Term
| What were Herz 2 overlying points regarding the politicization of accounting? |
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Definition
(1) "the investing public expects and deserves unbiased and transparent financial information."
(2) special interests can undermine the usefulness of financial reports by advocating inferior accounting methods and disclosures. |
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Term
| Examples of Congress/SEC interference |
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Definition
(1) accounting for the investment tax credit (APB Opinion No. 2) was overturned by Congress (which permitted a different method, conceded in Opinion No. 4).
(2) FAS 19 was overturned by the SEC in ASR 253.
(3) Congress threatened to intervene unless the FASB provided some relief with respect to FV accounting. |
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Term
| What should be expected when the FASB deals with an important issue? |
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Definition
| Lobbying- aggrieved parties will express themselves and resort to the SEC or Congress for help. |
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Term
| What did previous leaders of the FASB state about political factors? |
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Definition
They prevent standard setters from finding technical solutions to technical problems.
They yearned for a world in which standard setting would be insulated from politics, which doesn't exist. |
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Term
| What should leaders of the FASB do with regard to the politics of accounting? |
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Definition
| Accept the world as it is and embrace political challenges; do not wait until the political pressures are too great when little or nothing can be done. |
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Term
| Example of "seizing the moment" - WorldCom. |
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Definition
| The FASB should have required the expensing of stock options, taken steps to change the accounting for special purpose entities, and "dared anybody to prevent them from mandating more truthful and more transparent accounting." |
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Term
| Example of missed opportunity ("seizing the moment") - failures of AIG and Wall Street, Fannie Mae and Freddie Mac. |
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Definition
The FASB should have:
(1) written op-ed pieces for papers and online news agencies.
(2) presented its case on national TV.
(3) taken the case to the American people and informed the world that executives and managers at AIG, Fannie Mae and Freddie Mac had lied on the financial statements. |
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