Accounting Board Often Draws Wrath of Business

As the main rule-making body of the accounting profession, the Financial Accounting Standards Board has sometimes been a magnet for controversy.

The FASB is a sort of think tank made up of about 40 staff accountants and others “who possess knowledge of accounting, finance and business.” Its rule-making body is a seven-member board that spends five days a week contemplating current accounting rules and how they can be changed to better reflect companies’ true financial health.

Although the FASB is a private organization, the Securities and Exchange Commission enforces its dictates.

However, the board comes in conflict with business and industry at times, because it is constantly reviewing the way things are done. When the FASB decides that regulatory accounting rules or industry practice tend to mislead investors, it changes the rules.

Companies can protest proposed rules. But the FASB is supposed to base its final decision on accurate reporting--not industry wants. The only time it will succumb to less-than-ideal reporting standards is when the expected costs of implementing the rules exceeds the benefits, according to the organization’s mission.