Abstract:
Accounting standards setters have progressively moved towards decision-useful,
investor-focused fair value accounting standards for general purpose financial reporting
(GPFR). With some qualification, the case is made that this development is positive for
accounting as a discipline. This paper develops a referent theory of accounting to
contextualize standards setters' implicit direction, derived from existing research and
literature. A central element in the development of this theory is the case made for 'investor-as-GPFR user'. Against this, stakeholder theory and positive accounting
theory will be identified as confounding influences on the development of a general
theory of accounting. The argument is for the investor, both current and potential, as
the sole legitimate user of GPFR. The practical implications of the theory are
considered against the prevailing debate over optimal accounting valuation method; the
debate between fair value measurement and historical cost. The case is made that a
number of ostensible dichotomies in accounting thought, such as between relevance
and accountability, are substantially reconcilable. The mutual exclusivity often implied
of accounting information relevance and accountability-cum-reliability is rejected. The
development of a general theory of accounting is timely as such a referent theory is
necessary to legitimize standards setting and secure accounting's place in an
increasingly diverse financial information market. Inferentially, trends in the evolution
of fair value standards reflect the dominant concern to meet threats to the discipline as
a whole; this standard setting trend qualified in speed and degree by the narrow
interests of 'constituents'.
