Chapter 3 The APB Post ARS 1 and

Chapter 3 The APB Post ARS #1 and #3 • Examine the post-rejection of ARS #1 and #3 tenure of APB • Consider second major theory formulation: ASOBAT

Standard Setting V The APBPost ARS #1 and 3 • Started off with “Golden Opportunity (G. O. )” to develop theory. • Possible redemption: G. O. #2

GO #2: Accounting for Investment Credit • Options? • How did the APB react to golden opportunity #2? • What consequences followed?

Questions • Why do you think the APB adopted the deferral approach to the IC? • If you had been a member of the APB, how would you have felt when the SEC overruled Opinion #2 with ASR #96 in January, 1963?

Theory III ASOBAT 1966 • Profession still theory-less • Turn to who? • Comparative advantage?

ASOBAT • What was it to accomplish? • “…the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information. ” 3 definitional differences? • Approach, Contents, and Core

ASOBAT • Flavor

ASOBAT 3 Controversy • Three criticisms: – R. Morrison – G. Sorter – R. Sterling

ASOBAT Critique #1 • R. Morrison, the practitioner, Commentary

ASOBAT Critique #2 • Concerns: G. Sorter* • *”An Events Approach to Basic Accounting Theory, ” Accounting Review 1/1969.

ASOBAT Critique #3 • Concerns: Sterling* • *”ASOBAT: A Review Article, ” Journal of Accounting Research, Spring 1967.

APB Failing • By 1970, Major Problems emerged

International: Other Approaches to Standard Setting • World-wide Standard Setting Approaches-1. public, 2. private, 3. private as public, and 4. mixed.