Transcript Chapter 4 The New Tripartite Structure Trace the demise of the APB.

Chapter 4 The New Tripartite
Structure
Trace the demise of
the APB.
 Focus on the new view
of accounting.
 Consider the tripartite
structure.
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Standard Setting VI
Demise of the APB
 1970
APB in big trouble
 M. Armstrong AICPA President
AICPA and AAA Reaction
 2 Committees….
 Second
watershed period
 AAA 1971 action
 AICPA reaction…evaluate?
Trueblood Commitee
 Established
10/1971
“Objectives of Financial
Statements”
 Goal and methodology
Trueblood Report
 Issued
in October, 1973
 Content and flavor
Trueblood Evaluation
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Evaluation
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Reactions to TB
• Skinner
• ARS #1 again?
Origin of the FASB
Wheat Committee “The Study
Group on Establishment of
Accounting Principles”
Approach?
Why?
New View of Accounting
Old view focus:
 Micro: The Firm to investors
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New view focus:
 Macro: The Market: domestic & international
capital markets…
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New View
 Accounting Role and Importance
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Achieve Society goals=>
SE=>
cr allocated…….
allocation process =>
decisions=>
accounting …..
Concurrent International
Developments
Third watershed period
 Bretton Woods collapse 1971.
 Breakdown of economic barriers
 Growth of capital needs
 New vs. Old World Order
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FASB Context: Early 1970s
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Accounting reflects economic
environment so describe in early
1970s….
Public interest in capital markets
Dominant capital source
Financial media coverage
Pubic interest in accounting
Pressures on management
Stage of the economy
New growth industries
So accounting is….
Wheat Report: New Structure
 1972 Report; implemented 7/1/73
 Tripartite Structure:
 Web site: www.fasb.org/
1) FASB
 Mission
 Authority
• SEC, ASR 150 (1973) [FRR 1, 1982] and SarbanesOxley Act, 2002.
• AICPA Rule 203
FASB Structure
 7 Members
 Staff:
40
 Finances
2) FAF
 Parent, 501 (c)(3) Foundation
 Functions
 Trustees
New Structure:
3) FaSAC
 Advise FASB
 30 members
Tripartite Structure
 So…as evidenced by tripartite structure,
what lessons did we learn?
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FASB: f/t, small number, independent, $, start CF
FAF: Resources and shield for FASB
FaSac: Point person for FASB
SEC: formally delegated authority, SOX