Dimensions of CCA-1: an Oral History Study of the Failure of the Inflation Accounting Standard in New Zealand

Abstract

This study provides an oral history record of the Current Cost Accounting (CCA) debate in New Zealand between 1975 and 1985. Eleven men were interviewed, and their recollections of the debate and events surrounding the promulgation and withdrawal of this accounting standard are recorded in full transcripts. The study first compares the written explanations at the time of the non-compliance with the standard with those explanations for the failure of the standard as recalled by this group of Accounting Standard Setters. This shows that the records from academic writing and from studies of company reports during the period of non-compliance are usefully supplemented by the oral history record, as some issues, which were not given much importance at the time, in hindsight are considered to have been significant In particular, it is clear that the extent to which CCA methods show management and Board performance in poor light were not generally seen as important at the time, nor was it recognised the extent to which CCA represented a fundamental change in accounting which both preparers and users of accounts were not prepared to accept. This study then compares the events surrounding the failure of the standard in New Zealand with recent studies from the United Kingdom on the failure of CCA there. There were four major differences between the two jurisdictions: the importance of the impact on tax payable by the entities; the fall of inflation concurrent with the withdrawal of the standard in the United Kingdom which did not occur in New Zealand; the very high initial compliance in the United Kingdom compared with very low compliance in New Zealand, the practitioner revolt in the United Kingdom. It is concluded that the drivers to the acceptance or rejection of accounting standards should be viewed within specific social and economic regimes in each jurisdiction; irrespective of international trends to harmonisation, and the conceptual arguments in favour of a different method of accounting during periods of high inflation to increase representational faithfulness in accounts. This thesis further examines two other aspects of these events; the impact on the sharemarket of companies reporting using CCA, and the likelihood of any re-issue of a similar accounting standard during a future period of high inflation. The responses to these two topics both provide a complexity and diversity of views, and illustrate the uniqueness of the perspectives on this event from the point of view of the individual standard setters. The usefulness of oral history as a method in accounting research, as illustrated in this study, shows that it provides a valuable stand-alone record of the standard setting process in New Zealand, and the multiple hegemonic, economic and social factors which influence a variety of developments in accounting.