Question

Some accountants have said that politicization in the development and acceptance of generally accepted accounting principles (i.e., rule-making) is taking place. Some use the term “politicization” in a narrow sense to mean the influence by governmental agencies, particularly the Securities and Exchange Commission, on the development of generally accepted accounting principles. Others use it more broadly to mean the compromise that results when the bodies responsible for developing generally accepted accounting principles are pressured by interest groups (SEC, American Accounting Association, businesses through their various organizations, Institute of Management Accountants, financial analysts, bankers, lawyers, and so on).

Discuss the following:

What arguments can be raised to support the “politicization” of accounting rule-making?

Answer 1

The Arguments that can be raised to support are:

Politicization of accouring rule making should not be viewed in narrow sense. As accouting rules are meant for common benfit of the ecocnomy, the rule making body should consider the suggestions, recommendations of the various stake holders of the economy which includes Securities Exchange commission, American Accouting Association, other business stake holders. The accouting body can form a committee headed by equal weightage participation of various stakeholders with experts as its memebers for rule making in accouting.

In the current world econmy, the stakeholders are increasing and its getting interconnected at very fast pace, which means the governing rules of accouting has to broaden the scope and applicability of rules in a practical and meaningful way. The rules also should also protect the investors who are main drivers of economy. The active involvement of major suppliers and major work unions also helps to frame accouting rule on justice.

The participation and involvement of all the above stakeholder will not result in politicization of accouting rule making but it results in rule making outise the room and rule making with key Economic drivers who drives the economy and thereby sucessfull accouting rules which yeilds the expected results.