Chapter 4 The New Tripartite Structure b Trace the demise of the APB. b Focus on the new view of accounting. b Consider the tripartite structure.

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Presentation transcript:

Chapter 4 The New Tripartite Structure b Trace the demise of the APB. b Focus on the new view of accounting. b Consider the tripartite structure.

Standard Setting VI Demise of the APB Standard Setting VI Demise of the APB b b 1970 APB in big trouble b b M. Armstrong AICPA President

AICPA and AAA Reaction b b 2 Committees…. b b Second watershed period b b AAA 1971 action b b AICPA reaction…evaluate?

Trueblood Commitee b b Established 10/1971 “Objectives of Financial Statements” b b Goal and methodology

Trueblood Report b b Issued in October, 1973 b b Content and flavor

Trueblood Evaluation b b Evaluation b b Reactions to TB Skinner ARS #1 again?

Origin of the FASB b Wheat Committee “The Study Group on Establishment of Accounting Principles” b Approach? b Why?

New View of Accounting b Old view focus: b Micro: The Firm to investors b New view focus: b Macro: The Market: domestic & international capital markets…

New View b Accounting Role and Importance Achieve Society goals=>Achieve Society goals=> SE=>SE=> cr allocated…….cr allocated……. allocation process =>allocation process => decisions=>decisions=> accounting …..accounting …..

Concurrent International Developments b Third watershed period b Bretton Woods collapse b Breakdown of economic barriers b Growth of capital needs b New vs. Old World Order

FASB Context: Early 1970s b Accounting reflects economic environment so describe in early 1970s…. b Public interest in capital markets b Dominant capital source b Financial media coverage b Pubic interest in accounting b Pressures on management b Stage of the economy b New growth industries b So accounting is….

Wheat Report: New Structure b 1972 Report; implemented 7/1/73 b Tripartite Structure: b Web site:

1) FASB b Mission b Authority SEC, ASR 150 (1973) [FRR 1, 1982] and Sarbanes- Oxley Act, 2002.SEC, ASR 150 (1973) [FRR 1, 1982] and Sarbanes- Oxley Act, AICPA Rule 203AICPA Rule 203

FASB Structure b 7 Members b Staff: 40 b Finances

2) FAF b Parent, 501 (c)(3) Foundation b Functions b Trustees

New Structure: 3) FaSAC b Advise FASB b 30 members

Tripartite Structure b So…as evidenced by tripartite structure, what lessons did we learn? FASB: f/t, small number, independent, $, start CFFASB: f/t, small number, independent, $, start CF FAF: Resources and shield for FASBFAF: Resources and shield for FASB FaSac: Point person for FASBFaSac: Point person for FASB SEC: formally delegated authority, SOXSEC: formally delegated authority, SOX