is what distinguishes accounting from other information systems in an organization or in a society.

●Many aspects of current practice that appear to be odd and without reason can be understood consistently if we view accounting measurement as being essentially performance measurement.

9

Conceptual FrameworksYuji Ijiri, “On the accountability-based conceptual framework of accounting” (1983):●It is the world of I and You, not the world of I and It with which the accountant must deal.

●Accounting should be defined, explained, and taught as such.●To do otherwise is not only misleading to the public but also dangerous to the accounting profession because it widens the gap between what accounting really is and what the public thinks accounting is.

●Yuji stressed the importance of trust and verification and “the right to know” and “the right to privacy.”

10

Conceptual Frameworks3 of Ijiri’s 3s:●Accountability Relationship among:

– Accountor– Accountee– Accountant

●Hardness of Accounting Measures:– Verifiable facts– Well-specified measurement process– Restricted number of justifiable rules

●Historical Cost Accounting Explained by Axioms of:– Control– Quantities– Exchanges

11

Incentive Theory: Adverse Selection

●The problem of adverse selection arises when individuals have private information and incentives to misrepresent that private information.

●Economic models of adverse selection have been widely applied to design a variety of real-world mechanisms, including: auctions, procurement, versioning, and pricing in general.

●Adverse selection has also been used to understand existing management practices (e.g., rationing in capital budgeting) that are difficult to make sense of using neoclassical economics.

12

Incentive Theory: Moral Hazard

●Moral hazard arises when individuals do not bear the full consequence of their hidden actions.

●Insurance reduces the risks that individuals bear, which can be beneficial if those individuals are risk-averse.

●At the same time, insurance can lead to reckless actions.●The financial crisis of 2008 is often described as having (individual) moral hazard at its core.

●What about coordinated moral hazard caused by bailouts (Arya and Glover, 2005)? Correlated risk-taking seems to be an increasingly important problem in financial markets. Passive investing?

13

Insights from Information Economics●Earnings Management

–Smoothing to convey managerial expertise (Demski, 1998)–Limiting corporate board intervention to attract and

motivate CEOs (Arya, Glover, and Sunder, 1998, 2003)●Accounting Conservatism (managerial, auditor, and GAAP)

–Signaling confidence about the future (Lin, 2006) –Combatting opportunistic reporting (Gao, 2013)–Fostering relationships (Glover and Xue, 2018)

14

Insights from Information Economics●Recognition Thresholds

–Tradeoff between recognition and measurement manipulation (Herz, 2013; Glover, 2013; Dye, Glover, and Sunder, 2015; Gao and Jiang, 2018)

●Measurement Quality vs. Information Asymmetries about Measurement Quality–Robust incentives (Glover and Levine, 2018)

●Reporting Timeliness–Disciplining role of accounting on softer information

sources (Ball and Brown, 1968; Dye, 1983)

15

Norms and Regulation●How do we foster a good financial reporting culture?

●“It’s not obviously - shall we say - the moral thing to do, but I’m not willing to sacrifice my personal performance and four years of hard work for someone that is willing to do it and get away with it.”– Cameron van der Burgh (Gold Medal Winner in the 100m

Breaststroke at 2012 Summer Olympic Games)

●Culture can be thought of as a multiple equilibria or coordination problem (Kreps, 1998).

16

Norms and Regulation●Emergent norms—norms that emerge from practice and are enforced by mutual monitoring/peer pressure, not regulation.

●Good norms reinforced by mutual monitoring and regulation—regulation that fosters tacit cooperation.

●Bad norms targeted by regulation—regulation that targets tacit collusion.

●Regulation that targets individual firms (the status quo?).

17

Emergent Norms●George O. May’s evolutionary view of accounting standards emerging from practice (GAAP).

●Positive view of standard setting in the sense that standard setters look to practice to learn from and generalize in developing standards.

●The standard setter also has a role to play in creating common knowledge of the standards.

●The CAP largely followed the emergent norms approach, with a little pruning.

●Generally Imposed Accounting Principles (vs. GAAP) limit the room for good norms to emerge from practice.

18

Mutual Monitoring/Team Incentives

19

Good Norms Reinforced by Regulation●Regulation and standard setting used to set the stage for mutual monitoring—a less ambitious (and less costly) role for regulators and standard setters.

●Long-term relationships and mutual observability, usually viewed as a problem because of collusion, are to be fostered. Collusion can be turned into cooperation (beneficial to shareholders) if the regulator provides the right incentives.

●Penalties when there is widespread bad behavior.●In general, (expected) regulatory penalties can be smaller than they otherwise would be because of mutual monitoring.

●Controversial because of explicit or implicit joint accountability.

20

Good Norms Reinforced by Regulation●Over-regulation gets in the way of mutual monitoring by reducing the frequency of future self-governed interactions.

●Bailing firms out when they all “misunderstand” what the appropriate accounting treatment is (e.g., CFO letters from the SEC) is a form of relative performance evaluation and can foster a bad reporting culture. In general, relative performance evaluation undermines incentives for mutual monitoring (Che and Yoo, 2001).

●Strategic complementarity between firms enhances mutual monitoring, while strategic substitutability undermines mutual monitoring and can foster collusion (Glover and Kim, 2018).

21

Targeting Bad Norms●Regulation used to eliminate unwanted equilibria.●Large penalties when bad practices are discovered to be wide-spread (can be difficult for a regulator to commit to).

●Investigations targeting contagion in financial reporting:–Stephen Cutler (2004): “We need to reach beyond

investigating the cause of every announced restatement, to probe industries or practices about which we have concerns or suspicions, but no clear roadmap to wrongdoing”

–Pre-clearance processes should not be viewed as registrant-specific.

22

Targeting Bad NormsPreparer-Financial Engineer Relationship:●Why not require disclosures about external advice on structuring transactions to achieve an accounting objective?

●SEC could again require additional disclosures for specific transactions.

●If the transaction could have been replicated with simpler arrangement (e.g., one contract instead of two), adopt or disclose the accounting treatment of the simpler transaction.

●Have financial engineers register with the SEC products that describe accounting treatment as a feature of the product, along with their customer lists for such products.

23

RecommendationsStandard Setters:

–Look to theory for new perspectives and to understand tradeoffs, not for clear-cut answers.

–Don’t forget what GAAP stands for or the central role of accountability!

Regulators:–Reporting culture: collusion on bad financial reporting

norms can be reshaped into cooperation on good norms.–The optimal design is almost certainly country-specific.–Don’t try to do everything!

Academics:–More research on financial reporting culture. –Get back to studying accounting theory!

24

Accounting as the Life-giving Garment of Business

25

GEIST:In Lebensfluten, im TatensturmWall ich auf und ab,Wehe hin und her!Geburt und Grab,Ein ewiges Meer,Ein wechselndes Wehen,Ein glühend Leben,So schaff ich am laufenden Webstuhl der ZeitUnd wirke der Gottheit lebendiges Kleid.

SPIRIT:In the floods of life and creative stormTo and fro I wave.Weave eternally.And birth and grave,An eternal sea,A changeful strife,A glowing life:At the roaring loom of the ages I plodAnd fashion the life-giving garment of God.

-From Goethe’s Faust (1808)

26

财务要升职，就找升职通

职场金字塔，只有少于20%的人能把握升职通道口。而超过80%的人却没有这么幸运，即使手握大把证书，也没有升职机会，原因何在？没人指点？方向错了？没人举荐？

现在，升职触手可及！！！！！

（名师指点+努力=升职）年薪数百万的CFO导师资源一对一的专业指点导+推荐工作36个月内升职保障，不升职全额退款 更多详细信息请扫描上方二维码

“财务升职通”