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THE CENTURY OF CPA
Click to edit Master subtitle style Presented by:
Komang Ayu Kumaradewi (12030111150029)
Komang Yuli Pridarsanti (12030111150030)
The Cen Century tury Of CP CPA
4/27/12
OVERVIEW
•
•
•
•
•
The Origin of Regulation Regulation The Crash of 1929 The Post-war Post-war Boom The Modern Era Conclusion
The Cen Century tury Of CP CPA
4/27/12
THE TH E Orig Origin in of of Regu Regulat lation ion •
1830 The railway age began with the the opening of Liverpool and and Manchester Manchest er line. l ine.
•
1844 Joint Stock Companies Act Act in Great Great Britain.
•
1886 The Supreme Supreme court held that commerce commerce originating or ending beyond the boundaries of a state was beyond the power of the state to regulate. First meeting of American Association of Public Accountants (AAPA).
The Cen Century tury Of CP CPA
4/27/12
THE TH E ORIG ORIGIN IN OF RE REGU GULA LATIO TION N •
1887 Interstate Commerse Commission (ICC) was established by the Congress with the spesific authority to regulate railroad. AAPA incorporated in New York.
•
1890 Sherman Antitrust Act as a respond to the monopolies.
•
1894 AAPA adopted a resolution recommending that the order of presentation in the balance sheet should be from the most to the least liquid.
The Cen Century tury Of CP CPA
4/27/12
THE ORIGIN OF REGULATION •
1906 The Hepburn Act of 1906 gave the ICC the authority to establish a uniform accounting system for use in establishing an appropriate rail rates, thereby setting the stage for the century of regulation of accounting.
•
1910 AAPA formulate definition of technical accounting terms in order to give uniformity to their meaning. AAPA also attempted to make its influence felt in the area of income taxes.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATION 1913
•
Woodrow Wilson on the slogan of ‘new freedom’ for the people as the respond to the dissatisfaction with the liability of the government to control the growth of big business. •
1914 The Clayton Antitrust Act was enacted and the Federal Trade Commission was created to oversee the provision of the Act. The federal Reserve Board (FRB) was formed which, for the first time, created publicly controlled central banking system in the country.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATION •
1917 The new regulatory bodies perceived a need for standardization in the preparation of financial statement submitted to bankers for credit purposes. FTC suggested that FRB need to maintain a register of accountants considered acceptable to practice before the Board and the Commission. Uniform Accounting was issued by FRB.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATION •
1918 Approved Methods For the Preparation of Balance Sheet Statements.
•
1929 Verification of Financial Statements.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATion •
Regulation in Britain (1844) Joint Stock Company Act permit incorporation by registration only if shareholders would accept unlimited liability. As a further safeguard, the Act provided for the periodic balancing of the accountants and the presentation of a ‘full and fair’ balance sheet to stockholders.
The Century Of CPA
4/27/12
THE CRASH OF 1929 Some reactions/ critics: •
Adolph Berle “So long as accounting standards are not hardenend and the law doesn’t impose any spesific canons, directors and their accountants may frame their figure, within limits, much as they choose.” “The fact that accountants themselves have as yet failed to work out a series of standard rules.”
The Century Of CPA
4/27/12
THE CRASH OF 1929 Some reactions/ critics: •
J.M.B Hoxsey ü the lack of uniformity in accounting ü no rules in the areas of depreciation and consolidation ü companies were not even disclosing which methods they were using ü companies refused to release their revenue numbers on grounds ü companies ultraconservatives in undervaluing inventory and taking excessive depreciation
The Century Of CPA
4/27/12
THE CRASH OF 1929 AIA respond: The respond Several years earlier the AIA had attempted to draw the NYSE into conversation. Also NYSE had been relatively lax in its listing requirements. Although it was organized as early as 1792, it did not attempt to obtain financial statement from listed companies until about 1866. 1900, it requested that all companies applying for listing on the exchange agree to publish annual reports. 1926, require all listed companies to publish and The Century to Of CPA 4/27/12 submit stockholders an annual financial •
THE CRASH OF 1929 AIA respond: 1933 •
AIA creating a Special Commitee on Corporation with Stock Exchange NYSE requirement was that all companies seeking listing with the NYSE would have to furnish financial statements bearing the certificate of accountants ‘qualified under the laws of some state or country’.
The Century Of CPA
4/27/12
THE NEW DEAL •
1933 Roosevelt’s first 100 days in office: ü The Emergency Banking Act ü The Truth-in Securities Act ü The Glass Steagal Banking Act
•
1934 Securities and Exchange Commission (SEC) was created to administer Truth-in Securities Act, Securities Exchange Act and several other act.
The Century Of CPA
4/27/12
THE NEW DEAL •
1938 The Commission permit the profession to lead the way in formulating accounting principles. The policy was issued in the form of Accounting Series Release no. 4 (ASR 4), which stated: “that the commission would accept only financial statement prepared in accordance with accounting principles which have substantial authoritative support or in accordance with rules, regulation or other official pronouncements of the commission or the chief accuntant.”
The Century Of CPA
4/27/12
THE NEW DEAL •
1938 Formulating the accounting principles itself, began with the Commitee on Accounting Procedure (CAP), founded in 1936 by the AIA. CAP continued to meet until 1959 and issued 59 bulletins. 8 were subsequently consolidated into “Accounting Terminology Bulletin No 1: Review and Resume” 31 were consolidated into “Accounting Reseach Bulletin No 43”
The Century Of CPA
4/27/12
The Century Of CPA
4/27/12
THE POST-WAR BOMB
Click to edit Master subtitle style
The Century Of CPA
4/27/12
1945 – The End of World War II •
•
•
•
•
•
The economy surged ahead. The newly found prosperity of middle-class in America persuaded investment in the stock market. This investors need appropriate information for their investment decisions. The standard investment advice to determine the appropriate stock price of the company is to multiply the company’s earnings by a Price-Earnings Ratio (PE Ratio). The company’s earnings number is a key part of the PE approach to investment. Therefore, accounting became vitally important.
The Century Of CPA
4/27/12
Accounting Alternatives •
1963 SEC was obliged to list areas that could lead to material differences in reporting, i.e : 1. Valuation of inventories. 2. Depreciation & depletion. Income tax allocation. 3. 4. Pensions. Research & development cost. 5. Goodwill. 6. 7. Time of realizing income. All-inclusive vs. an operating concept of income 8. statement.
The Century Of CPA
4/27/12
Accounting Alternatives
9.
Intercorporate investment.
10.
Long-term leases.
11.
Principles of consolidation.
13.
Business combinations. Income measurement in finance companies.
14.
Intangible costs in the oil and gas industries.
12.
The Century Of CPA
4/27/12
Price Level Adjustment •
•
•
The boom, accompanied by relatively serious burst of inflation, lead to a debate on “price – level depreciation”. In periods of price stability, the replacement cost equals the original cost; in periods of inflation the replacement cost is greater. Published in 1952, the report (after 5 years study) recommended that financial statements be adjusted for changes in the general price level.
The Century Of CPA
4/27/12
Earning Power Debate •
AIA “current operating income” ; the firm’s ordinary income, excluding extraordinary gains and losses, tempting management to manipulating the potential earning power of the company.
•
SEC & AAA “all-inclusive income” ; including all gains and losses, thus preventing management from manipulating the EPS number.
The Century Of CPA
4/27/12
Calls for Comparability •
•
•
•
The debates lead to the call for uniformity in accounting. Leonard Spacek attributed the lack of comparability to the inability of the Commitee on Accounting Procedure to withstand the pressure of industry. August 1957, he called for the creation of an Accounting Court of Appeals. Then, in the same year, AAA issuing it’s 3rd revision of Tentative Principles now called Accounting & Reporting Standards.
The Century Of CPA
4/27/12
the Accounting Principle Board •
October 1957 Alvin R. Jennings proposing a new organization to examine basic accounting assumption, identify “best” principles, and devise new methods to guide industry and the accounting profession.
•
December 1957 A Special Commitee on Research Programs was appointed. It’s report of December 1958 recommended replacing the Commitee on Accounting Procedure with Accounting Principles Board (APB) and Accounting Research Division (ARD).
•
1959 APB and ARD were formed. The Century Of CPA
4/27/12
the Accounting Principle Board
The objectives of the APB: Advance the written expression of GAAP, narrow the areas of difference in appropriate practice, and lead in discussions of unsettled and controversial issues.
The Century Of CPA
4/27/12
The Turbulent Sixties •
1960 The economy was struggling so John F. Kennedy’s administration enacted an Investment Tax Credit . There were 2 methods in accounting the tax benefits: “flowthrough” method & “deferred” method.
•
December 1962 The APB ruled in favor of the “deferred” method (APB 2). ASR 96 : SEC accepted both method APB 4 : several alternatives permited (including the immediate reduction of Income Tax Expese)
The Century Of CPA
4/27/12
The Turbulent Sixties •
1971 Through APB 11 (Accounting for Income Taxes) : APB mandating the deferral method. Opposition from the Internal Revenue Service and others for that mandate: Revenue Act of 1971. That Act caused the APB to withdraw it’s recomendation prior to the final draft.
The Century Of CPA
4/27/12
Authoritative Opinions •
•
The council recommended that after 1965, all departures from APB Opinions and effective Accounting Research Bulletins should be disclosed in footnotes to financial statements or in audit reports of members. That is, all opinions of the APB were considered to constitute substantial authoritative support for GAAP.
The Century Of CPA
4/27/12
Authoritative Opinions •
•
Rule 203: result of the replacement of the APB by the FASB Content of Rule 203: A member of the AICPA shall not express an opinion that financial statements are represented in conformity with GAAP if such statements contain any departure from an accounting principle promulgated by the FASB which has a material effect on statements taken as a whole, unless the member can show that due to unusual circumstances the financial statements would otherwise have been missleading.
The Century Of CPA
4/27/12
THE MODERN ERA
Click to edit Master subtitle style
The Century Of CPA
4/27/12
the Financial Accounting Standards Board •
•
Both the AICPA & the AAA proposed studies on the most effective organization structure for establishing accounting principles.
1970 The president of the Institute called a special conference proposed two studies to explore the means by which accounting principle should be established and to review the objectives of financial statements.
•
March 1971 The Wheat Study Group was appointed.
The Century Of CPA
4/27/12
the Financial Accounting Standards BoARD •
March 1972 The report of this group was submitted to the AICPA and adopted by the AICPA Council in June.
•
1973 The APB demised and the FAF, the FASB and the FASAC established (on July 1).
The Century Of CPA
4/27/12
Structure & Function •
•.
The principal duties of FAF : 1.
to appoint the member of FASB, FASAC and GASB;
2.
to raise the fund for their operations.
The FASB consists of 7 full time members and has a stated mission to establish and improve standards of financial accounting and reporting for the guidance and education of the public.
The Century Of CPA
4/27/12
Structure & Function •
The FASAC has a minimum of 20 members. The Council assist the standards Boards by : 1.
2. 3. 4.
maintaining contanct with business and the accounting profesion, sugesting new issues, pressing or delaying old issues, and acting as a sounding board on tentative positions taken by the Board.
The Century Of CPA
4/27/12
The Transition Several significant things that occured to permit the transition from the APB to the FASB: 1.
2.
3.
The AICPA had to relinguish its primary role, begun with the Commitee on Accounting Procedure, in the setting of accounting standards. The new Institutional structure had to be given some authority. This movement was initiated by the FASB’s Rules of Procedure. Rule 203 amanded to give FASB pronouncements official recognition by CPA. ASR No. 150 released in December 1973. The introduction of very deliberate process of arriving at a new standard.
The Century Of CPA
4/27/12
The Transition Steps in the FASB’s due process: •
Preliminary evaluation;
•
Admission to agenda;
•
•
Early deliberations; Tentative resolution (Exposure Draft);
•
Further deliberations (Hearings);
•
Final resolution (Standard).
The Century Of CPA
4/27/12
Emerging Issues Task Force (EITF) •
•
EITF created to attempt to resolve pressing issues rapidly due to the length of the process of arriving a new standard. It consist of 16 permanent person whose chairman is the FASB’s Director of Research and Technical Activities.
The Century Of CPA
4/27/12
Government Accounting Standard Board (GASB) •
•
•
•
GASB was established in 1984 to parallel the FASB and to report to the FAF. It has 5 members that appointed to fiveyear terms by the FAF acting in consultation with the GASAC. The initial agreement was that the GASB would rule on issues affecting state and local government. Standards set by the NCGA (the prior organization) would be binding in the absence of a ruling by the GASB. Where The Century Of CPA 4/27/12 neither the GASB nor the NCGA had ruled,
Ongoing Dissent •
•
•
One of the difficulties with the APB : it was composed only of members of the AICPA and was appointed and financed by the Institute. The hope to overcome the difficulties : creating FASB as a semi-independent organization with broader base of support and full-time members. In fact, many problem persists.
The Century Of CPA
4/27/12
Ongoing Dissent •
Controvercies & criticisms: 1.
Opposition in accounting policy about reported earnings
2.
Criticism about the volume of standard setting
3.
4. 5.
The discovery of illegal political contributions of 17 major companies in 1973 Hesitation of the effectiveness of SEC Private interest group that take part in the operation of FASB, which sets accounting standard, is not suited to control the accounting standards which affect the Federal Government and the public.
The Century Of CPA
4/27/12
Ongoing Dissent •
•
•
The AICPA affraid that accounting would be swept from the private sector. In September 1977, it separated it’s membership into 2 groups : the SEC Practice Section and the Private Companies Practice Section. It also established a Public Oversight Board to exercise oversight of the SEC Practise Section and instituted peer reviews.
The Century Of CPA
4/27/12
CONCLUSION
Click to edit Master subtitle style
The Century Of CPA
4/27/12
Conclusion •
•
•
The First Century of AICPA has been a dramatic and curious history. It is a history in which standards have tended to be set reactively rather than proactively. Whether the end result will be more information for shareholders or more convenient system for bureaucratic enforcement of accounting rules remain to be seen.
The Century Of CPA
4/27/12
Click to edit Master subtitle style Presented by:
Komang Ayu Kumaradewi (12030111150029)
Komang Yuli Pridarsanti (12030111150030)
The Cen Century tury Of CP CPA
4/27/12
OVERVIEW
•
•
•
•
•
The Origin of Regulation Regulation The Crash of 1929 The Post-war Post-war Boom The Modern Era Conclusion
The Cen Century tury Of CP CPA
4/27/12
THE TH E Orig Origin in of of Regu Regulat lation ion •
1830 The railway age began with the the opening of Liverpool and and Manchester Manchest er line. l ine.
•
1844 Joint Stock Companies Act Act in Great Great Britain.
•
1886 The Supreme Supreme court held that commerce commerce originating or ending beyond the boundaries of a state was beyond the power of the state to regulate. First meeting of American Association of Public Accountants (AAPA).
The Cen Century tury Of CP CPA
4/27/12
THE TH E ORIG ORIGIN IN OF RE REGU GULA LATIO TION N •
1887 Interstate Commerse Commission (ICC) was established by the Congress with the spesific authority to regulate railroad. AAPA incorporated in New York.
•
1890 Sherman Antitrust Act as a respond to the monopolies.
•
1894 AAPA adopted a resolution recommending that the order of presentation in the balance sheet should be from the most to the least liquid.
The Cen Century tury Of CP CPA
4/27/12
THE ORIGIN OF REGULATION •
1906 The Hepburn Act of 1906 gave the ICC the authority to establish a uniform accounting system for use in establishing an appropriate rail rates, thereby setting the stage for the century of regulation of accounting.
•
1910 AAPA formulate definition of technical accounting terms in order to give uniformity to their meaning. AAPA also attempted to make its influence felt in the area of income taxes.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATION 1913
•
Woodrow Wilson on the slogan of ‘new freedom’ for the people as the respond to the dissatisfaction with the liability of the government to control the growth of big business. •
1914 The Clayton Antitrust Act was enacted and the Federal Trade Commission was created to oversee the provision of the Act. The federal Reserve Board (FRB) was formed which, for the first time, created publicly controlled central banking system in the country.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATION •
1917 The new regulatory bodies perceived a need for standardization in the preparation of financial statement submitted to bankers for credit purposes. FTC suggested that FRB need to maintain a register of accountants considered acceptable to practice before the Board and the Commission. Uniform Accounting was issued by FRB.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATION •
1918 Approved Methods For the Preparation of Balance Sheet Statements.
•
1929 Verification of Financial Statements.
The Century Of CPA
4/27/12
THE ORIGIN OF REGULATion •
Regulation in Britain (1844) Joint Stock Company Act permit incorporation by registration only if shareholders would accept unlimited liability. As a further safeguard, the Act provided for the periodic balancing of the accountants and the presentation of a ‘full and fair’ balance sheet to stockholders.
The Century Of CPA
4/27/12
THE CRASH OF 1929 Some reactions/ critics: •
Adolph Berle “So long as accounting standards are not hardenend and the law doesn’t impose any spesific canons, directors and their accountants may frame their figure, within limits, much as they choose.” “The fact that accountants themselves have as yet failed to work out a series of standard rules.”
The Century Of CPA
4/27/12
THE CRASH OF 1929 Some reactions/ critics: •
J.M.B Hoxsey ü the lack of uniformity in accounting ü no rules in the areas of depreciation and consolidation ü companies were not even disclosing which methods they were using ü companies refused to release their revenue numbers on grounds ü companies ultraconservatives in undervaluing inventory and taking excessive depreciation
The Century Of CPA
4/27/12
THE CRASH OF 1929 AIA respond: The respond Several years earlier the AIA had attempted to draw the NYSE into conversation. Also NYSE had been relatively lax in its listing requirements. Although it was organized as early as 1792, it did not attempt to obtain financial statement from listed companies until about 1866. 1900, it requested that all companies applying for listing on the exchange agree to publish annual reports. 1926, require all listed companies to publish and The Century to Of CPA 4/27/12 submit stockholders an annual financial •
THE CRASH OF 1929 AIA respond: 1933 •
AIA creating a Special Commitee on Corporation with Stock Exchange NYSE requirement was that all companies seeking listing with the NYSE would have to furnish financial statements bearing the certificate of accountants ‘qualified under the laws of some state or country’.
The Century Of CPA
4/27/12
THE NEW DEAL •
1933 Roosevelt’s first 100 days in office: ü The Emergency Banking Act ü The Truth-in Securities Act ü The Glass Steagal Banking Act
•
1934 Securities and Exchange Commission (SEC) was created to administer Truth-in Securities Act, Securities Exchange Act and several other act.
The Century Of CPA
4/27/12
THE NEW DEAL •
1938 The Commission permit the profession to lead the way in formulating accounting principles. The policy was issued in the form of Accounting Series Release no. 4 (ASR 4), which stated: “that the commission would accept only financial statement prepared in accordance with accounting principles which have substantial authoritative support or in accordance with rules, regulation or other official pronouncements of the commission or the chief accuntant.”
The Century Of CPA
4/27/12
THE NEW DEAL •
1938 Formulating the accounting principles itself, began with the Commitee on Accounting Procedure (CAP), founded in 1936 by the AIA. CAP continued to meet until 1959 and issued 59 bulletins. 8 were subsequently consolidated into “Accounting Terminology Bulletin No 1: Review and Resume” 31 were consolidated into “Accounting Reseach Bulletin No 43”
The Century Of CPA
4/27/12
The Century Of CPA
4/27/12
THE POST-WAR BOMB
Click to edit Master subtitle style
The Century Of CPA
4/27/12
1945 – The End of World War II •
•
•
•
•
•
The economy surged ahead. The newly found prosperity of middle-class in America persuaded investment in the stock market. This investors need appropriate information for their investment decisions. The standard investment advice to determine the appropriate stock price of the company is to multiply the company’s earnings by a Price-Earnings Ratio (PE Ratio). The company’s earnings number is a key part of the PE approach to investment. Therefore, accounting became vitally important.
The Century Of CPA
4/27/12
Accounting Alternatives •
1963 SEC was obliged to list areas that could lead to material differences in reporting, i.e : 1. Valuation of inventories. 2. Depreciation & depletion. Income tax allocation. 3. 4. Pensions. Research & development cost. 5. Goodwill. 6. 7. Time of realizing income. All-inclusive vs. an operating concept of income 8. statement.
The Century Of CPA
4/27/12
Accounting Alternatives
9.
Intercorporate investment.
10.
Long-term leases.
11.
Principles of consolidation.
13.
Business combinations. Income measurement in finance companies.
14.
Intangible costs in the oil and gas industries.
12.
The Century Of CPA
4/27/12
Price Level Adjustment •
•
•
The boom, accompanied by relatively serious burst of inflation, lead to a debate on “price – level depreciation”. In periods of price stability, the replacement cost equals the original cost; in periods of inflation the replacement cost is greater. Published in 1952, the report (after 5 years study) recommended that financial statements be adjusted for changes in the general price level.
The Century Of CPA
4/27/12
Earning Power Debate •
AIA “current operating income” ; the firm’s ordinary income, excluding extraordinary gains and losses, tempting management to manipulating the potential earning power of the company.
•
SEC & AAA “all-inclusive income” ; including all gains and losses, thus preventing management from manipulating the EPS number.
The Century Of CPA
4/27/12
Calls for Comparability •
•
•
•
The debates lead to the call for uniformity in accounting. Leonard Spacek attributed the lack of comparability to the inability of the Commitee on Accounting Procedure to withstand the pressure of industry. August 1957, he called for the creation of an Accounting Court of Appeals. Then, in the same year, AAA issuing it’s 3rd revision of Tentative Principles now called Accounting & Reporting Standards.
The Century Of CPA
4/27/12
the Accounting Principle Board •
October 1957 Alvin R. Jennings proposing a new organization to examine basic accounting assumption, identify “best” principles, and devise new methods to guide industry and the accounting profession.
•
December 1957 A Special Commitee on Research Programs was appointed. It’s report of December 1958 recommended replacing the Commitee on Accounting Procedure with Accounting Principles Board (APB) and Accounting Research Division (ARD).
•
1959 APB and ARD were formed. The Century Of CPA
4/27/12
the Accounting Principle Board
The objectives of the APB: Advance the written expression of GAAP, narrow the areas of difference in appropriate practice, and lead in discussions of unsettled and controversial issues.
The Century Of CPA
4/27/12
The Turbulent Sixties •
1960 The economy was struggling so John F. Kennedy’s administration enacted an Investment Tax Credit . There were 2 methods in accounting the tax benefits: “flowthrough” method & “deferred” method.
•
December 1962 The APB ruled in favor of the “deferred” method (APB 2). ASR 96 : SEC accepted both method APB 4 : several alternatives permited (including the immediate reduction of Income Tax Expese)
The Century Of CPA
4/27/12
The Turbulent Sixties •
1971 Through APB 11 (Accounting for Income Taxes) : APB mandating the deferral method. Opposition from the Internal Revenue Service and others for that mandate: Revenue Act of 1971. That Act caused the APB to withdraw it’s recomendation prior to the final draft.
The Century Of CPA
4/27/12
Authoritative Opinions •
•
The council recommended that after 1965, all departures from APB Opinions and effective Accounting Research Bulletins should be disclosed in footnotes to financial statements or in audit reports of members. That is, all opinions of the APB were considered to constitute substantial authoritative support for GAAP.
The Century Of CPA
4/27/12
Authoritative Opinions •
•
Rule 203: result of the replacement of the APB by the FASB Content of Rule 203: A member of the AICPA shall not express an opinion that financial statements are represented in conformity with GAAP if such statements contain any departure from an accounting principle promulgated by the FASB which has a material effect on statements taken as a whole, unless the member can show that due to unusual circumstances the financial statements would otherwise have been missleading.
The Century Of CPA
4/27/12
THE MODERN ERA
Click to edit Master subtitle style
The Century Of CPA
4/27/12
the Financial Accounting Standards Board •
•
Both the AICPA & the AAA proposed studies on the most effective organization structure for establishing accounting principles.
1970 The president of the Institute called a special conference proposed two studies to explore the means by which accounting principle should be established and to review the objectives of financial statements.
•
March 1971 The Wheat Study Group was appointed.
The Century Of CPA
4/27/12
the Financial Accounting Standards BoARD •
March 1972 The report of this group was submitted to the AICPA and adopted by the AICPA Council in June.
•
1973 The APB demised and the FAF, the FASB and the FASAC established (on July 1).
The Century Of CPA
4/27/12
Structure & Function •
•.
The principal duties of FAF : 1.
to appoint the member of FASB, FASAC and GASB;
2.
to raise the fund for their operations.
The FASB consists of 7 full time members and has a stated mission to establish and improve standards of financial accounting and reporting for the guidance and education of the public.
The Century Of CPA
4/27/12
Structure & Function •
The FASAC has a minimum of 20 members. The Council assist the standards Boards by : 1.
2. 3. 4.
maintaining contanct with business and the accounting profesion, sugesting new issues, pressing or delaying old issues, and acting as a sounding board on tentative positions taken by the Board.
The Century Of CPA
4/27/12
The Transition Several significant things that occured to permit the transition from the APB to the FASB: 1.
2.
3.
The AICPA had to relinguish its primary role, begun with the Commitee on Accounting Procedure, in the setting of accounting standards. The new Institutional structure had to be given some authority. This movement was initiated by the FASB’s Rules of Procedure. Rule 203 amanded to give FASB pronouncements official recognition by CPA. ASR No. 150 released in December 1973. The introduction of very deliberate process of arriving at a new standard.
The Century Of CPA
4/27/12
The Transition Steps in the FASB’s due process: •
Preliminary evaluation;
•
Admission to agenda;
•
•
Early deliberations; Tentative resolution (Exposure Draft);
•
Further deliberations (Hearings);
•
Final resolution (Standard).
The Century Of CPA
4/27/12
Emerging Issues Task Force (EITF) •
•
EITF created to attempt to resolve pressing issues rapidly due to the length of the process of arriving a new standard. It consist of 16 permanent person whose chairman is the FASB’s Director of Research and Technical Activities.
The Century Of CPA
4/27/12
Government Accounting Standard Board (GASB) •
•
•
•
GASB was established in 1984 to parallel the FASB and to report to the FAF. It has 5 members that appointed to fiveyear terms by the FAF acting in consultation with the GASAC. The initial agreement was that the GASB would rule on issues affecting state and local government. Standards set by the NCGA (the prior organization) would be binding in the absence of a ruling by the GASB. Where The Century Of CPA 4/27/12 neither the GASB nor the NCGA had ruled,
Ongoing Dissent •
•
•
One of the difficulties with the APB : it was composed only of members of the AICPA and was appointed and financed by the Institute. The hope to overcome the difficulties : creating FASB as a semi-independent organization with broader base of support and full-time members. In fact, many problem persists.
The Century Of CPA
4/27/12
Ongoing Dissent •
Controvercies & criticisms: 1.
Opposition in accounting policy about reported earnings
2.
Criticism about the volume of standard setting
3.
4. 5.
The discovery of illegal political contributions of 17 major companies in 1973 Hesitation of the effectiveness of SEC Private interest group that take part in the operation of FASB, which sets accounting standard, is not suited to control the accounting standards which affect the Federal Government and the public.
The Century Of CPA
4/27/12
Ongoing Dissent •
•
•
The AICPA affraid that accounting would be swept from the private sector. In September 1977, it separated it’s membership into 2 groups : the SEC Practice Section and the Private Companies Practice Section. It also established a Public Oversight Board to exercise oversight of the SEC Practise Section and instituted peer reviews.
The Century Of CPA
4/27/12
CONCLUSION
Click to edit Master subtitle style
The Century Of CPA
4/27/12
Conclusion •
•
•
The First Century of AICPA has been a dramatic and curious history. It is a history in which standards have tended to be set reactively rather than proactively. Whether the end result will be more information for shareholders or more convenient system for bureaucratic enforcement of accounting rules remain to be seen.
The Century Of CPA
4/27/12
