Knowledge that Transforms

Financialization–the increasing relevance of financial markets, financial actors and financial logics–and the related rise of originate-to-distribute-cycles in the mortgage industry have been considered key explanations for the emergence of financial crises. Analyzing a case study in the European real estate industry, we show how actors strategically manage inter-organizational relations and take advantage of rising asset prices, through refinancing on the basis of loan-to-value even before the originate-to-distribute-cycle of the mortgage industry unfolds. Valuation and accounting are core practices of financialized business models that evolve around management fees, which serve as value carriers and bring potential future profits into the present. Auditing also plays a role as it legitimizes these business activities and facilitates jurisdictional arbitrage. We contribute to the accounting literature by explaining how the strategic configuration of a valuation-accounting nexus leads to organizational short-termism and rewards unsustainable business activities in the real estate industry.

The International Financial Reporting Standards (IFRS) have been widely adopted well beyond English-speaking jurisdictions. Using the Finnish translation of the IFRS as a primary object of investigation, this article analyses the way in which the standards are translated into another language. Drawing on interviews with translators and translation review committee members and on an analysis of archival materials, it provides an empirically grounded understanding of practical problems of linguistic equivalence, and the institutional work required to maintain the IFRS as a global, translingual institution. Accordingly, the article highlights the constructed and negotiated nature of the linguistic equivalence between the IFRS and their translations. As translation lies at the interface between transnational standard-setting and local implementation, examining the IFRS translation offers further insight into the complex institutional interactions and practices that support transnational regulation. The article identifies the commonalities and discrepancies between the translation policies of the EU and the IFRS Foundation, and analyses the translation as a contested area of expertise involving multiple, recurrently changing constituents.

This paper complements financial accounting research by a qualitative study of financial accounting practices. Its object is goodwill impairment tests (IAS 36) under the influence of International Financial Reporting Standards, which it uses to illustrate how financial accounting is produced. The aim is to investigate how accounting standards are translated into accounting practices, and to investigate how this is reliable. Drawing on actor network theory, the paper proposes calculative practices to be a networked and distributed affair. The study has two main contributions. Firstly, it shows that in the case of goodwill impairment tests, financial accounting is a process of finding, qualifying, stabilizing and calculating traces that often have to be found beyond the company infrastructure of sheets of accounts and the financial ledger. Secondly, it shows that these traces increase reliability when they are recognisable and impersonal. No single person is responsible for the financial calculation and the traces used assume that a firm cannot systematically outperform the broader economy or the history of the firm. It also helps to increase reliability if institutional roles such as auditors and valuation experts tolerate the calculation. Reliability increase when traces and supporting institutional actors that take part in the calculation are at a distance. Because of this production process, readers of financial statements face the following paradox: the things they see are less associated with specific entrepreneurial activities in the firm and more with normalised trends inside and outside the firm. Seeing the firm requires them to look at its past, at negotiated budgets, at its competitors, at industrial outlook, and at the statistical bureaus that compile information on the economic development of industries and countries; they may also have to listen to valuation experts and auditors. Seeing the value of a firm requires actors to look elsewhere.