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How IFRS Contribute to the Financialization of Capitalism

Abstract

The contribution of IFRS to the process of financialization of capitalism can be analysed from several angles. We first propose two meanings that can be assigned to the concept of financialization: first as a process of morphological transformation of capitalism, and second as a gradual colonisation by specific “financialised” techniques and calculation methods. We then show that in many respects IFRS can be regarded as “financialised” standards. Finally we highlight some contributions of IFRS to the morphological transformation of capitalism (that is changes in distribution of wealth and power). As a result, IFRS can be seen as much financialised as financialising standards.

Keywords

  • Cash Flow
  • Accounting Standard
  • International Financial Reporting Standard
  • Financial Activity
  • Future Cash Flow

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

  1. 1.

    This has in fact become a branch of economics, judging by the frequency with which so called “Nobel Prizes” for Economics are awarded to finance researchers.

  2. 2.

    IFRS 13, released by the IASB in 2011 and endorsed by the EU in December 2012, adopts the three-level valuation logic of the 2006 standard FAS 157. This lays down three ways of determining fair value depending on whether a market price exists (level 1), no market price exists but other observable data can be used in estimation models (level 2), or no observable data exists, in which case valuation is entirely based on modelling (level 3). Regarding derivatives, which played a very important role in the 2008 crisis, it is very unusual for them to have a level 1 valuation.

  3. 3.

    Desrosières (2008) explained that quantifications are both instruments of proof and governance tools, which matches what we call epistemological functions and pragmatic functions. To stress the convention-based nature of quantification work, dependent on systems of political, social and scientific representation, he also explained that quantifying was choosing a convention, then measuring.

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Chiapello, E. (2016). How IFRS Contribute to the Financialization of Capitalism. In: Bensadon, D., Praquin, N. (eds) IFRS in a Global World. Springer, Cham. https://doi.org/10.1007/978-3-319-28225-1_6

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