The Financial Accounting Standards Board (FASB)

Paper Summary:

This paper explains that the objectives of the FASB's conceptual framework are to identify the goals and purposes of financial reporting and their underlying fundamentals; however, it is more than two decades old and has fallen behind the times especially in the area of currency and scope. The author points out that, despite the best attempts by the FASB to provide frameworks and standards to regulate accounting practices, unethical management always seems to discover loopholes to make their accounting statements say whatever they want them to say. The paper states that principle-based standards help management work with auditors to exercise professional judgment in determining appropriate accounting; nonetheless, rules-based accounting does more to promote consistency and adherence to guidelines.

Table of Contents:
The Conceptual Framework Developed by the FASB
The Role and Ethical Considerations
Principles-Based Accounting vs. Rules-Based Accounting

From the Paper:

"Some believe the solution for preventing unethical accounting conduct is to regulate as many accounting translations as possible. While closing loopholes should certainly be an objective of standards setting bodies such as FASB, unethical people will always find a new and better way to behave unethically if their corporate culture allows or encourages unethical behavior or if people behaving unethically simply believe they will not be punished for their conduct. Increasingly, accountants need to be trained in ethics in addition to improving financial skills."

Sample of Sources Used:

• A conversation with George J. Batavick,the FASB's newest member (2003, December 31). The FASB Report. http://www.fasb.org/articles&reports/batavick_tfr_dec_2003.pdf
• Close the "anything goes" accounting loopholes and regulate all transactions. EnronWatchdog.org http://www.enronwatchdog.org/topreforms/topreforms8.html
• Foster, J.M. and Johnson, L.T. (2001, August). Why does the FASB have a conceptual framework? Financial Accounting Standards Board. http://www.fasb.org/articles&reports/conceptual_framework_uti_aug_2001.pdf
• Simon, D. "Corporate accountability: a summary of the Sarbanes-Oxley Act." LegalZoom. <http://www.legalzoom.com/articles/article_content/article5470.html>.
• Toppe, R. and Myring, M. (2004, August 4). Defining principles-based accounting standards. The CPA Journal. http://www.nysscpa.org/cpajournal/2004/804/essentials/p34.htm

More papers on The Financial Accounting Standards Board (FASB):

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• Analytical Essay # 149596 : "An Analysis of Financial Accounting Standards Statement No. 157"

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