You Can Influence Accounting Standards
Beresford, Dennis R., Ihlanfeldt, William J., Strategic Finance
As financial professionals, many of you are responsible for implementing accounting standards in companies. But do you know how the standards-setting process works? Would you like to influence it? You can. It's easier than you think.
The first thing you'll have to do is become familiar with the Financial Accounting Standards Board and its work. The FASB is an independent body, composed of full-time Board members and staff, that establishes generally accepted accounting principles (GAAP) in the U.S. Its process is very open and involves considerable participation by corporate accountants and financial managers as well as all other groups affected by its rulings. As part of this process, the affected parties are invited to comment on various issues. That's where you come in.
Already you're probably thinking, "I have a hard time keeping up with my job and other responsibilities. Where am I going to find the time to get involved as these two guys are suggesting?" Even those of you who may have an interest in new technical accounting issues no doubt are thinking, "What could my company gain from my spending time in this area? Or even more specifically, how could it possibly help me?."
In very general terms, all of us have a responsibility to be involved in the continuing improvement of our profession. Making sure we have financial accounting of the highest possible quality has to be one of the most important foundations. Also, those of you with CMA (Certified Management Accountant), CFM (Certified in Financial Management), CPA (Certified Public Accountant), and similar designations are required to update your knowledge of accounting requirements. But with all the changes taking place in today's business world, simply staying reasonably informed about new requirements takes considerable effort. You may view helping to shape any new requirements as "going beyond the call of duty."
Only a small percentage of corporate accountants participate directly in the FASB's process right now, and it probably is unrealistic to expect that to change dramatically. But the system simply doesn't work as intended unless there's sufficient involvement by all interested parties. Keep in mind that public accounting firms, financial analysts, securities regulators, and many other constituencies will try to convince the FASB to adopt their point of view with respect to new accounting issues. And those points of view often are quite different from the corporate business perspective. Even more important, those other constituencies lack your special insights because they haven't had to spend the time thinking through how to actually account for the item in question under current conditions. Also, they wouldn't have the information you would about associated practical matters such as costs of developing systems to provide new information or other implementation problems.
YOU CAN MAKE A DIFFERENCE
The IMA's Financial Reporting Committee is one way in which the business point of view is represented in the FASB's standards-setting process now. FRC writes letters on almost all proposals, testifies at public hearings, meets periodically with FASB representatives, and otherwise stays on top of pending projects. If you belong to an industry (banking, pharmaceuticals, oil and gas) association, check to see if it has a similar accounting committee that interfaces with the Board regularly. These groups make a significant contribution, and we encourage you to think about becoming involved in such a committee. But individual corporations also must make their views known because committee recommendations often are a compromise among strongly held but quite diverse positions.
There are costs and benefits to joining the process. There certainly is a cost involved in studying rule proposals and trying to figure out how they might affect your company if they were adopted as final standards. Most companies probably reason that proposals almost always change to some degree and that it isn't certain when or even whether a final standard will be issued, so why bother. …