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Chapter 1: Question 18Q (page 22)

Explain the role of the Emerging Issues Task Force in establishing generally accepted accounting principles.

Short Answer

Expert verified

The Emerging Issues Task Force was set up by the Financial Accounting Standards Board in 1984. The objective behind establishing it is to reduce the use of the Financial Accounting Standards Board (FASB). It also helps by providing financial reporting on a regular basis.

Step by step solution

01

Meaning of Emerging Issues Task Force

The Emerging issues task force is defined as an entity whose motive is to provide support and guidance; it recognizes and resolves financial accounting problems with the purpose of developing the financial reporting system.

02

Role of Emerging Issues Task Force in establishing Generally Accepted Accounting Principles

The duties of the Emerging Issues Task Force are to deal with the emerging issues within the domain of Generally Accepted Accounting Principles (GAAP). The emerging issues task force comprises Certified Public Accountants (CPA), professional accountants, chief, members of the Financial Accounting Standards Board (FASB), members of the Securities and Exchange Commission (SEC) as well as members from the private and public sector who take part in the meeting and discuss the emerging issues.

The Emerging Issues Task Force (EITF) usually comes to consensus conclusions on particular financial reporting issues. These consensus conclusions are then observed as Generally Accepted Accounting Principles (GAAP) by practitioners as the Securities Exchange Commission (SEC) has stated that it will view consensus solutions as preferred accounting and need persuasive jurisdiction for drifting away from them. Hence, for public companies which are inclined to Securities Exchange Commission (SEC) oversight, consensus solutions developed by the Emerging Issues Task Force are adhered to unless eventually overruled by the Financial Accounting Standards Board (FASB). Moreover, Financial Accounting Standards Board (FASB) has taken ownership of GAAP established by the Emerging Issues Task Force (EITF) by demanding that the consensus positions be approved by the Financial Accounting Standards Board (FASB).

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Most popular questions from this chapter

The Sarbanes-Oxley Act was enacted to combat fraud and curb poor reporting practices. What are some key provisions of this legislation?

Differentiate between 鈥渇inancial statements鈥� and 鈥渇inancial reporting.鈥�

Presented below are three models for setting GAAP.

  1. The purely political approach, where national legislative action decrees GAAP.
  2. The private, professional approach, where GAAP is set and enforced by private professional actions only.
  3. The public/ private mixed approach, where GAAP is basically set by private-sector bodies that behave as though they were public agencies and whose standards to a great extent are enforced through governmental agencies.

Instructions

  1. Which of these three models best describes standard-setting in the United States? Provide justification for your answer.
  2. Why do companies, financial analysts, labor unions, industry trade associations, and others take such an active interest in standard-setting?
  3. Cite an example of a group other than the FASB that attempts to establish accounting standards. Speculate as to why another group might wish to set its own standards.

IFRS is comprised of:

(a) International Financial Reporting Standards and FASB Financial Reporting Standards.

(b) International Financial Reporting Standards, International Accounting Standards, and International Accounting Interpretations.

(c) International Accounting Standards and International Accounting Interpretations.

(d) FASB Financial Reporting Standards and International Accounting Standards.

The major key players on the international side are the:

(a) IASB and FASB. (c) SEC and FASB.

(b) IOSCO and the SEC. (d) IASB and IOSCO.
See all solutions

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