Securities and Exchange Commission Historical Society

The Richard C. Adkerson Gallery on the SEC Role in Accounting Standards Setting

Finding the Right Structure

Financial Accounting Standards Board (1973 - present): Operation

“Seeing what the FASB is doing, one can rightly conclude that accounting is too important to leave to the accountants.”

- January 28, 1994 Letter from Malcolm S. Forbes, Jr., to Dennis Beresford, Financial Accounting Standards Board

Even with a new structure, the FASB’s process has been tweaked several times during its life. The FAF has changed the Board’s voting requirements three times and the number of members twice. The initial “super majority” requirement of 5-2, which was consistent with the prior two-thirds majority of both the APB and CAP, was considered too high a hurdle and was lowered in 1977 to a simple 4-3 majority. In an attempt to slow down the issuance of controversial statements, super-majority voting was reinstated in 1991, only to be reduced again in 2002 to simple majority, where it rests today. In 2008, the FAF reduced the size of the FASB to five members, only to restore it to seven members two years later.

After decades of inability by the Committee on Accounting Procedure and Accounting Principles Board to fashion a statement defining accounting’s basic concepts, the FASB finally developed a conceptual framework comprising seven Statements of Financial Accounting Concepts issued from 1978 to 2002. The Concepts Statements do not establish GAAP, but are intended primarily to “establish the objectives and concepts that the [Board] will use in developing standards of financial accounting and reporting.”(16)

The Board’s due process may militate against timely guidance for some new or emerging problems. In response, the FASB formed the Emerging Issues Task Force (EITF) in 1984 to resolve narrow implementation, application, or other emerging issues that can be analyzed within the context of existing GAAP. The EITF has 10-15 members (13 in 2012), chaired by a non-voting FASB appointee (in 2012 the FASB’s Technical Director). A consensus is reached if no more than three members object to a proposed position, and is subject to FASB ratification. The SEC has the privilege of the floor, may advise the EITF’s Agenda Committee when it believes that there is only one acceptable answer to an issue, and uses EITF meetings as a forum for making announcements that may or may not relate to a particular EITF Issue.

In 2009, the Board launched its FASB Accounting Standards Codification®, a major five-year effort to place all authoritative accounting standards for nongovernmental entities in one place. All previous US GAAP standards issued by a standard setter were superseded, and all other accounting literature not included in the Codification is considered non-authoritative. The Codification is a structural overhaul from a chronological standards-based model (with thousands of individual standards, including 168 FASB Statements) to a topically-based model (with roughly 90 topics).  Relevant portions of authoritative content issued by the SEC and selected SEC staff interpretations are included for reference in the Codification. The FASB periodically amends the Codification through Accounting Standards Updates. In printed form, the Codification comprises four tomes, a far cry from the few pages of authoritative guidance of the mid-1930s.

A major issue challenging the FASB and the SEC is the international convergence of accounting standards. In September 2002, the FASB and the International Accounting Standards Board (IASB) began to work together to improve and converge U.S. GAAP and International Financial Reporting Standards (IFRS). In 2007, the SEC eliminated the requirement for foreign registrants that use IFRS as issued by the IASB to reconcile to U.S. GAAP. The SEC continues to encourage international convergence as it studies whether to allow U.S. registrants to use IFRS.


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Footnotes:

(16) November 1978 Statement of Financial Accounting Concepts No. 1, Objectives of Financial Reporting by Business Enterprises.

Related Museum Resources

Papers

January 5, 1973
image pdf (JT Ball Collection, University of Mississippi)
September 24, 1973
transcript pdf (Courtesy of Stephen Zeff)
October 16, 1973
document pdf (Courtesy of Harvey L. Pitt)
November 14, 1973
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
1974
image pdf (All rights are owned exclusively by NYSE Euronext (copyright) 2009 NYSE Euronext. All Rights Reserved, courtesy New York Stock Exchange Archives)
January 3, 1974
image pdf (Courtesy of the Gerald R. Ford Library)
January 8, 1974
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 17, 1974
document pdf (Government Records)
March 20, 1974
image pdf (Government Records)
May 3, 1974
transcript pdf (Courtesy of Harvey L. Pitt)
May 9 and 10, 1974
document pdf (Government Records)
May 30, 1974
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
May 30, 1974
document pdf (Government Records)
September 11, 1974
transcript pdf (Courtesy of Harvey L. Pitt)
September 12, 1974
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
September 20, 1974
image pdf (Courtesy of the Gerald R. Ford Library)
September 24, 1974
transcript pdf (Courtesy of the Gerald R. Ford Library)
October 8, 1974
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 25, 1974
document pdf (Government Records)
December 11, 1974
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
December 12, 1974
transcript pdf (Courtesy of Harvey L. Pitt)
January 31, 1975
document pdf (Government Records)
February 18, 1975
document pdf (Government Records)
February 19, 1975
document pdf (Government Records)
April 26, 1975
document pdf (Government Records)
June 10, 1975
image pdf (Courtesy of the Gerald R. Ford Library)
June 30, 1975
image pdf (Government Records)
July 16, 1975
transcript pdf (Courtesy of Harvey L. Pitt)
August 21, 1975
transcript pdf (Courtesy of the Gerald R. Ford Library)
August 25, 1975
image pdf (Roderick Hills Papers, Courtesy of the Gerald R. Ford Library)
October 3, 1975
image pdf (Government Records)
October 14, 1975
document pdf (Government Records)
October 28, 1975
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 3, 1975
document pdf (Government Records)
November 11, 1975
document pdf (Government Records)
December 8, 1975
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
1976
image pdf (Courtesy of Robert J. Sack and Darden School, University of Virginia)
January 7, 1976
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 29, 1976
document pdf (Government Records)
March 16, 1976
document pdf (Government Records)
March 17, 1976
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
March 25 through 27, 1976
document pdf (Government Records)
April 2, 1976
image pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
April 9, 1976
image pdf (Roderick Hills Papers, Courtesy of the Gerald R. Ford Library)
April 16, 1976
transcript pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
May 1976
document pdf (Government Records)
June 15, 1976
image pdf (Courtesy of Robert J. Sack and Darden School, University of Virginia)
August 10, 1976
image pdf (Harvey L. Pitt SEC Brief Collection, courtesy of Fried Frank Harris Shriver & Jacobson LLP)
August 27, 1976
image pdf (JT Ball Collection, University of Mississippi)
October 4, 1976
image pdf (Harvey L. Pitt SEC Brief Collection, courtesy of Fried Frank Harris Shriver & Jacobson LLP)
January 13, 1977
image pdf (Courtesy of Roderick M. Hills)
January 13-15 1977
transcript pdf
February 25, 1977
image pdf (Harvey L. Pitt SEC Brief Collection, courtesy of Fried Frank Harris Shriver & Jacobson LLP)
March 4, 1977
image pdf (Government Records)
April 22, 1977
image pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
May 13, 1977
transcript pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
August 1, 1977
transcript pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
November 3, 1977
image pdf (Courtesy of the Library of Congress)
November 9, 1977
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 28, 1977
image pdf (JT Ball Collection, University of Mississippi)
December 12, 1977
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
December 13, 1977
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
1978
image pdf (Courtesy of the American Institute of Certified Public Accountants)
January 24, 1978
image pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
February 15, 1978
image pdf (JT Ball Collection, University of Mississippi)
March 2, 1979
document pdf (Courtesy of Theodore A. Levine)
May 31, 1979
image pdf (Government Records)
September 18, 1979
image pdf (Government Records)
January 3, 1980
image pdf (Government Records)
March 13, 1980
image pdf (Government Records)
May 28, 1980
transcript pdf (Courtesy of the estate of John R. Evans)
June 18, 1980
transcript pdf (Courtesy of the estate of John R. Evans)
September 1980
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
September 16, 1980
image pdf (Government Records)
November 21, 1980
image pdf (Government Records)
January 13, 1981
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 23, 1981
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
April 24, 1981
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
June 16, 1981
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
March 11, 1983
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
April 1983
image pdf (JT Ball Collection, University of Mississippi)
May 6-7, 1983
image pdf (JT Ball Collection, University of Mississippi)
June 3, 1983
"Financial Frauds and Related Party Transactions - the SEC Response," by Theodore A. Levine, Frederick Wade, James B. Bragg and Thomas A. Ferrigno

(Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)

June 9, 1983
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
June 9-10, 1983
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
June 27, 1983
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
June 28 to 29 1984
document pdf (Courtesy of Paul Gonson)
June 3, 1986
image pdf (Courtesy of Stuart Kaswell)
October 1987
image pdf (AICPA Collection, University of Mississippi)
August 12, 1992
image pdf (JT Ball Collection, University of Mississippi)
1994
image pdf (Courtesy of George P. Fritz)
February 28, 1994
image pdf (Anonymous)
March 7, 1995
image pdf (Courtesy of Margaret Bancroft)
April 10, 1995
image pdf (Courtesy of Margaret Bancroft)
March 5, 1996
document pdf (Courtesy of Richard Rowe)
September 30, 1996
image pdf (Government Records)
November 2001
Proceedings Book of "Securities Regulation in the Global Internet Economy" Major Issues Conference
November 15, 2001
document PDF
June 2, 2004
document pdf (prepared for the museum by David S. Ruder)
June 2, 2004
document pdf (prepared for the museum by Harvey L. Pitt)
June 2, 2004
document pdf (prepared for the museum by Roderick M. Hills)
April 5, 2006
transcript pdf (with permission of The George Washington University Law School)
September 19, 2008
transcript pdf (Courtesy of Walter Schuetze)
September 19, 2008
transcript pdf (Courtesy of Walter Schuetze)
May 16, 2011
image pdf (Courtesy of the Financial Accounting Foundation Library)
June 27, 2014
image pdf (Courtesy of the Financial Accounting Foundation Library)

Oral Histories

18 April 2011

Dennis Beresford

26 March 1976

John C. Burton and Robert T. Sprouse

(Courtesy of the Academy of Accounting Historians, University of Mississippi)

13 May 2007

Edmund Coulson

11 March 2011

Robert Herz

09 November 2010

Conrad Hewitt

28 October 2004

Howard Hodges

16 March 2011

Edmund Jenkins

Programs

07 November 2012

Deloitte Fireside Chat VIII: International Convergence

Moderator: James McKinney

Presenter(s): Robert Herz, Joseph Ucuzoglu

07 June 2012

A Creative Irritant: The Relationship between the SEC and Accounting Standard Setters (Thirteenth Annual Meeting)

Moderator: George Fritz

Presenter(s): Dennis Beresford, Edmund Jenkins, A. Clarence Sampson

18 September 2007

Fireside Chat - Accounting Aspects of the Foreign Corrupt Practices Act

Moderator: Theresa Gabaldon

Presenter(s): Philip Ameen, Teresa Iannaconi

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