IM_CH_06 - Chapter 6: The Search for Objectives...

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Chapter 6: The Search for Objectives Instructor’s Manual 7 th edition Page 1 of 8 C HAPTER H IGHLIGHTS Chapter 6 continues the thrust of Chapter 5 by examining important documents and committee reports that have appeared since the publication of ARS 1 and ARS 3. As its title indicates, the chapter is concerned with the question of who financial reporting is prepared for and what information they should have access to. ASOBAT was the first formal report to emphasize the importance of user needs to accounting standard setting, even though the actual development of the user needs themselves was quite limited. APB Statement 4 was the APB’s “last hurrah.” The document contained much of the “conventional wisdom” going back to the basic concepts underlying historical costing discussed in Chapter 5, as well as material coming from ASOBAT. In some ways it was more complete than ASOBAT, because it listed users of financial accounting information—classifying them into those with direct interests and those with indirect interests. In the wake of the demise of the APB, the AICPA commissioned the Wheat Committee and the Trueblood Committee reports. The former pertained to the organization of the APB’s successor and was briefly discussed in Chapter 3. The latter attempted to delineate the major overall objectives of accounting in terms of user needs. The objectives have been criticized as being non-operational. However, since they were intended to be at the apex of a metatheoretical structure, that criticism misses the point, in our opinion. SATTA, like its predecessor ASOBAT, was an attempt to assess the contemporary state of financial accounting theory. Unlike ASOBAT, which attempted to codify some elements of a metatheoretical structure, SATTA attempted to show why agreement in terms of selecting among competing accounting theories (valuation systems such as replacement cost or exit values) could not be achieved at that particular time. We believe that one of the crucial issues brought up in SATTA is the question of how diverse the information needs of the various user groups are. This is an empirical question that has not yet been resolved. In fact, little, if any, work has been done on this extremely important question. It is also interesting to note that SATTA took a very pessimistic view at almost the same time that the FASB launched the conceptual framework. The discussion of user objectives and user diversity, which was given in separate appendices in previous editions of this book, are now included in the body of the chapter. This information is important and supplements the discussion of the various committee reports and documents covered in the chapter.
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Chapter 6: The Search for Objectives Instructor’s Manual 7 th edition Page 2 of 8 Q UESTIONS Q-1 How do objectives differ from postulates? Objectives are goals to be strived for.
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IM_CH_06 - Chapter 6: The Search for Objectives...

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