Financial accounting practice

This chapter discusses the agency theory as a useful lens through which to observe the contours of change in financial accounting practice. The increased globalisation of the world economy - and of capital markets in particular - from the 1960s onwards shaped developments in financial accounting practice. Throughout this period, there is evidence at times of an entrenched continuity, evidence of financial accounting practice struggling to represent an increasingly complex world while clinging to principles such as prudence and historical cost which have formed the back-bone of financial reporting since the nineteenth century. New forms of business organisation extended the distance between principal and agent, rendering more acute the need for increased statutory protection of shareholders and other providers of finance. The late eighteenth and early nineteenth centuries saw increasing competition for capital among joint stock companies, fed by and feeding the industrial revolution.