International accounting standards setting and U.S. exceptionalism

This paper explores the relationship between the institutional arrangements for setting financial accounting standards in the United States of America (U.S.) and the International Accounting Standards Board (IASB) with a view to exploring the likelihood that the U.S. will adopt IASB standards in place of its own. Our paper highlights the role of nationalistic and political influences on international standard-setting. Although the Financial Accounting Standards Board (FASB) and the IASB have formally agreed to work towards “convergence” of their two sets of accounting standards, we argue that the form of the final outcome of that arrangement remains highly uncertain. The result may either be the continued existence of significant differences between U.S. and IASB accounting standards or, perhaps more likely, a “domination” of IASB accounting standards by the FASB. Our reasons for this belief are derived from the relatively short-term nature of the political incentives currently driving convergence efforts between the U.S. and the IASB; most notably the lack of clear incentives for U.S. firms to adopt international standards, regulatory capture as a result of the relative power of the U.S. in international affairs vis-à-vis other nations, power struggles between the various regulatory bodies in the U.S., and a well documented history of “American exceptionalism” as a means of defending U.S. sovereignty in matters of U.S. foreign policy. © 2005 Elsevier Ltd. All rights reserved. ∗ Corresponding author. Tel.: +61 8 8303 4760; fax: +61 8 8223 4782. E-mail address: [email protected] (B. Howieson). 1045-2354/$ – see front matter © 2005 Elsevier Ltd. All rights reserved. doi:10.1016/j.cpa.2005.08.011 1008 P. De Lange, B. Howieson / Critical Perspectives on Accounting 17 (2006) 1007–1032