accounting memo

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The History of Financial Accounting Standard Setting in the United States

Group 1

History of U.S. Standard Setting

1930 Began an attempt to revise financial reporting requirement

1934 Congress Creates the SEC

1939-1959 CAP issues Accounting Research Bulletins

1959-1973 APB issues APB Opinions

1973 The FASB is established

Additional Timeline

1977 FASB establishes due process

1984 FAF established the GASB

2002 Sarbanes-Oxley became public law

2014 FASB and IASB issue converged guidance on revenue recognition

2016 FASB issues new leases standard

Principles vs. Rules Based Accounting

Rules based standard

Specific accounting rules

Comply with GAAP

Increase accuracy

Complicated

Principles based standard

Simple set of key objectives

Practical for a variety of situations

Cause unreliable and inconsistent information

Current Standard Setting Bodies

International Financial Reporting Standard Foundation (IFRS)

International Accounting Standard Board (IASB)

Accounting Standard Advisory Forum (ASAF)

International Financial Reporting Standard Foundation

Important issues confronted

Should we incorporate IFRS into the financial reporting system with GAAP?

Let’s discuss

Important individuals

Michel Prada ~ Chairman

Ronald Arculli ~Vice Chair

Additional Info

Currently, more than 120 nations and reporting jurisdictions permit or require IFRS for domestic listed companies.

IFRS oversee the IASB

Perhaps the greatest difference between IFRS and U.S. GAAP is that IFRS provides less overall detail and industry-specific guidance.

2015 is the year the SEC allowed companies to convert their financials to IFRS

International Accounting Standard Board

Important issues confronted

Constant changes in economy and regulations

Important individuals

Hans Hoogervorst ~ Chair

Sue Lloyd ~ Vice Chair

Structure diagram

Federal Accounting Standard Advisory Board

Important issues confronted

Budget and Accrual Reconciliations

Important individuals

D. Scott Showalter ~ Chairman

Gila J. Bronner~ Vice Chairman

Wendy M. Payne~ Executive Director

George O. May 1st

He was born on May 22, 1875

Native of Teignmouth, England

Joined PriceWaterhouse & Co. in early 1897

Served as the AICPA Vice president (1917-18)

1944 received the Gold Medal Award

Cooperation with Stock Exchanges (1930-35)

Development of Accounting principles

Leonard P. Spacek 35th

Born on September 12, 1907

Cedar Rapids, Iowa

Accepted an Accountant position with Arthur Andersen & Co. in 1928

Manager-->Partner-->Senior Partner

Served on the APB (1960-65)

Member of the AICPA’s project advisory committee

“Ethical” Trademark

Written Numerous Articles & over 200 speeches

MF

Why are they Significant…?

Made major contribution to the accounting profession:

George O. May

Set forth publications as guides for Audits of Corporate accounts (1934)

NYSE requires listed companies to have annual independent Audits

Persuaded the newly formed SEC that the accounting profession should be the authority on accounting principles.

Leonard P. Spacek

Pioneer on public responsibility & Public Accounting practice

Influential speeches throughout his career

Opposing Views

Paul Spacek advocated for more professional responsibility on the other hand George Olive enhanced Accounting principles to have more tighter regulations.

MF

Do they still play a role in today’s Accounting standards?

George O. May

Yes since the early inception of the SEC he worked together to allow the profession to be the leading authority in the accounting principles and also helped with early development of them.

Leonard P. Spacek

Not directly but many of its speeches given throughout his career have many influences that relate directly to the Sarbanes-Oxley act of 2002.

MF

Committee on Accounting Procedure, Accounting Principles Board: Failures

Composed of practicing CPA’s

Issued 51 “Accounting Research Bulletins” from 1939-1959

Major failures of CAP

It addressed accounting issues one by one

Lack of body structure for accounting principles

Lead to many F/S lacking uniformity thus causing too mislead investors

MF

Committee on Accounting Procedure, Accounting Principles Board: Successes

Replaced the APB with FASB in 1973

FASB’s mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public.

FASB Successes

Issues Accounting standards update

FASB codification(authoritative source of Generally accepted accounting principles)

Full time members, smaller membership (7), Increased independence

MF