The Equity Accounting Saga in Australia: Cyclical Standard Setting

Equity accounting in Australia has had a long, chequered history. This article examines that history by reference to a succession of six Exposure Drafts, one Statement of Accounting Practice and two Standards issued between 1968 and 1995. We adapt Nobes' (1991, 1992a. 1992b) cycle model of regulation to explain variation in ‘standardization’ across these documents. Nobes defined ‘standardization’ to mean the restriction of choice in accounting methods but we modify the concept to allow for measurement rule ‘improvements’ and changes in required disclosure levels. Nobes' cycle model has four stages: a starting point of varied practice: energy inputs, often crises, drawing attention to the issue at hand: forces opposing and forces in favour of standardization. A cycle‐ like pattern of variation in standardization emerges in the present context. Potential shortcomings of the cycle model are addressed, including Skerratt and Whittington's (1992) criticisms of Nobes' cycle model. The article extends the literature with respect to a cyclical explanation of the standard setting process. The cycle pattern evident here reflects a slow and incomplete resolution of various conceptual and legal difficulties in regulating equity accounting in Australia.