Fair value accounting: epistemic commitment and resistance

Abstract

ABSTRACT This study responds to calls for additional research on how accounting prescriptions are being operationalised with a specific focus on fair value accounting by individual practitioners. Detailed interviews are carried out to evaluate how accountants understand and resist fair value accounting. The nature of resistance is used to distinguish between proponents of historical cost accounting and flexible adherents to fair value accounting. Contrary to expectations, the former do not reject fair value accounting outright but see it as playing a complementary role when fair value disclosures support historical cost accounting. Resistance is only evident when fair value movements are recognised in financial statements and takes the form of technical and conceptual objections. Departures from accounting standards are, however, avoided with the result that historical cost advocates are reluctant but obedient adopters of fair value accounting. Flexible adherents also resist fair value but the nature of their resistance is procedural or operational. Without a clear commitment to either regime, legalistic and superficial application of accounting standards becomes more common. Consequently, flexible adherents pose a greater risk to auditors, regulators and standard setters than do “dissidents” advocating for historical cost accounting. Overall, the study highlights the interconnection between the level of commitment to well-established accounting knowledge templates and resistance rather than treating these as separate theoretical perspectives. The results demonstrate that resistance is not specific to certain groups of accountants but is both dynamic and systemic. How resistance manifests itself has important implications for the understanding and application of accounting prescriptions.