This article, the second of a two-part commentary about accounting standards setting, chronicles the rising importance of financial accounting standards in different sectors of the US economy, which has led to increasing special-interest lobbying for accounting standards with characteristics compatible with the desired outcomes. Financial accounting standards affect the US economy in many ways, both in the aggregate and in the distribution of income, wealth and risk. This commentary captures many of the key issues that have preoccupied standards setters, and especially identifies the efforts of the Financial Accounting Standards Board (FASB) to implement an asset-and-liability approach to recognition and a fair-value approach to measurement.
According to the author, “When a highly prescriptive standards setter is coupled with a rigorous enforcement process used by a government regulator to secure compliance with accounting standards, especially in a confrontational society such as the United States, companies and even branches of government will lobby the standards setter not to approve standards that interfere with their business plans and strategies. This is what has happened increasingly in the United States since the 1970s, and there is no sign that, on sensitive and controversial issues, it will diminish in intensity or frequency.”
(Read more in the article “The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards (Part II)” by Stephen A. Zeff, PhD, in the February 2005 issue of The CPA Journal online.)
