Question

11. What is the importance of the FAF and FASAC to the success of the FASB? 12. The three attempts at standard setting in the private sector (CAP, APB, and FASB) have all dealt with the need for a theoretical foundation. Why were the CAP and the APB unsuccessful at this endeavor?

Answer 1

1. The Financial Accounting Foundation (FAF) elects members to the Board of Trustees, whose responsibility is to select FASB members and do the oversight, administration, and finances of FASB. The Financial Accounting Standards Advisory Council (FASAC) plays the role of advising the FASB on its operating and project plans, agenda and priorities, and appointment of task forces as well as on all major technical issues.

2. The Committee on Accounting Procedures (CAP) never really attempted to develop a theoretical foundation. Although it recognized the need for one, it did not believe that it could afford the time commitment. The Accounting Principles Board (APB) attempted to develop a theoretical foundation by commissioning ARSs 1 and 3; but neither of those ARSs were accepted by the accounting professions or bodies. APB Statement 4 was slightly successful in developing a theoretical foundation, but it neither had authoritative support nor went far enough. The brief answer as to why the CAP and APB failed to develop a theoretical foundation is that they did not sustain or just focus their efforts on short-term successes versus the work required to assure long-term progress.