Transcript Chapter 3 The APB Post ARS #1 and #3

Chapter 3
The APB Post ARS #1 and #3
• Examine the post-rejection of ARS #1 and
#3 tenure of APB
• Consider second major theory formulation:
ASOBAT
Standard Setting V The APB-Post
ARS #1 and 3
• Started off with “Golden Opportunity
(G.O.)” to develop theory.
• Possible redemption: G.O. #2
GO #2:Accounting for Investment
Credit
• Options?
• How did the APB react to
golden opportunity #2?
• What consequences
followed?
Questions
• Why do you think the APB adopted the
deferral approach to the IC?
• If you had been a member of the APB, how
would you have felt when the SEC
overruled Opinion #2 with ASR #96 in
January, 1963?
Theory III
ASOBAT 1966
• Profession still theory-less
• Turn to who?
• Comparative advantage?
ASOBAT
• What was it to accomplish?
• “…the process of identifying, measuring,
and communicating economic information
to permit informed judgments and decisions
by users of the information.” 3 definitional
differences?
• Approach, Contents, and Core
ASOBAT
• Flavor
ASOBAT 3 Controversy
• Three criticisms:
– R. Morrison
– G. Sorter
– R. Sterling
ASOBAT Critique #1
• R. Morrison, the practitioner, Commentary
ASOBAT Critique #2
• Concerns: G. Sorter*
• *”An Events Approach to Basic
Accounting Theory,” Accounting Review
1/1969.
ASOBAT Critique #3
• Concerns: Sterling*
• *”ASOBAT: A Review Article,” Journal
of Accounting Research, Spring 1967.
APB Failing
• By 1970, Major
Problems emerged
International: Other Approaches
to Standard Setting
• World-wide
Standard Setting
Approaches-1.
public, 2. private,
3. private as
public, and 4.
mixed.