Discuss the steps in the accounting standard-setting process and explain why it may not be capable of dealing with the complex environment of the 2000s and beyond.
What will be an ideal response?
ANSWER:
The standard-setting procedure starts with the identification of a problem. A task force then explores all aspects of the problem and circulates a discussion memorandum that identifies the issues and possible solutions. The FASB then convenes a public hearing where interested parties may make their views known to the board. An exposure draft of the final standard is then issued and written comments requested. After consideration of written comments, either a revised exposure draft is issued or a final vote is taken by the board. Five votes are needed for the issuance of a final standard.
The FASB process developed in the 1970s may not be capable of dealing with the more complex environment of the 1990s and beyond. Financial markets are now globalized, communication is almost instantaneous, institutions are more competitive, and information technology makes it possible to better determine current valuations of both assets and liabilities. Secondly, some non-financial measures may correlate more closely with security prices than financial measures such as income that are addressed in the typical financial statements generated under GAAP. An additional issue involves how the conceptual framework might need to be amended and extended to adapt to newly emerging types of business.
You might also like to view...
What is the most common type of agent wholesaler?
A) wholesale merchant B) industrial distributor C) limited-service wholesaler D) manufacturers' representative E) truck jobber
Many researchers prefer to state hypotheses in the null form because:
A) ?it favors a single possibility or outcome. B) ?it is easier to describe than a regular hypothesis. C) ?it is not prejudiced toward a particular answer. D) ?it is always proved correct during experiments.
A computer's ability to imitate human decision making when confronting situations that are complex and ambiguous is called ______________________________.
Fill in the blank(s) with the appropriate word(s).
Icarus Airway's decision to acquire Midas Fuels Inc. proved to be ill-fated because the Icarus managers overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airline industry. What does this scenario best illustrate?
A. managerial hubris B. knowledge race C. unfettered free market D. competitive feasibility