CA 1-7 - Acct 3401 - Intermediate Accounting I Chapter 1,...

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Acct 3401 - Intermediate Accounting I Chapter 1, CA 8 Some accountants has said that politicization in the development and acceptance of generally accepted accounting principles (i.e., standard setting) is taking place. Some use the term, “politicization” in a narrow sense to mean the influence by governmental agencies, particularly the Securities and Exchange Commission, on the development of generally accepted accounting principles. Others use it more broadly to mean the compromise that results when the bodies responsible for developing generally accepted accounting principles are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, and so on). (a) The Committee on Accounting Procedure of the AICPA was established in the mid- to late 1930s and functioned until 1959, at which time the Accounting Principles Board cam into existence. In 1973, the Financial Accounting Standards Board was formed and the APB went out of existence. Do the reasons these groups were formed, their methods of operation while in existence, and the reasons for the demise indicate an increasing politicization (as the term is used in the broad sense) of accounting standard setting? Explain you answer by indicating how the CAP, the APB and the FASB operated or operate. Cite specific developments that tend to support your answer. THE COMMITTEE ON ACCOUNTING PROCEDURE, CAP , which was in existence from 1939 to 1959, was a natural outgrowth of AICPA committees which were in existence during the period 1933 to 1938. The committee was formed in direct response to the criticism received by the accounting profession during the financial crisis of 1929 and the years thereafter. The authorization to issue pronouncements on matters of accounting principles and procedures was based on the belief that the AICPA had the responsibility to establish practices that would become generally accepted by the profession and by corporate management. As a general rule, the CAP directed its attention, almost entirely, to resolving specific accounting problems and topics rather than to the development of generally accepted accounting principles. The committee voted on the acceptance of specific Accounting Research Bulletins published by the committee. A two-thirds majority was required to issue a particular research bulletin. The CAP did
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CA 1-7 - Acct 3401 - Intermediate Accounting I Chapter 1,...

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