Answer
a.
The process of setting accounting standards is highly politicized. First, CAP was predominantly made up of CPAs whose approach entailed the preparation of research bulletins focusing on various accounting problems. The CAP's approach failed to come up with sufficiently structured accounting principles due to its problem-by-problem methodology. Secondly, APB was formed after CAP's failure. APB intended to develop a conceptual framework of accounting principles and practices. The members of APB were from public accountants and academia. CPA firms were at the forefront of opposing APB. Besides government occasionally meddled in APB affairs. Thirdly, FASB replaced APB. Task forces are formed to oversee the FASB projects. Although FASB enjoys greater autonomy when compared to CAP and APB, it is not immune to political interference. Government agencies such as IRS are among the user groups contributing to the accounting standards that FASB formulates. Moreover, the input from industry associations, which can have political interests, contributes to the politicization of GAAP too.
b.
Arguments For
Politicizing the process of making accounting rules is encouraged, considering how politics plays a role in other areas, such as education and religion. The process of formulating GAAP cannot be separated from politics because the GAAP will be applied in real life and will affect people and entities with divergent political views.
c.
Arguments against
Politicizing GAAP is detrimental. If FASB issues rules intended to serve political interests, then such rules may fail to take into account the prevailing economic realities and the likely economic consequences that may ensue. FASB should conduct in-depth research instead of relying on politically-motivated agendas. FASB should operate as a neutral board with no political interests.
Work Step by Step
a.
The process of setting accounting standards is highly politicized. First, CAP was predominantly made up of CPAs whose approach entailed the preparation of research bulletins focusing on various accounting problems. The CAP's approach failed to come up with sufficiently structured accounting principles due to its problem-by-problem methodology. Secondly, APB was formed after CAP's failure. APB intended to develop a conceptual framework of accounting principles and practices. The members of APB were from public accountants and academia. CPA firms were at the forefront of opposing APB. Besides government occasionally meddled in APB affairs. Thirdly, FASB replaced APB. Task forces are formed to oversee the FASB projects. Although FASB enjoys greater autonomy when compared to CAP and APB, it is not immune to political interference. Government agencies such as IRS are among the user groups contributing to the accounting standards that FASB formulates. Moreover, the input from industry associations, which can have political interests, contributes to the politicization of GAAP too.
b.
Arguments For
Politicizing the process of making accounting rules is encouraged, considering how politics plays a role in other areas, such as education and religion. The process of formulating GAAP cannot be separated from politics because the GAAP will be applied in real life and will affect people and entities with divergent political views.
c.
Arguments against
Politicizing GAAP is detrimental. If FASB issues rules intended to serve political interests, then such rules may fail to take into account the prevailing economic realities and the likely economic consequences that may ensue. FASB should conduct in-depth research instead of relying on politically-motivated agendas. FASB should operate as a neutral board with no political interests.
