Financialisation and Accounting Standard-Setting: The Case of Narrative Reporting

The purpose of this paper is to argue for a more nuanced understanding of the accounting techniques that have made the ‘financialisation’ of the British accounting standard-setting agenda since the 1970s possible. This is achieved by exploring the entanglement of narrative reporting with the rise of financial decision-models and economic valuation as a justification for accounting standard-setting using a cultural economy approach and qualitative methods.

The study of recurring calls for the integration of qualitative reports by management on the agenda of accounting standard-setting in the UK since the 1970s challenges the assumption that the movement towards a financial reasoning in accounting standard-setting has been invariably linked to the replacement of legal conceptions of corporate accountability with financial economic theory and market-based measurement techniques. Instead, it shows the importance of a discourse of ‘legal rights’ has supported the movement towards ‘decision usefulness’ as a justification for accounting standard-setting. It further highlights the different roles which narrative reporting has played throughout this process, and which allowed to counterbalance different perceived limits of measurement techniques in general to operationalise abstract principles of decision-making.

Accordingly, the study has implications for how we think about the relative stability of the relationship between accounting and financial economics in spite of the many crises of fair value accounting.