Assume you are tutoring a beginning accounting student who tells you that the members of the FASB must have a great deal of power because they have the authority to issue standards that dictate accounting procedure.
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Required:
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Explain why accounting standards are the result of compromise and how such compromises are reached.
What will be an ideal response?
In order for a new standard to be issued, a majority of at least a four-to-three vote is necessary. In order for such a vote to occur, the members within the board must negotiate with each other to determine which points are important and which are not. In turn, each board member is influenced by the data and opinions collected from the various interested parties--preparers, users, and auditors--during the multistage process of issuing a standard. This includes discussion memorandums, public hearings, and exposure drafts.
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