The ASB's Exposure Draft Statement of Principles: A Comment

This paper is based on a shorter comment sent to the Accounting Standards Board in response to the request for comments on the exposure draft, Statement of Principles for Financial Reporting. It is intended to be a comprehensive dissent from that ED, and also to suggest an alternative course of action for the ASB. In the first place, the ASB's position, according to which the provision of more fair value accounting (FVA)-based information is a central plank among its principles, is contested on the grounds of both (a) market incompleteness (entailing limited availability of reliable FVA-based information) and (b) lack of evidence of demand on the part of financial statement users for FVA-based information. In the second place, the ASB's approach to issues of recognition is subjected to critical analysis and found to be inadequate. Finally, the ASB's decision that the essential function of its Statement of Principles should be to advocate a set of recognition rules and measurement bases (including some that are controversial) is contested. Instead, it is proposed that the Statement of Principles should incorporate a larger framework, including a set of procedural principles , according to which the Board would reach conclusions on the various issues with which it has to deal, so that its conclusions would be seen to be authoritative because they had been reached by a process of rigorous enquiry in accordance with appropriate procedures. These principles would incorporate Rawls' (1971) notions of reflective equilibrium and procedural justice.