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Chapter 1: Question 13Q (page 23)

In what ways it felt that the pronouncements issued by the Financial Accounting Standards Board would carry greater weight than the opinions issued by the Accounting Principles Board?

Short Answer

Expert verified

Ways that certify that the opinions of the Financial Accounting Standards Boardwould carry greater weight than those of the Accounting Principles Board are:

The number of persons, way of remuneration, autonomy, independence as well as representation.

Step by step solution

01

Meaning of Financial Accounting Standards Board

The Financial Accounting Standards Board is an independent non-profit organization. Its purpose is to create accounting and financial reporting standards for firms and non-profit organizations in the United States, in accordance with the generally accepted accounting principles.

02

Ways by which it felt that the pronouncements issued by Financial Accounting Standards Board would carry greater weight.

  • Financial Accounting Standards Boards had 7 members, while Accounting Principles Board had 18 members.
  • Members of the Financial Accounting Standards Board were paid on a full-time basis and were appointed for a tenure of 5 years, while, the members of the Accounting Principles Board were paid for their part-time work.
  • Financial Accounting Standards Board were appointed by and answerable only to the Financial Accounting Foundation. Accounting Principles Board is the senior committee of the AICPA while Financial Accounting is not engaged in any professional firm.
  • Financial Accounting Standards Board must split their relations with their private positions while Accounting Principles Board did not do so.
  • Accounting Principles Board were supposed to be Certified Public Accountants and the members of American Institute of Certified Public Accountants while Financial Accounting Standards Board members do not.

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Most popular questions from this chapter

Economic consequences of accounting standard-setting means:

(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.

(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.

(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.

(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.

Presented below are comments made in the financial press.InstructionsPrepare responses to the requirements in each item.

a) Rep. John Dingell, at one time the ranking Democrat on the House Commerce Committee, threw his support behind the FASB鈥檚 controversial derivatives accounting standard and encouraged the FASB to adopt the rule promptly. Indicate why a member of Congress might feel obligated to comment on his proposed FASB standard.

b) In a strongly worded letter to Senator Lauch Faircloth (R-NC) and House Banking Committee Chairman Jim Leach (R-IA), the American Institute of Certified Public Accountants (AICPA) cautioned against government intervention in the accounting standard-setting process, warning that it had the potential of jeopardizing U.S. capital markets. Explain how government intervention could possibly affect capital markets adversely.

Question: Which of the following statements is true?

(a) The IASB has the same number of members as the FASB.

(b) The IASB structure has both advisory and interpretation functions, but no trustees.

(c) The IASB has been in existence longer than the FASB.

(d) The IASB structure is quite similar to the FASB鈥檚, except the IASB has a larger number of board members.

For what purposes did the AICPA create the Accounting Principles Board?

Question: The authoritative status of The Conceptual Framework for Financial Reporting is as follows:

(a) It is used when there is no standard or interpretation related to the reporting issues under consideration.

(b) It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue.

(c) It takes precedence over all other authoritative literature.

(d) It has no authoritative status.
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