Accounting Standard Setting

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

The IOSCO plan does not cover accounting standards.(66) These standards are important for providing financial statements in a scheme that are prepared in the similar manner as those by issuers from other countries. The development of international accounting standards is the subject of a distinct project by IOSCO, and many accounting professionals who are concomitant with that undertaking are hopeful that a satisfactory solution is within reach.(67) Supposing, however, that an agreement is possible on a core set of financial standards and that they too are embraced by securities regulators as compulsory for foreign issuers, the road to commonality has at least two other impediments.

Likewise, "Enlightened Regulatory Capture" by David Thaw, contributed alternative views of the role of interest groups and exterior actors in the public policy making process. This will be a beneficial component of literature because it will express how the regulatory process must, inevitably, have active outside players to run effectively. When addressing the issues of regulatory capturing in the industry and executive agencies, it will be important to consider balancing the role of outside players.

Regulation is a major activity at all levels of government. As society becomes more complex, regulations must grow and evolved to meet the demands of a developing society. Concentrating more on the role of regulation, it can be noted that it is a system that helps protect individuals from one another. So from buyers to sellers; from employee to employer; tenants to landlords, and so on. Regulations is also implemented to alleviate human suffering and promote overall welfare. For instance, aid in the form of Social Security and to Veterans, natural disaster relief, regulation of pollution and toxins, as well as temporary assistance for the unemployed. Last, and most importantly regulation is implemented to minimize and eliminate corruption and abuse of power by government agencies or officials. (Book Source) Taking into account the terms and ideologies stated above, it is easily understood why, we as individuals have decided for so many years, to abide by this social contract with our government. We gain the most benefit from this quid pro quo relationship.

“A regulation is a rule or law intended on governing the conduct of people. The term economic regulation refers to taxes, subsidies as well as the explicit legislative and administrative controls over rates, entry, and many other facets of economic activity.” (Posner, R.A. “Theories of Economic Regulation”, Bell Journal of Economics, 1974).

In this essay arguments for capitalism as the dominant economic system, and the role that accountants can play in improving this system is discussed. Capitalism is defined as “An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. ‘an era of free-market capitalism’ “ (Anon., 2017).

The issue surrounding high levels of fraternization between the agency and the industry is the risk of acting in ways that threaten public interest. If the firms within the industry are too influential in the formation of regulations, their interests outweigh that of the public. It is a common concern that this capturing could lead to policies that hinder competition to the benefit of a particular firm or give one firm a substantial advantage in the market. It is evident that regulatory capture is a failure in policy making because the purpose of regulation is to distinguish between programs that regulate and those that promote business enterprise. If the industry is promoted in the regulation process, there is a clear conflict of interest and evidence of

The United States is known to operate in a free market economy. In other words, the economy is based solely on supply and demand with little to no government control. In reality, however, the United States has various government regulations on our country’s market. The amount of regulation that is necessary is a continuing debate among politicians and economists to this day. Some would say that the key to a successful market economy is to remove government restrictions in order to force businesses to provide superior products and services at affordable prices. Yet, others assert that government regulations are essential in protecting consumers, stemming from the assumption that corporations are not always looking out for the public’s interest. Of course, there are various advantages and disadvantages associated with each level of regulation, however it is safe to assume that there must be a balance between an unregulated free market and a regulated economy in order to protect people and the environment and allow the economy to flourish.

government regulation was defined by Grajzl & Murrell (2007) as the study of “comparative regulatory design,” a topic rarely discussed amongst academics, economists, or politicians alike. While government regulation is discussed broadly across many different fields, rarely is it analyzed in direct comparison to self-regulation. However, some academic papers have discussed this topic of “comparative regulatory design”: Gehrig & Jost (1995), Segerson & Miceli (1998), and Stefan's (2003), to name a few. These articles have all taken a different perspective of analysis and in the end concluded that self-regulation, when applied properly, can be far more effective than any form of government regulation. In their paper titled “Quacks, Lemons, and Self-Regulation: A Welfare Analysis,” Gehrig & Jost (1995) make the observation that if the information regarding an environmental issue is relatively simple and widespread, it may be best to leave the regulatory powers up to the government. If, on the other hand, the science and knowledge behind the issue is complex and limited, a self-regulatory body within the industry would be far better suited in resolving the environmental damage. In other words, the decision regarding which political body should be placed in charge of resolving an environmental issue should be determined by whichever body holds the most knowledge regarding the issue. Following these guidelines, the self-regulatory bodies should

It is very difficult for political and social goals to not influence US accounting standard setting. According to Solomons (1978, p. 65) quoting Charles Horngren, “the setting of accounting standards is as much a product of political action as of flawless logic or empirical findings. Why? Because the setting of standards is a social decision. Standards place restrictions on behavior; therefore, they must be accepted by the affected parties…getting acceptance is an exceedingly complicated process that requires skillful marketing in a political arena.” When a person or group of people see an issue that they feel needs to be addressed, they are going to want it handled in the way most desirable to them and their position. Hand in hand with

The standard setting process is governed by the FASB, but the decisions they make ultimately affect the corporations that have to adopt these accounting standards. Operating in a manner that does not take into account the views of the governed bodies would be unjust and would create a large disparity between the two bodies. Knowing that accounting rules affect human behavior, Dale Gerboth argues that politics is the only way to command others to follow rules. Political accounting is the main reason that accountants in the first place had a positive perception and the confidence of the public. Since the government has an inside knowledge of the goals and health of the economy, they can direct accountants to determine what is the most relevant information and display the information in a way that is most beneficial to the final users. By having government influence in politics, it sets a restriction on behavior whether voluntarily or by force. These restrictions were agreed upon by all parties in the society and represent the best interest of the society. Without government influence in accounting standards, standards would be chaotic as there would be no focus on what is the best for the economy. In conclusion, as governments have the best vision, and understand the weaknesses of the economy they are most capable of providing input for the accounting

2-1.) In most cases, private businesses would prefer not have government regulate how they achieve their interests, but there are situations where private businesses benefit from some types of regulations. One of the purposes of government includes the promotion of business to grow and expand, so that its outputs and outcomes benefit all of society. This is done via a trickle down affect that includes changes to employment opportunities, community incomes, business sales and services and state revenues. Government is also mandated, through another purpose, to protect the health, safety and welfare of the public from being harmed by threats or actions from internal or external entities. Business regulation by government is a process that restrains

Regulation is defined as a set of rules that is designed to control and govern conduct by authority (Deegan 2009, p.59). On the basis of this definition, Deegan (2009, p.59) has defined regulations relating to financial accounting as rules that are developed by independent authoritative body to govern the preparation of financial statements which are accounting standards. Since decades ago, there have been arguments for and against the existence of accounting regulations. With a stance of pro-regulation, this essay is going to examine the reasons that financial accounting and reporting should be regulated and the merits of accounting regulations.

It has been become an issue of great concern that the accounting profession must find a common theory in order to address and put the issue at rest. This therefore, has called for the study of this topic under review “the demand for and supply of accounting theories: the market for excuses. As a result of this several questions have been raised. For instance, the question of why accounting theories are predominantly normative has been put forward by this article? Secondly, why no single theory in accounting profession that is generally or widely accepted? It has been argued that the financial accounting theories have been found to be ineffective most especially in the area of impacting accounting practice and policy, though, this has been

The definition of accounting theory according to Coetsee (2010) is described in two different ways. The first philosophy concludes that accounting theory is a set of general principles that guide the evolution of accounting practice. The other philosophy describes accounting theory as activity of explaining and predicting accounting practice. What the viewer can see from the statement of the first philosophy is that the accounting theory exists before accounting practices meanwhile the latter states that the accounting practice exists before the theory. Since there are many arguments about this matter, many academic researchers have concluded that accounting theory can be divided into two categories which are positive and normative theory.