Explain how accounting standard setting is political

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Are we going to set accounting standards in the private sector or not? . . . Part of the answer depends on how the business community views accounting standards. Are they rules of conduct, designed to restrain unsocial behavior and arbitrate conflicts of economic interest? Or are they rules of measurement, designed to generalize and communicate as accurately as possible the complex results of economic events? . . . Rules of conduct call for a political process . . . Rules of measurement, on the other hand, call for a research process of observation and experimentation . . . Intellectually, the case is compelling for viewing accounting as a measurement process . . . But the history of accounting standard setting has been dominated by the other view-that accounting standards are rules of conduct. The FASB was created out of the ashes of predecessors burned up in the fires of the resulting political process.

Required:

a. Discuss your views on the difference between "rules of conduct" and "rules of measurement."

b. Explain how accounting standard setting is political process. Identify arguments for and against viewing accounting standard setting as political.

Reference no: EM13480742

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