1. How Does The Market Influence Financial Reporting Standard Setting?

1a. How does the market influence financial reporting standard setting? In the December 1978 Journal of Accountancy academic article, “The Rise of ‘Economic Consequences,’” Stephen Zeff talks about how economic consequences – “the impact of accounting reports on the decision making behavior of business, government, unions, investors, and creditors” – can often be detrimental and therefore, should be taken into consideration when setting financial reporting standards. He mentions how in 1977, the conclusion of the FAF’s structure committee was that “the Board need not be unduly influenced but the possibility of an economic impact, but it should consider both the possible costs and the expected benefits of a proposal.” The FASB mentions how it does this today on their website, explaining how their “due process” of setting standards is open to public participation to provide such transparency into the standards setting process.
1b. How do politics and regulation influence financial reporting standard setting?
Politics and regulation have a huge influence on financial reporting standard setting. You don’t have to watch the Enron documentary to understand the power that lobbyists possess in the governmental regulation overseeing the financial reporting standard setting process. The majority of donors to
These regulatory bodies help to provide the proper checks and balances needed for a standard setting committee to properly function. In fact, it was the inability of the APB to deal effectively with such influences that led to its downfall and the creation of the FASB in 1973. These regulators are also needed to do just that: regulate. The FASB can set standards all day long, but if there is no system in place to regulate those standards, then what’s the