ABSTRACT
This chapter provides an awareness of the political aspects of accounting standard setting. It understands how opportunistic behaviour and the relationship between agents and principals may affect accounting practices and how institutional pressure may influence accounting practice and harmonization. The economic consequences of the accounting regulation make the standard-setting process highly political. Influence over standard setting allows indirect effect over how resources are distributed among different stakeholders in society. A critical factor is obviously whether standards are designed in a way that facilitate and enable comparability, i.e. it is not enough to do the same things, and one also has to do the right things in order to achieve comparability. However, even if the standards support comparability, it does not mean that comparability actually is achieved. Interpretation and application of accounting standards are critical factors that largely affect comparability and how the performance and financial position of the reporting entity is reflected.
