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Posts Tagged ‘Accounting Standard Setting’

Senator Sherrod Brown (D-Ohio)

Freshman Senator Sherrod Brown (D-Ohio), on May 5, 2010, offered an amendment to S. 3217:  Restoring American Financial Stability Act of 2010.  On May 7, 2010, a joint letter from seven prominent organizations was sent to the Senate, objecting the Brown’s excursion into accounting standard setting.

What’s going on, ProfAlbrecht?

Thanks for asking.  I’ll lay it out for you.  Senator Brown is a voice of reason on this issue and the seven prominent organizations are blowing smoke.

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It is said frequently by politicians, SEC and other regulators, journalists and special interests that the accounting standard setting process should and must be insulated from politics.  As I explain in this essay, this runs counter to everything we understand about accounting theory.  For decades it has been taught in every graduate accounting program in the country that accounting standards have economic consequences.  As a result, I contend it is natural and predictable that competing economic interest attempt a political solution to proposed accounting standards.

This is an important issue at this time, because they are proposing major changes in the accounting regulatory landscape that run counter to this conventional wisdom of the financial reporting and capital market world.

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