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Throughout the conceptual framework projects, the ‘focus has been to provide information to
users of financial reports in an unbiased and objective manner. Freedom ' fem bias, or
neutrality, has been defined as 'an information quality that avoids leading users to conclusions
that secure the particular needs, desires or preconceptions of the preparers'. Solomons explains
freedom from bias as 'financial mapmaking'. Accounting is financial mapmaking: the better the
map, the more completely it represents the complex phenomena that are being mapped. We do
not judge a map by the behavioral effects it produces. The distribution of natural wealth or
rainfall shown on a map may lead to population shifts or changes in industrial location which
the government may like or dislike. That should be no concern of the cartographer. We judge
their map by how well it represents the facts. People can then react to it as they will.
This philosophy of realism comes about in accounting from the assumption that we can
observe, measure and communicate an objective economic reality. Some philosophers of
science, for example Feyerabend, argue that scientific truth is not absolute — it refers only to
a statement about a constructed reality. A given statement or belief warrants acceptance only
after the evidence conforms with prescribed and agreed-upon rules about what is scientific
methodology. Hines points out that the problem with the economic realism/measurement
approach adopted by the conceptual framework project in the United States (and this applies
to the IASB framework as well) is that within many scientific communities, reality is now
viewed as being constructed and sustained by social practices, thereby polluting accountants'
perceptions of economic reality.46 In the social sciences, the undermining of the realism
philosophy is even more complete. Within the social sciences, actors act in accordance with
prevailing definitions and concepts of reality. By doing this, they maintain and perpetuate that
reality.
......but we have not so much grasped reality, as created it, by thinking of it in a certain way,
and treating it that way ... But when people have a preconceived notion of what reality is, well
we can't afford to go against it! Why not?
Each person has characteristics that limit the usefulness of a conceptual framework... Almost
everyone says he or she wants a conceptual framework, but his or her conceptual framework
may not be yours.
Circularity of reasoning
As we have seen, one of the stated objectives of a conceptual framework is to guide the
everyday practice of accountants. A superficial view of the conceptual frameworks indicates
that accountants at least follow one scientific path — that of deducing principles and practice
from generalized theory. However, various countries' existing conceptual frameworks are
typified by an internal circularity. For example, within FASB Statement No. 2, information
qualities such as reliability are stated to depend on the achievement of other qualities, such as
representational faithfulness, neutrality and verifiability. However, these qualities, in turn,
depend on other non-operationalised information qualities. For example, the discussion of
neutrality relies on relevance, reliability and representational faithfulness, but the necessary'
and sufficient conditions for obtaining any of these qualities are not stated. The FASB
framework attempts to break out of, or justify, this circularity of reasoning by referring to the
notion of an informed accounting person who will have sufficient and appropriate knowledge
to determine and interpret financial reports. However, it provides no specific guidance as to
how this should be achieved.
An unscientific discipline
Is accounting a science? Conceptual frameworks may have attempted to adopt the deductive
(scientific) approach, but this approach is questionable if accounting does not qualify as a
science to begin with. Accounting has been variously described as an art or a craft in addition
to its scientific description. In 1981, Stamp said:
Until we are sure in our minds about the nature of accounting, it is fruitless for the
profession to invest large resources in developing a conceptual framework to support
accounting standards.
Indeed, Stamp considers that accounting is more closely aligned to law than to the
physical sciences, since both the accounting and legal professions deal with conflicts between
different user groups with varying interests and objectives. He describes law as a normative
discipline which is prescriptive in nature and full of value-laden concepts. Accounting faces
imperfect markets and involves subjectively based, human decision – making processes. In
contrast, the physical sciences are considered to be positive disciplines, descriptive in nature
and characterized by value-free concepts.
Theoretical and empirical elements are somewhat loosely defined and applied in
accounting, and it lacks a definitive scientific paradigm. Early (normative) accounting theory
had many weaknesses. Positive accounting theory is still in its embryonic, possibly pre-
scientific, stage. This does not necessarily indicate the lack of a scientific approach, however.
Provided the theoretician is rigorous in applying the ontological, epistemological and
methodological rules relating to the field of study, the scientific methodology may be said to
be applied.
Positive research
It has been argued that the basic focus of the conceptual framework projects — providing
financial information to help users make economic decisions — ignores the empirical findings
of positive accounting research. Early market research has cast doubt on the ability of published
accounting data to influence share prices and on the importance of accounting data for making
economic decisions relating to the share market. Some argue that the share market does not
appear to be fooled by creative accounting techniques, the valuation of assets and liabilities is
not a real issue and that the market is relatively efficient in the semi-strong form. Furthermore,
agency theory offers an explanation for the observation of many different accounting
techniques. These accounting techniques are demanded by agents who seek to minimise
monitoring costs in the most cost-efficient manner. The accounting technique of least cost will
naturally vary between firms and industries and variation in accounting practice is therefore
desirable. Nonetheless, for decisions with multiple choices, accounting information may be
useful This is an area that behavioural research has not yet fully considered.
Furthermore, those who argue that positive accounting research and a conceptual framework
are in conflict sometimes ignore the mounting evidence that capital markets are not completely
efficient Even if they are efficient the fact that the market responds immediately to information
in financial reports does not mean that individuals process the information efficiently or that
individuals or groups cannot make incorrect investment lending, supply, or purchase decisions.
If a conceptual framework could ensure that these people received useful information, it would
serve a useful purpose.
They left science the boring task of finding the details of this knowledge but its essence they
held, without proof, to be attainable either by special intuition or by reason alone (rationalism),
in any case without introspection and experiment.
The constitutional approach also conforms with the assertion that accounting largely
relies on self-evident or dogmatic bases for establishing criteria for truth, fix tending this to the
conceptual framework, truth may simply be tire ideas embodied in the conventions and
doctrines of accounting. That is, in line with the historical-constitutional approach, the
conceptual framework is little more than the perpetuation of unquestioned accounting
conventions. This approach is expressed in Chambers claim:
......all we have as fundamental or basic is a set of propositions that are more or less arbitrarily
established, or which are plain dogmas. There is no body of ideas or knowledge by reference
to which we can judge whether or not these propositions are preferable to others, we must
simply accept them.
In defending the FASB approach to building a conceptual framework, its- chairman at
the time, Kirk, claimed that the view that standards can be set by consensus is part of a belief
that standards are conventions and conventions are formed by agreement. He promotes the idea
that a conceptual framework best serves the public interest, because it is a conceptual approach.
Standard setting by consensus, compromise or consequences does not serve the public interest,
because it is a political approach. However, this is problematic since the public interest is
represented by users who have conflicting needs. Kirk's remarks are compromised by a
research survey which he quotes. The survey showed that a majority of respondents from
universities, government, the financial media and the large accounting firms wanted a
framework that would result in significant changes in financial reporting. In contrast, a majority
of company managers and security industry officials favored a framework that affirmed the
status quo.
The fact that the FASB conceptual framework in many instances describes existing
practice tends to indicate that the political process prevailed in the development of the
framework. Miller has claimed that the FASB and its conceptual framework will survive only
by maintaining a position that reflects the interests of the beneficiaries o the capital market. He
rejects Kirk's claim that the FASB managed to avoid having to develop a conceptual framework
based on consensus, claiming that standards emerge from 'a vested set of political processes
that create inconsistencies as the search for a consensus continues'.
The political nature of accounting and its reflection in conceptual framework projects
has been stressed in the accounting literature. For example, Burchell and his colleagues state:
......the roles which [financial accounting] serves are starting to be recognized as being shaped
by the pressures which give rise to accounting innovation and change rather than any essence
of the accounting mission.