Case 1-3 Politicalization of Accounting Standards

Case 1-3 Politicalization of Accounting Standards - Case...

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“• Case 1-3 Politicalization of Accounting Standards Some accountants have said that politicalization in the development and acceptance of generally accepted accounting principles (i.e., standard setting) is taking place. Some use the term politicalization 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 compromising that takes place in bodies responsible for developing these principles because of the influence and pressure of interested groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, lawyers, etc.).” Required: “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 came 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 of the first two indicate an increasing politicalization (as the term is used in the broad sense) of accounting standard setting? Explain your answer by indicating how the CAP, APB, and FASB operated or operate. Cite specific developments that tend to support your answer.” The Committee on Accounting Procedure, otherwise known as CAP, was in existence from 1939 to 1959. CAP grew from the AICPA committees which were in existence during the period 1933 to 1938. The committee was formed in direct response to the disapproval that was received by the accounting world during the financial crisis of 1929. The authorization to issue pronouncements on matters of accounting principles and procedures was based on the principle that the AICPA had
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Case 1-3 Politicalization of Accounting Standards - Case...

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