Is the Federal Accounting Standards Advisory Board Independent? Can the Federal Accounting Standards Advisory Board Be More Independent?

By Patton, James; Mosso, David | The Journal of Government Financial Management, Fall 2009 | Go to article overview

Is the Federal Accounting Standards Advisory Board Independent? Can the Federal Accounting Standards Advisory Board Be More Independent?


Patton, James, Mosso, David, The Journal of Government Financial Management


Is the Federal Accounting Standards Advisory Board (FASAB) Independent?

FASAB was created (as its name implies) as a federal advisory board. At its inception in 1990, federal employees dominated the board and three principal sponsors - the director of the U.S. Office of Management and Budget (OMB), the Comptroller General of the United States representing the U.S. Government Accountability Office (GAO) and the Secretary of the Treasury - initially retained the power to veto financial reporting policies recommended by the board. In part, this structure was designed to resolve constitutional issues concerning the prerogatives of the executive and legislative branches of the federal government. While public members could participate and potentially influence the outcomes via collegial, reasoned arguments, the federal government retained the final say over federal financial reporting requirements. One result of this structure was that (in at least one case), the board did not include certain solutions to an issue in a standard because it knew those solutions would lead to a veto of the standard by one of the principals. For example, OMB was openly opposed to explicitly disclosing and labeling a closed group dollar amount for Social Insurance. As a result, that option was not seriously considered as part of what became SFFAS 17. This sort of self-censorship was a natural result of the structure of the board and its processes. FASAB operated under this structure for over nine years.

In addition to the ability of the principal sponsoring federal agencies to veto policies at FASAB, the U.S. Department of Defense (DoD) was also able to exercise near-veto power with respect to a variety of issues relating to financial reporting for specialized defense situations. For example, for a number of years DoD repeatedly opposed depreciation of what the FASAB described as National Defense Property Plant and Equipment. As a result, FASAB did not produce a standard requiring depreciation for such items. Only when a new head of DoD with a stronger business orientation arrived did DoD change its view; and only then did FASAB produce a standard that required depreciation of many DoD weapons-related assets. This deference of the board to DoD seemed to be due to the fact that the DoD appeared to have many powerful allies in Congress who might be willing to provide financial reporting exemptions for DoD or bring into question the continuing role of FASAB in issuing financial reporting standards. Thus, federal members' interests clearly dominated FASAB proceedings through the late 1990s; by design, FASAB was not independent of the federal government financial report preparers.

In 1999, FASAB sought and received designation from the American Institute of Certified Public Accountants (AICPA) as the generally accepted accounting principles (GAAP) standards-setter for the federal government (Rule 203 status). One of the major concerns of the AICPA in reaching this endorsement was the real and perceived independence of FASAB. To try to accommodate those concerns, FASAB was eventually restructured to have a majority of public members, at six, and four federal members. Although veto power was retained by OMB and GAO, the AICPA indicated that if the veto power was ever used it would most likely rescind the FASAB's status as GAAP standards-setter. The AICPA also said that it would periodically review FASAB to see if GAAP status should be retained. The last review was in 2004; the next review is scheduled to begin in late 2009 and be completed by May 2010.

Although no explicit veto by a FASAB principal has occurred in the period since FASAB received Rule 203 status, other indications of impaired independence are evident. The federal government continues to dominate FASAB by threats of veto, selection of board members and budget control/ oversight management. This domination constitutes a continuing threat to the independence of FASAB. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Is the Federal Accounting Standards Advisory Board Independent? Can the Federal Accounting Standards Advisory Board Be More Independent?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.