Practical expedients and theoretical flaws: the IASB's legitimacy strategy during the COVID-19 pandemic
Accounting, Auditing & Accountability Journal
ISSN: 0951-3574
Article publication date: 14 July 2021
Issue publication date: 3 January 2022
Abstract
Purpose
Grounded in the legitimacy theory and framed within the context of European Union’s (EU's) endorsement process, this paper analyses the International Accounting Standards Board’s (IASB's) response to the COVID-19 crisis and the impact of its practical expedient COVID-19-Related Rent Concession on the IASB's output legitimacy.
Design/methodology/approach
This study uses a qualitative process-tracing approach and combines inductive historical narratives and deductive reasoning to draw theoretical implications concerning the COVID-19 crisis' impact on the standard-setting process.
Findings
The paper shows a growing reliance on practical expedients in International Financial Reporting Standards (IFRS) to maintain the IASB's output legitimacy. While introducing some theoretical flaws, practical expedients increase the standards' flexibility and strengthen the IASB's ability to respond to the European political bodies' concerns. Indeed, an analysis of the IASB's response to the COVID-19 outbreak reveals the role practical expedients might play not only in reducing (ex ante) new IFRS transition costs but also in dealing (ex-post) with the broader economic impact of unexpected systemic crises to limit criticisms and controversies surrounding IFRS.
Originality/value
This study reveals a causal relationship between the rise of the European public good criterion in the EU endorsement process and the wider use of practical expedients in IFRS. An analysis of the latest amendment to IFRS 16 in response to the COVID-19 crisis also confirms the role of practical expedients in strengthening the acceptance of IFRS in an increasingly complex economic reality and sheds some light on the new strategies adopted by the IASB to preserve its legitimacy in the EU.
Keywords
Acknowledgements
The authors are grateful to the Editor and reviewers whose many invaluable comments and suggestions considerably sharpened the exposition and improved the substance of the paper. The authors would also thank Alessandro Carcaterra for his assistance in finding documents and materials referred to in the paper.
Citation
Moscariello, N. and Pizzo, M. (2022), "Practical expedients and theoretical flaws: the IASB's legitimacy strategy during the COVID-19 pandemic", Accounting, Auditing & Accountability Journal, Vol. 35 No. 1, pp. 158-168. https://doi.org/10.1108/AAAJ-08-2020-4876
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited