Does every accounting issue need a solution?

Hombach, Katharina and Sellhorn, Thorsten (2022): Does every accounting issue need a solution? In: Accounting and Business Research, Vol. 52, No. 5: pp. 540-561

Abstract

We discuss the concept and costs of resolving accounting issues. We first characterise the (degree of) resolution of an accounting issue as a continuous concept, arguing that an accounting issue is unresolved where an established solution is either uncertain or produces financial information with undesired consequences. We then describe standard setters and market participants as possible institutions that can contribute to such resolution. A series of standard-setting cases illustrates different settings as well as sources and degrees of resolution. We then review extant studies that speak to two important cost factors shaping the supply of accounting solutions: costs of learning about accounting solutions and opportunity costs arising from reduced incentives for innovations in accounting. We conclude with suggestions for future research and implications for standard setting.

• Item Type: Journal article
• Faculties: Munich School of Management > Institute for Accounting, Auditing and Analysis
• Subjects: 300 Social sciences > 330 Economics
• ISSN: 0001-4788
• Language: English