Throughout the globe, U.S.A. has been famous for their notion of freedom, their way of life, and their entrepreneurship, stemming back to its very origins. This is a legacy from the very first pioneer, which still affects them nowadays either in their private or business life. It's a country where you can strive to be someone by your work and on your own. It was true for pioneers, and it remains the crux of their economic leadership. The Silicon Valley is a perfect example with so many people who started from almost nothing and emerging as near legends. Apple inc. is a perfect illustration of this. The two Steves changed the computer industry only with their work, their passion, and their love for the well-done work and good products. In this way, they are really like The Fountainhead's main character, and in line with Ayn Rand's Philosophy as we will see further. Of course, a systematic and strict application of Rand's principle could lead, as we will underlie, to unethical behaviors. Moreover, recent cases of fraud, as we will focus on, have led to cast doubt on financial reporting rules and standards. Thus, the convergence movements and the adoption of new accounting standards speed up during the very last years or months.
Henceforth, we will at first focus on this essay on Rand's philosophy and thereby how it could sometimes lead to such difficulties. Then, a closer look at how it had induced a revision and convergence movement of accounting standards as well as some emerging fears from businessmen like T.J. Rodgers.
Published in 1943, The Fountainhead has as the main theme the dualism between individualism and collectivism. The main character is the architect Howard Roark who, as the author explains, “breaks with tradition, recognizes no authority but that of his own independent judgement, struggles for the integrity of his creative work against every form of social opposition - and wins” (Rand, 1961).This sentence highlights the two key points of Objectivism, i.e. the concepts of “independent judgement” and of “integrity”.
The term “objectivism” refers to the belief that valid concepts are objective and therefore based on direct experience with reality (Rand 1964). This philosophy is funded on two axioms. First, reality exists independent from consciousness. Second, human beings possess the capacity to choose among alternative courses of action (Becker 1998).
With respect to ethics, Objectivism stresses that the aim of human life is the pursuit of one's own happiness. According to Rand (1964), the “basic social principle of the Objectivist ethics is […] that man must live for his own sake, neither sacrificing himself to others nor sacrificing others to himself. To live for his own sake means that the achievement of his own happiness is man's higher moral purpose”.
Another fundamental concept of Rand's philosophy is “integrity”, defined as fidelity to rational principles and values (Rand 1964). Integrity is not identified with honesty and in particular, Objectivists affirm that honesty is a necessary but not sufficient condition for integrity (Becker 1998).
[...] These limits led to a convergence movement of accounting standards, which will occur only after debate and possibly a shift in the position of both boards. With accounting fundamentals being generically the same, it's not right for people like Rodgers to feel that adoption of IASB standards in the US or greater convergence between the two could lead to stifling of American business growth or the American way of accounting. There is absolutely no evidence to justify the same and a hundred countries would not have already opted to follow IFRS, if they had such apprehensions. [...]
[...] N Cooperation between FASB and IASB to Achieve Convergence of Accounting Standards, Review of Business, 24(2),52 Houston, M., & Reinstein, A International Accounting Standards and Their Implications for Accountants and U.S. Financial Statement Users, Review of Business, 22(1) Ira Yuta Chairas & Wirawan E.D. Radianto Göteborg University, Accounting Harmonization in ASEAN : The Process, Benefits and Obstacles, Retrieved May from https://gupea.ub.gu.se/dspace/bitstream/2077/2499/1/Chairas_2001_5_inlag a.pdf IFRS and US GAAP IAS Plus Deloitte, Retrieved November from http://deloitte.net/dtt/cda/doc/content/dtt_audit_iasplusgl_073106.pdf Jones, D 2002, Scandals lead execs to 'Atlas Shrugged', USA Today [online], Available: http://www.usatoday.com/news/nation/2002-09-23-rand- 1acover_x.htm Klein, N Thanks a million, Ayn Rand, for setting the greedy free, The Guardian [online], Available: http://www.guardian.co.uk/commentisfree/story/0,,2179825,00.html Knapp, M & Knapp, C Europe's Enron: Royal Ahold, N.V., University of Oklahama, Retrieved April from http://aaahq.org/audit/midyear/07midyear/papers/Knapp_EuropesEnron.pdf Meek, J Houston, we have a problem, The Guardian, [online], Available:http://www.guardian.co.uk/business/2002/jan/30/corporatefraud. [...]
[...] Whereas US GAAP recommends valuing employee stock options on the date they are granted using the intrinsic value accounting method with there being no need to book expenses, if the exercise price of options is fixed at the prevailing market price on the date of the grant, the IASB recommends that options be measured at fair value on the date they vest with employees, and that the compensation expense be accrued over the vesting period of the options. (Penman, 2003) whereas both methods have their particular advantages, some business leaders in the US feel it inherently impractical to determine the fair value of options and argue that such policies could well suppress the innovative and entrepreneurial spirit of American entrepreneurs and take away from American business leadership. [...]
[...] The demise of Enron involved the management creation of international entities providing management with full anonymity to hide any losses that the company was incurring. These entities made Enron look more profitable than it really was, and as Bryce (2002) outlines, created a dangerous spiral in which each quarter, corporate officers would have to perform more and more contorted financial deception to create the illusion of billions in profits while the company was actually losing money. Chief Financial Officer Andrew Fastow led the team which “created the off- books companies, and manipulated the deals to provide himself, his family, and his friends with hundreds of millions of dollars in guaranteed revenue, at the expense of the corporation he worked for and its shareholders.” (Fox 2003). [...]
[...] But this vision contradicts a basic element on which Rand built her philosophy. In fact Objectivism, which stresses the importance of objective judgements rather than subjective considerations, must be accepted by believers on the basis of faith (Fletcher 1974). Another paradox of this philosophy is clearly expressed by Howard Roark, protagonist of The Fountainhead. Roark affirms: don't intend to build in order to serve or help anyone. I don't intend to build in order to have clients. I intend to have clients in order to build” (Rand 1943). [...]
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