Chapter 8 FASB Present and Future Consider current

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 • Discussion Teams: What could the accounting profession do to polish its image?

Current Situation…. #2 • FAF Contributions Trend Down B 4 Sox • Congress: new laws on accounting, especially post-Enron.

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

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…. ”

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

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?

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

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

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

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

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.

Domestic Competition #2 • AICPA Accounting Standards Executive Committee (Ac. SEC) 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

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

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

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?

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

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

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

Advantages of FASB to SEC • Support Status quo

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

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.