Explain the role of the Emerging Issues Task Force in establishing generally accepted accounting principles.
The Emerging Issues Task Force was set up by the Financial Accounting Standards Board in 1984. The objective behind establishing it is to reduce the use of the Financial Accounting Standards Board (FASB). It also helps by providing financial reporting on a regular basis.
The Emerging issues task force is defined as an entity whose motive is to provide support and guidance; it recognizes and resolves financial accounting problems with the purpose of developing the financial reporting system.
The duties of the Emerging Issues Task Force are to deal with the emerging issues within the domain of Generally Accepted Accounting Principles (GAAP). The emerging issues task force comprises Certified Public Accountants (CPA), professional accountants, chief, members of the Financial Accounting Standards Board (FASB), members of the Securities and Exchange Commission (SEC) as well as members from the private and public sector who take part in the meeting and discuss the emerging issues.
The Emerging Issues Task Force (EITF) usually comes to consensus conclusions on particular financial reporting issues. These consensus conclusions are then observed as Generally Accepted Accounting Principles (GAAP) by practitioners as the Securities Exchange Commission (SEC) has stated that it will view consensus solutions as preferred accounting and need persuasive jurisdiction for drifting away from them. Hence, for public companies which are inclined to Securities Exchange Commission (SEC) oversight, consensus solutions developed by the Emerging Issues Task Force are adhered to unless eventually overruled by the Financial Accounting Standards Board (FASB). Moreover, Financial Accounting Standards Board (FASB) has taken ownership of GAAP established by the Emerging Issues Task Force (EITF) by demanding that the consensus positions be approved by the Financial Accounting Standards Board (FASB).
The following comments were made at an Annual Conference of the Financial Executives Institutes (FEI). There is an irreversible movement toward the harmonization of financial reporting throughout the world. The international capital markets require an end to:
Question: Economic consequences of accounting standard-setting means:
(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.
(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.
(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.
(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information
ETHICS (Rule-Making Issues) When the FASB issues new pronouncements, the implementation date is usually 12 months from date of issuance, with early implementation encouraged. Karen Weller, controller, discusses with her financial vice president the need for early implementation of a rule that would result in a fairer presentation of the company’s financial condition and earnings. When the financial vice president determines that early implementation of the rule will adversely affect the reported net income for the year, he discourages Weller from implementing the rule until it is required.
Instructions: Answer the following questions.(b) Is the financial vice president acting improperly or immorally?
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