Question

SEC Accounting Series Release (ASR No. 4) allowed accounting principles to be set in the private sector. ASR No. 4 also indicated that reports filed with the SEC must be prepared in accordance with accounting principles that have “substantial authoritative support.” Define substantial authoritative support.

Answer 1

As per Accounting Series releases through 1945, if the financial statements filed to SEC, even though prepared in accordance with accounting principles for which there is no substantial authoritative support will be presumed to be misleading and inaccurate despite disclosures. Howevrer, Accounting principles board of the American Institute of Certified Pubic Accountants(AICPA). It also said that, the commisiion will weigh the value of expert testimony against its own judgement of what is sound accounting principle. It also provided sources form where th meaning of substantial authoritative support can be interpreted like special commission of opinions of accounting standards board of AICPA. Varius sources reveal the meaning of Substantial authoritative support as that the reporting member should follow all the authoritative pronouncement in conducting their functions. if the reporting member follows Statements of Financial accounting concepts, Statements of financial accounting Standards and statements on auditing standards issued by AICPA , then he is said to be following Subtantial authoritatove support in financial reports reports submitted to authorities. Further one has to follow FASB statements and interpretations, APB Opinions and Accounting research bulletins for the coverage of substantial authoritative support for particular accounting transaction pertaining to them.

After all this , the commission has preserved the right to their professional judgement to decide on whether the reports are having ubstantial authoritative support or not which would be processed through the suggestions of the expert panel for decision of every case.