In: Computer Science
Assume that the FASB is considering revising an important accounting standard.
Required:
1. What constraint applies to the FASB’s consideration of whether to require companies to provide new information?
2. In what Concepts Statement is that constraint discussed?
3. What are some of the possible costs that could result from a revision of an accounting standard?
4. What does the FASB do in order to assess possible benefits and costs of a proposed revision of an accounting standard?
Financial Accounting Standards Board (FASB)
The accounting principles adopted by entities in order to record and report financial statements, are introduced, regulated and modified when necessary by Financial Accounting Standards Board.
The primary objective of FASB is to regularly ameliorate accounting standards and procedures as per industry needs which eventually helps the investors in prudent decision making. FASB make sure that reports presented are easier to interpret for its external users.
1. Cost and Benefit should be considered by FASB whenever they require corporations to provide new information. For every entity, in order to report additional information, they will have to incur additional expense so that the appropriate information is collected and reported. If the cost so involved is more than the benefits accruing out of it, they might have to reconsider their decision.
2. Cost and Benefit have been discussed in Concept Statement 8.
3. FASB has to incur a lot of expenditure in order to accumulate information, carry out research and discussions and thereafter, distributing the information in order to revise an existing standard. Therefore, it is important to assess its cost effectiveness. The adoption of a revised standard should be valuable for the economy as a whole and neither the internal nor the external users of such information should incur costs that they find to be irrelevant.
4. In order to revise an accounting standard, FASB has to make sure that all of the information required to make a prudent decision is gathered and discussed upon.
The information so received is rigorously researched by the interested parties and FASB makes sure that all of the inputs are duly recorded. The information along with the inputs provided is further circulated to the necessary individuals and organisations and after necessary amendments, a revised accounting standard is accepted.
The information so received is rigorously researched by the interested parties and FASB makes sure that all of the inputs are duly recorded. The information along with the inputs provided is further circulated to the necessary individuals and organisations and after necessary amendments, a revised accounting standard is accepted.