Building legitimacy for European public sector accounting standards (EPSAS). A governance perspective

• Date: 19 August 2019
• DOI: https://doi.org/10.1108/IJPSM-12-2018-0264
• Pages: 229-245
• Published date: 19 August 2019
• Author: Giovanna Dabbicco,Ileana Steccolini
• Subject Matter: Public policy & environmental management

Building legitimacy for European

public sector accounting

standards (EPSAS)

A governance perspective

Giovanna Dabbicco

Department of National Accounts,

Istituto Nazionale di Statistica, Roma, Italy, and

Ileana Steccolini

Essex Business School, Southend-on-Sea, UK

Abstract

Purpose –The purpose of this paper is to look at the European public sector accounting standards (EPSAS)

project development path to explore how governance and legitimacy issues intertwine when a new standard-

setting system is developed.

Design/methodology/approach –A qualitative interpretative multimethod approach is adopted, which

encompasses document analysis and participative observations.

Findings –The analysis shows the role of governance dimensions, including institutional participation and

consensus, in the process for securing the legitimacy of accounting standards and the related setting

processes, pointing to the critical issues emerging throughout the development of the EPSAS project.

Originality/value –The definition of public sector accounting standards poses significant challenges to the

accounting profession and regulators alike. A paradigmatic case of such challenges is represented by the

decisions to develop harmonised EPSAS. A key contribution of this paperis to connect legitimacy dimensions

with network governance, offering a view of the input, output and procedural dimensions associated with

decisions to legitimise EPSAS and how these may be affected by network governance.

Keywords Legitimacy, EPSAS, Network governance, Accounting and politics

Paper type Research paper

1. Introduction

Research in standard setting has pointed to the centrality of issues of legitimation and

governance in ensuring that the processes of definition, adoption and implementation of

standards take place with the participation and representation of relevant stakeholders (e.g.

Durocher et al., 2007; Jorissen et al., 2012; Pelger, 2016; Richardson, 2009; Richardson and

Eberlein, 2011). This literature highlights that standard setting takes place in a

transnational policy arena (Hanberger, 2003; Pierson,1996; Schmidt and Radaelli, 2004)

where the roles of national governments, standard setters and regulators are shaped by

international forces and institutions, multi-national firms and professional associations. Yet

much remains to be explored in terms of actors’interactions, the related governance

arrangements and how this shapes standard setting and the contents of standards (Black,

2008; Samsonova-Taddei and Humphrey, 2014).

Standard setting in the public sector raises parallel preoccupations, presenting elements

of complexity that make it particularly deserving of scholarly attention.

A paradigmatic case where such complexities are at play is the current European public

sector accounting standards (EPSAS) project. In the aftermath of the global financial crisis,

Received 19 December 2018

Revised 12 April 2019

7 June 2019

Accepted 5 July 2019

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0951-3558.htm

Although the paper is the result of an equal joint effort by the authors, their primary individual

contributions are reflected in the following sections of the paper: Giovanna Dabbicco –Sections 2–4

and Ileana Steccolini –Sections 1, 5 and 6.

Building

legitimacy

for EPSAS

InternationalJournalof Public

SectorManagement

Vol.33 No. 2/3,2020

pp.229-245

©EmeraldPublishingLimited

0951-3558

DOI10.1108/IJPSM-12-2018-0264

229

the European Commission (EC) embarked on the ambitious project of developing accrual-

based accounting standards for the EU member states (MSs)’governments, drawing on

International Public Sector Accounting Standards (IPSASs). The EPSAS project represents

an interesting opportunity for observing critical issues of standard setting, while

contributing more generally to a better understanding of how the process of legitimising

standards is linked to governance issues. The need to ensure legitimacy of policies by

tackling at the same time issues of governability of complex societies has led to a growing

attention to new forms of governance, mostly in seeking to ensure effective regulations and

accountability (Klijn, 2008; Kersbergen and Van Waarden, 2004; Hirst, 2000; Rhodes, 1996;

Stoker, 1998). Parallel concerns are to be observed in the public sector accounting

standard-setting arena, as the development of IPSASs has been accompanied by debates on

the legitimacy of such standards and the related setting processes (Aggestam and Brusca,

2016; Dabbicco and D’Amore, 2016; Baskerville and Grossi, 2018).

The publication of the Commission’s report on IPSAS (EC, 2013a) stimulated the

emergence of a new body of EPSAS research. Among others, Biondi (2014), Calmel (2014),

Mussari (2014) and Aggestam and Brusca (2016) focused on EPSAS issues and process of

harmonisation. Heald and Hodges (2015) and Oulasvirta and Bailey (2016) focused on the

EPSAS development in connection with austerity and fiscal consolidation. Jones and

Caruana (2014), Caruana (2016), Manes Rossi et al. (2016) and Sforza and Cimini (2017)

discussed whether EPSASs can represent the solution to governments’accountability and

transparency needs, and the suitability and adaptation of private sector standards to the

public sector. Caruana and Grima (2019), Dabbicco and D’Amore (2016), Dasí et al. (2016) and

Jorge et al. (2016) focused on the relationship of EPSAS with macro-surveillance and

statistical reporting. Biondi and Boisseau-Sierra (2017), Biondi (2016) and Dabbicco (2015,

2018) focused on technical issues, e.g. recognition, measurement issues and impact of

implementation of accrual. This shows that EPSASs have already attracted significant

attention. This paper aims at contributing to this lively debate introducing a complementary

perspective, i.e. focusing on how combining legitimacy and network governance theories

can shed new lights on the understanding of (EPSAS) standard-setting processes.

More specifically, the purpose of this paper is to analyse the ongoing path of development of

the EPSAS project to explore in practise how legitimacy (Richardson and Eberlein, 2011; Scharpf,

1998; Suchman, 1995) and governance (Koppenjan and Klijn, 2004; Klijn and Koppenjan, 2012;

Larson, 2002; Provan and Kenis, 2008; Richardson, 2009; Schmidt and Radaelli, 2004; Skogstad,

2003; Stoker, 1998; Wallner, 2008) issues intertwine, drawing on the relevant literatures.

A key contribution of this paper is to connect legitimacy dimensions with network

governance, offering a view of the input, output and procedural dimensions associated with

decisions to legitimise public sector accounting standards and how these may be affected by

network governance. Looking at the EPSAS project allows to develop recommendations on

the ongoing EPSAS project, and more general recommendations on the conditions of

effectiveness of complex standard-setting processes, such as the development of IPSASs

(Christiaens and Neyt, 2015)[1].

The paper is structured as follows. The next section discusses relevant literature on

EPSASs and on legitimacy and network governance; Section 3 clarifies the research

methods; Section 4 illustrates the emergence and development of the EPSAS project in the

EU context; Section 5 looks at the ongoing development of the EPSAS project through

legitimacy and governance lenses. The last section draws conclusions.

2. Standard setting: the perspective of legitimacy and network

governance theories

As Cooper and Robson (2006, pp. 424-425) point out, the “politics of standards setting”

places accounting in relation with politics and the regulatory space. This is particularly true

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