Evaluating accounting standards: A comment on Ramanna's 'the international politics of IFRS Harmonization'

Abstract

Ramanna (this issue) argues that the big question at the centre of IFRS research is: “is the political process underlying IFRS facilitating the production of economically efficient standards?”, and presents new evidence that is informative about the political process underlying IFRS adoption decisions. In this comment, I explore how questions about the economic efficiency of standards might come to be answered. The current expertise-based approach to the evaluation of accounting standards is likely limited because it requires the deployment of expertise where it is likely least valuable, in low-validity/low feedback environments. I propose regulatory field experimentation as a potential alternative means of accumulating the knowledge required to perform effective expertise-based evaluations of standards. But field experimentation could be costly and politically controversial. The proposal to permit multiple accounting standard-setters to compete in a given jurisdiction may be an effective means of reducing the reliance of the evaluative system on expertise, replacing it with market feedback.