Some accountants have said that politicization in the development and
acceptance of generally accepted accounting principles (i.e rule
making) is taking place. Some use the term “politicization” in a narrow
sense to mean the influence by governmental agencies, particularly the
Security and Exchange Commission, on the development of generally
accepted accounting principles.Others use it more broadly to mean the
compromise that results when the bodies responsible for developing
generally accepted accounting principles are pressured by interest
groups (SEC, American Accounting Association, businesses through their
various organizations, Institute of Management Accountants, financial
analysts, bankers, lawyers, and so on).
(a) The Committee on Accounting Procedure of the AICPA was
established in the mid-to late 1930s and functioned until 1959, at which
time the Accounting Principles Board came into existence.In 1973, the
Financial Accounting Standards Board was formed and the APB went out of
existence.Do the reasons these groups were formed, their methods of
operation while in existence, and the reasons for the demise of the
first two indicate an increasing politicization (as the term is used in
the broad sense) of accounting standard-setting?Explain your answer by
indicating how the CAP, the APB, and the FASB operated or operate. Cite
specific developments that tend to support your answer.
(b) What arguments can be raised to support the “politicization” of accounting rule-making?
(c) What arguments can be raised against the “politicization” of accounting rule-making?