Case Analyis on Standard Setting Essay

572 Words Jun 24th, 2016 3 Pages
1. What is meant by the term “economic consequences” in accounting standard-setting?

A. Accounting standards can have detrimental impacts on the wealth levels of the providers of financial information. Financial accounting is objective; if a company is not doing well, that's what the financial statements must present.
"Economic consequences" is meant the impact of accounting reports on the decision making behavior of business, government, unions, investors and creditors. It is argued that the resulting behavior of these individuals and groups could be detrimental to the interests of other affected parties. And, the argument goes, accounting standard setters must take into consideration these allegedly detrimental consequences
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The main point here is the community of these group of businesses wants a full study of this approach before it will be released as a final standard by the FASB.

4. Why do you believe a copy of this letter was sent by the business community to influential members of the U.S. Congress?

A. I believe a copy of this letter was sent by the business community to influential members of the U.S. Congress to urge them to study first the crucial events that involves or might affect the said proposal before its final issuance. They want an assessment on the impact that these proposed rules may have on the capital markets, on company’s risk management practices, and on management and financial controls. It was stated in the letter that FASB itself has said throughout this process, its mission does not permit it to consider matters that go beyond accounting and reporting considerations. I believe this is one of the reason why these group of businesses have extended this letter to the other agencies in the US because there are other issues that involves already that maybe beyond FASB’s control. And this letter is actually a recommendation about the steps that should be conducted or followed if the FASB is to produce the best

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