Chapter 12

Financial Accounting Theory
Craig Deegan
Chapter 12
Critical perspectives on accounting
Slides written by Michaela Rankin
Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan 12.1
Chapter 12: Critical perspectives on accounting
Learning Objectives
In this chapter you will be introduced to
particular perspectives that challenge
conventional opinions about the role of
accounting within society
the basic arguments that suggest that financial
accounting tends to support the positions of
individuals who hold wealth and social status,
while undermining the positions of others
Learning Objectives
the fact that disclosure (or non-disclosure) of
information can be construed to be an important
strategy to promote and legitimise particular social
orders
Critical perspective defined

Refers to accounting research that goes
beyond questioning whether particular
methods of accounting should be employed
focuses on the role of accounting in
sustaining the privileged positions of those
in control of resources (capital) while
undermining or restraining the voice of
those without capital
Critical perspective
definedcontinued
Critical accounting theorists seek to
highlight, through critical analysis, the key
role of accounting in society
challenges the view that accounting can be
construed as objective or neutral
accounting seen as a means of constructing
or legitimising particular social structures
Criticism of capitalist system

Critical theorists tend to oppose aspects of
the capitalist system and accounting
emphasise that systems of accounting are
built around the prevailing social order
given the practice of accounting is in the
hands of large corporations and accounting
in the hands of government, accounting will
never do anything but support the current
system
Origins of critical perspective

Grounded in Political Economy Theory
political economy is the social, political
and economic framework within which
human life takes place (Gray et al 1996)
based on Classical branchchallenges the
existing nature and structure of society
Classical political economy

perspective
Related to the works of philosophers such
as Marx
explicitly considers structural conflict,
inequity, and the role of the State at the
heart of the analysis
highlights issues which may not otherwise
be addressed
social welfare
Disclosure of social
responsibility information
Critical theorists argue that disclosure of
social responsibility information is wasted
unless accompanied by fundamental
changes in how society strucutred
acts to legitimise, not challenge, those
providing the information
Views on social and

environmental accounting
As accounting deemed to sustain particular
social structures, introduction of new forms
of accounting only help to sustain that
social system
considered wasted effort to use accounting
to solve problems
one is using the very process that caused the
problem to try to solve the problem
Criticism of critical perspective

Critical theorists often marginalised to a
greater extent than others
often do not provide solutions to perceived
problems
inconsistent with normal training of
accountants to provide solutions if problems are
evident
critical of accountants
Role of the State

The State is seen as a vehicle of support for
holders of capital and for the capitalist
system as a whole
Government will take action to enhance the
legitimacy of the social system
social disclosures seen as a means of
pacifying challenges against the capitalist
system where corporations given many
rights and powers
Role of the Statecontinued

Restricting the flow of information, or
availability of specific types of information
seen as a means of maintaining particular
organisations and social structures
government does not operate in the public
interest, but in the interests of well off
groups
Role of accounting research

Accounting researchers are seen as
providing research results and perspectives
that help to legitimise and maintain certain
political ideologies
eg. anti regulation stance and EMH during the
late 1970s and 1980s matched the views of
government at the time
rise of PAT consistent with political views at
the time
Role of accounting
researchcontinued
rise of economic consequences research
seems to have been motivated by desire of large
corporations to counter attempts to change
reporting systems and levels of disclosure
research efforts into inflation accounting were
seen as being motivated by a desire to alleviate
shifts in real wealth from owners to higher
wages, not by rate of inflation
Role of accounting practice

Critical theorists see conceptual frameworks
as legitimising the accounting profession
and of financial reports produced by
reporting entities
accountants seen as imposing their own
views about what performance
characteristics are important or not
important
Role of accounting
practicecontinued
Attention is directed to particular measures
(eg. profits) through accounting
in communicating reality, accountants
simultaneously construct reality
political economy perspective emphasises
the role of accounting reports in
maintaining social arrangements
see corporate social reporting as harmful as
it gives the impression of concern and
change without any real change occurring

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Chapter 12

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Financial Accounting Theory

Critical perspective defined

Criticism of capitalist system

Origins of critical perspective

Classical political economy

Views on social and

Criticism of critical perspective

Role of the State

Role of the Statecontinued

Role of accounting research

Role of accounting practice

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