The article by Marc Siegel defines “economic consequences” by the framework the FASB uses to handle such issues. Per the article, the first stage of the framework involves determining whether the benefits (improvements on relevance and neutrality) justify the costs to financial statement preparers. Secondly, if there are negative economic consequences, the FASB will pause and then assess whether the consequences are those of neutral information or unintentionally biased information. The latter requires the board to take another look at the proposed standard and assess it again later. Such an approach takes a facts-and-circumstances viewpoint that is often found in the field of accounting. This actually makes this view more concurrent …show more content…
The Siegel article mentions another article that we read by Stephen Zeff, an article that is widely considered to be a fundamental article for accounting theory. The Zeff article presents another definition of economic consequences. The article states that economic consequences refers to “the impact of accounting reports on the decision-making behavior of business, government, unions, investors and creditors” (Zeff, 1978, pp. 56). Essentially, the definition of economic consequences comes down to the costs and benefits associated with implementing the standard in question.
For a long time, there has been a debate on whether politics should influence accounting standards. At this point, the field of accounting and its standards is rife with politics that it seems almost pointless to argue when it’s reached a level where political influence is almost natural, if not expected. The Solomons article we read for class discusses this issue when it states “In a society committed to democratic legitimization of authority, only politically responsive institutions have the right to command others to obey their rules” (Solomons, 1978, pp. 65). The quote was originally said by Dale