Research for Accounting Policy: An Overview

Abstract

A SIGNIFICANT amount of accounting research is devoted to questions of accounting (financial reporting) policy. Such research is addressed to the alternative models, measurement rules and disclosure requirements that are or might be applied in current financial reporting by business enterprises. Such research accounts for much of the combined research efforts sponsored or undertaken by institutions such as the AICPA and FASB as well as for much of the independent academic research in accounting. The purpose of this paper is to offer a model for organizing one's thoughts and efforts directed toward the process of accounting policy making and related research strategies. The motivation for attempting such a task is a conviction that results from individual accounting research studies must be interpreted as interrelated building blocks for accounting policy decisions. As Gonedes and Dopuch [1974] showed, virtually no research strategy used by accounting researchers to date is capable of selecting the most socially desirable accounting alternative. However, because Gonedes and Dopuch applied such a demanding performance criterion to accounting research (i.e., achieving a social ranking of alternatives), they leave an impression of great pessimism. Yet, as will be evident later, the most promising use of any given research strategy (data source) in the area of financial reporting policy is not in selecting optimal alternatives; rather, it is in contributing, along with all other available strategies, to developing theories that then may be used by policy makers to settle specific issues. The paper begins with a description of accounting policy making as a social choice process. This discussion contains a brief enumeration of certain implications of the social choice dimension of accounting policy making; the second section presents a model for interpretation of research for accounting policy making; and the third section discusses the potential contributions of various research strategies.