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Chapter 8 FASB Present and Future

Chapter 8 FASB Present and Future. Consider current situation of FASB. Identify competition to FASB. Consider international GAAP. Debate private vs. public in post-Enron situation. The post-Enron outlook or look out!. FASB Current Situation. 1997-2005 FASB/Accounting Press Bashing

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Chapter 8 FASB Present and Future

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  1. Chapter 8 FASB Present and Future • Consider current situation of FASB. • Identify competition to FASB. • Consider international GAAP. • Debate private vs. public in post-Enron situation. • The post-Enron outlook or look out!

  2. FASB Current Situation • 1997-2005 FASB/Accounting Press Bashing • Discussion Teams: What could the accounting profession do to polish its image?

  3. Current Situation….#2 • FAF Contributions Trend Down B4 Sox • Congress: new laws on accounting, especially post-Enron.

  4. Current Situation #3 • SEC Activism; SEC Chairman A. Levitt late 1990’s • Levitt’s “illusions,” “grave concerns,” and “numbers gamesmanship” • Significance • Competition……

  5. FASB Competition- International • No competition for CF (most international CF based on FASB CF). • International and domestic competition for FASB… • International--Global Economy… • “An end to economic geography….”

  6. International Competition • ?Remember from Chapter 4 • Old World Order • New World Order • Overview: economic world of trading pacts and blocs • Worldwide: GATT

  7. International Competition • Regional: European Union (Euroland) • Integration on three fronts • Customs, economic, political union • IASB IFRS in 2005. • Parlez vous comptable? • Verstechen Sie wie die Rechnungswesen gemacht ist?

  8. International Competition • NAFTA • Professional reciprocity progress • Habla Ud. contabilidad?

  9. International Outlook • Future Structure of world economy: trading and monetary blocs? • ? Will world economy of trading and monetary blocs increase international trade and world wealth? • Growth in cross-border capital flows and investments • Resulting need for World-wide GAAP

  10. I.C. • IASB (IASC) • 1973 nine founders; now 125 bodies in 90 nations. 2001 restructured IASB ala FASB. IFRS • 2000 IOSCO Endorsement • NYSE-SEC • FASB-IASB Convergence

  11. I.C. • Conclusions • Pressure • Structure (blocs) make it easier for world-GAAP? • Whose standards?

  12. FASB Competition Domestic • Emerging Issues Task Force (EITF) • Created by FASB in 1984 • 16 sr. techies, FASB, SEC • Consensus (14 ayes) has SAS! But…. • 2003 limits.

  13. Domestic Competition #2 • AICPA Accounting Standards Executive Committee (AcSEC) 1973 • 15 members • SAS 69, SOPs are GAAP! • Due Process, FASB approval • 2003 limits. • Peekaboo (Public Company Accounting Oversight Board) 2003-5. • SEC 2003-5

  14. Discussion Teams:Competition • Questions: • Should the SEC be considered as a domestic competitor? • Which threat is bigger, domestic or international competition?

  15. Big Question • Should accounting standard setting be continued in private sector or returned to public sector? • Significant issue in post-Enron period.

  16. Private-Public Debate: Objectives of Financial Reporting • Permit firm to present financial information most conducive to its purposes. Corporate reporting. • Provide investors with information to compare two or more firms. Investor evaluation. • Provide government with basis for macro-economic decision for economy. Government reporting. • Debate: Which should prevail? Currently, which does?

  17. Private-Public Standard Setting Levels in the US • Level One • Branches of gov. • Level Two • Gov regulatory • Level Three • Private regulatory

  18. Standard Setting: Private or Public? • Public-PRO and Con • Private-Pro and Con

  19. Discussion Teams • Which, private or public, do you prefer? • What is the strongest argument to support your position?

  20. Advantages of FASB to SEC • Support Status quo

  21. Standard Setting Conclusion • Different world since 1973. • FASB embattled in 2005. Outlook or look out! • Fallout from Enron. • World forces.

  22. Discussion Question • Assess the current situation of the FASB in post-Enron world and in light of the competition. Are you optimistic or pessimistic about its future as a standard setting body? Explain.

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