Magazine article The CPA Journal

Book Review: Setting Standards for Financial Reporting

Magazine article The CPA Journal

Book Review: Setting Standards for Financial Reporting

Article excerpt

While the book is a chronological history of sorts of the FASB, its real purpose and message is in its subtitle, FASB and the Struggle for Control of a Critical Process. The author, a retired senior member of staff at the FASB, clearly feels the FASB is surrounded by assassins. Within this group are big business, accounting firms, Congress, and the SEC. Coming in for some of the heaviest criticism are the members of the Board of Trustees of the Financial Accounting Foundation.

Big business is seen as wanting broad standards that would leave plenty of room for judgement. Leading the way in attempting to influence the FASB to this position are the Business Roundtable and the FEI. Two leaders of the Business Roundtable cited as having the heaviest hands in this effort are Roger B. Smith and John S. Reed. With GM's huge unfunded pension liability, Smith's real target was the Board's project on pension accounting. Reed, the head of Citicorp, didn't appear to have a particular axe to grind, but did voice his views that the FASB had issued too many standards, its opinions were too conceptual, an it was not responsive to the views of industry.

The FEI is specifically censored for its role in lobbying to not have C. Arthur Northrop reappointed to the Board. Seen as a representative of Corporate America's point of view when he was first appointed, Northrop committed the sin of voting for FAS No. 94, which required the full consolidation of all majority-owned subsidiaries. He was not reappointed.

Originally, the accounting profession was seen as wanting more and very specific standards that would defuse differences of opinion with clients. However, because of the new competitive environment in public accounting, some firms were seen to be following the practice of surveying their important clients before taking a position on FASB projects. One Board member noted, "the Big Six are taking advocacy positions in the last few years that would have been strange for them before. …

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