1. Adverse Effects of Accounting Uniformity on Practice, Education and Research Shyam Sunder, Yale School of Management Emanuel Saxe Lecture in Accounting Baruch College, City University of New York New York – October 22, 2007

2. (c) Shyam Sunder: Norms, Standards and Failures 2 Samuel Johnson published his dictionary not as the conqueror of the language but as the person who knew best how unconquerable it really is. Verlyn Klinkenborg (2005) The rules of accounting, even more than those of law, are the product of experience rather than logic. George O. May (1943) Common global standards, if read to mean identical, is an illusory and unobtainable goal. However, seeking to achieve similar objectives and and to address in an effective way similar problems is a realistic goal. Richard Breeden (1992), Former Chair, SEC

3. (c) Shyam Sunder: Norms, Standards and Failures 3 An Overview Broad support for pursuit of uniform standards of accounting Consider the contrarian case –Diminished effectiveness of accounting for stewardship, governance and information –Discourages thoughtful classroom discourse –Discourages talent from classrooms and profession –Serves as a substitute for judgment and personal responsibility –Increases the threats to the status of accounting as a part of the university We should consider finding a better balance between standards and social norms in accounting

4. (c) Shyam Sunder: Norms, Standards and Failures 4 Four Objects with Two Properties (Size and Color)

5. (c) Shyam Sunder: Norms, Standards and Failures 5 Classification by Size

6. (c) Shyam Sunder: Norms, Standards and Failures 6 Classification by Color

7. (c) Shyam Sunder: Norms, Standards and Failures 7 Classification by Size and Color

8. (c) Shyam Sunder: Norms, Standards and Failures 8 Uniform Standards and Social Norms

9. (c) Shyam Sunder: Norms, Standards and Failures 9 Accounting Practice The Information Problem The Design Problem The Gaming Problem The Signaling Problem

10. (c) Shyam Sunder: Norms, Standards and Failures 10 Law and Social Norms

11. (c) Shyam Sunder: Norms, Standards and Failures 11 Accounting Institutions

12. (c) Shyam Sunder: Norms, Standards and Failures 12 Education and Research

13. (c) Shyam Sunder: Norms, Standards and Failures 13 Concluding Remarks

14. Thank You. Shyam.sunder@yale.edu www.som.yale.edu\faculty\sunder