Question

Describe the role of accounting before 1973 and after 1973.

Answer 1

In 1939, encouraged by SEC AICPA formed comitte on accounting procedures. It issued 51 Accountin bulletins in order to deal with issues as they arose. It had limited success as it wasn't a overall framework but acted on specific cases. Creating scope for huge number of loopholes and delays.

In 1959, CAP was replaced by accounting principles board (APB) that issued 31 opinions and 4 statement. It was disloved in 1973.

The modern day GAAP essentially rose fron the opinions of APB

APB was criticized over it's structure and for several decisions on controversial topics.

After 1973

Wheat committee hired to evaluate APB and recommended to dissolve the same and come up with a new standard setting structure.

This was implemented in 1973 and consisted of three organisations :

1. Financial accounting foundation (FAF)

2. Financial accounting standards board (FASB)

3. Financial accounting standards advisory councol (FASC)

FASB is the primary body and is independent with board comprising memebers who have severed ties with thier emplpyers and provate firms.

FASB issues GAAPs and modifications tonit and AICPA issues audit guides. When the two standards and guides get in conflict, FASBs GAAPs are followed.

Formation of IFRS :

Intentional accounting standards committe (IASC) was formed in 1973 to encourage international cooperation to set up consistent accounting standards across the world. In 2001, IASC was succeeded by International Accounting Standard Board ( IASB) which has formulated the IFRS (integration financial reporting standards)

These standards are formed to bring consistency across various local accounting standards and is getting widely adopted by firms and nations across the world.