Some accountants have said that politicization in the development and acceptance ofgenerally accepted accounting principles (i.e., rule-making) is taking place. Some use the term “politicization” in a narrow sense tomean the influence by governmental agencies, particularly the Securities and Exchange Commission, on the development of generallyaccepted accounting principles. Others use it more broadly to mean the compromise that results when the bodies responsible fordeveloping generally accepted accounting principles are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, lawyers, and so on). Instructions(a) The Committee on Accounting Procedure of the AICPA was established in the mid- to late 1930s and functioned until1959, at which time the Accounting Principles Board came into existence. In 1973, the Financial Accounting StandardsBoard was formed and the APB went out of existence. Do the reasons these groups were formed, their methods ofoperation while in existence, and the reasons for the demise of the first two indicate an increasing politicization (as theterm is used in the broad sense) of accounting standard-setting? Explain your answer by indicating how the CAP, theAPB, and the FASB operated or operate. Cite specific developments that tend to support your answer.(b) What arguments can be raised to support the “politicization” of accounting rule-making?(c) What arguments can be raised against the “politicization” of accounting rule-making?(CMA adapted)
Some accountants have said that politicization in the development and acceptance of
generally accepted accounting principles (i.e., rule-making) is taking place. Some use the term “politicization” in a narrow sense to
mean the influence by governmental agencies, particularly the Securities and Exchange Commission, on the development of generally
accepted accounting principles. Others use it more broadly to mean the compromise that results when the bodies responsible for
developing generally accepted accounting principles are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of
Instructions
(a) The Committee on Accounting Procedure of the AICPA was established in the mid- to late 1930s and functioned until
1959, at which time the Accounting Principles Board came into existence. In 1973, the Financial Accounting Standards
Board was formed and the APB went out of existence. Do the reasons these groups were formed, their methods of
operation while in existence, and the reasons for the demise of the first two indicate an increasing politicization (as the
term is used in the broad sense) of accounting standard-setting? Explain your answer by indicating how the CAP, the
APB, and the FASB operated or operate. Cite specific developments that tend to support your answer.
(b) What arguments can be raised to support the “politicization” of accounting rule-making?
(c) What arguments can be raised against the “politicization” of accounting rule-making?
(CMA adapted)
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