Posted: September 14th, 2017

Politicization of GAAP

a) Increasing politicization (as the term is used in the broad sense) of accounting standard-
Committee of Accounting Procedures (CAP) : it was entrusted with the task of setting accounting standards .On paper it was required to rationalize the reporting of Business performance .But due to its private organizing body lately it started formulation of principals favoring politicization .And it resulted the massive financial crisis of USA in 1930’s.
Accounting Principal Board (APB) : Replacing CAP APB was formed in 1954 and operated till 1973 .They formulated and published basic accounting principals. This board also failed to operate independently. It also become the reason for politicization of accounting rule-making. Securities exchange commission was also not able to help.
Financial Accounting Standard Board( FASB) : Replacing CAP, APB and AICPA, FASB was fully independently formed to operate and develop GAAP.It operates to bring and improve reporting of financial statements, Proper convergence and consolidation of accounts, etc.
b) Arguments to support the “politicization” of accounting rule-making: According to me it cannot be supported in any form .Politicization is massive harm to economy.c) Arguments against the “politicization” of accounting rule-making:Many a times the group formulating the accounting policies are favoring the corporate and big business houses.
Politicization pass on the benefits of one group to other.Politicization have economic consequences.

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