Convergence of accounting standards in Germany: biases and challenges

The convergence process with the development and adoption of International Financial Reporting Standards (IFRS) as national standards has become the focus of governments, professionals and researchers. The growing number of countries implementing IFRS, their experiences and emerging challenges have further raised researchers’ attention. However, almost no study has critically examined the historical development of accounting practices and issues related to convergence in its socio-economic context, and importantly no study has rigorously examined the issue of biases and Anglo-American hegemony in this rush towards convergence of accounting standards. This paper critically examines the usefulness of IFRS in Germany by taking into account the development of the German accounting model with particular reference to the influence of historical, political, economic, cultural and legal features. The objective is to critically evaluate the assumption by the International Accounting Standards Board (IASB) that IFRS’s standards and objectives are superior to other accounting paradigms, which often appears to be an inherent and indisputable feature of IFRS. The focus is on establishing that this assumption neglects the importance of contextual factors in the current process of convergence and importantly that this notion of IFRS’ superiority is driven by Anglo-American biases towards the Continental European accounting model. This paper makes an important and original contribution to international accounting literature by invoking institutional theory and specifically the legitimacy aspect of institutional theory to examine these Anglo-American biases. While institutional theory has been applied in existing management accounting literature, this study contributes to international accounting literature by drawing on constitutive sociological and organisational perspectives provided by institutional theory to examine Anglo-American biases present in the rush towards convergence. As such, this study extends the existing accounting literature and contributes by providing broader and sharper insights into the controversial topic of convergence.