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Chapter 4 The New Tripartite Structure

Chapter 4 The New Tripartite Structure. Trace the demise of the APB. Focus on the new view of accounting. Consider the tripartite structure. Standard Setting VI Demise of the APB. 1970 APB in big trouble M. Armstrong AICPA President. AICPA and AAA Reaction. 2 Committees….

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Chapter 4 The New Tripartite Structure

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  1. Chapter 4 The New Tripartite Structure • Trace the demise of the APB. • Focus on the new view of accounting. • Consider the tripartite structure.

  2. Standard Setting VIDemise of the APB • 1970 APB in big trouble • M. Armstrong AICPA President

  3. AICPA and AAA Reaction • 2 Committees…. • Second watershed period • AAA 1971 action • AICPA reaction…evaluate?

  4. Trueblood Commitee • Established 10/1971 “Objectives of Financial Statements” • Goal and methodology

  5. Trueblood Report • Issued in October, 1973 • Content and flavor

  6. Trueblood Evaluation • Evaluation • Reactions to TB • Skinner • ARS #1 again?

  7. Origin of the FASB • Wheat Committee “The Study Group on Establishment of Accounting Principles” • Approach? • Why?

  8. New View of Accounting • Old view focus: • Micro: The Firm to investors • New view focus: • Macro: The Market: domestic & international capital markets…

  9. New View • Accounting Role and Importance • Achieve Society goals=> • SE=> • cr allocated……. • allocation process => • decisions=> • accounting …..

  10. Concurrent International Developments • Third watershed period • Bretton Woods collapse 1971. • Breakdown of economic barriers • Growth of capital needs • New vs. Old World Order

  11. FASB Context: Early 1970s • 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….

  12. Wheat Report: New Structure • 1972 Report; implemented 7/1/73 • Tripartite Structure: • Web site: www.fasb.org/

  13. 1) FASB • Mission • Authority • SEC, ASR 150 (1973) [FRR 1, 1982] and Sarbanes-Oxley Act, 2002. • AICPA Rule 203

  14. FASB Structure • 7 Members • Staff: 40 • Finances

  15. 2) FAF • Parent, 501 (c)(3) Foundation • Functions • Trustees

  16. New Structure:3) FaSAC • Advise FASB • 30 members

  17. Tripartite Structure • So…as evidenced by tripartite structure, what lessons did we learn? • FASB: f/t, small number, independent, $, start CF • FAF: Resources and shield for FASB • FaSac: Point person for FASB • SEC: formally delegated authority, SOX

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