My goal is to thoroughly illustrate why Parker & Associates, LLP should comply with the rules and regulations of FASB should strictly and state my personal recommendation.
The History of FASB.
In 1973, the Security Exchange Commission (SEC) established FASB and illustrated the standards established by FASB by publishing them in the General Accepted Accounting Principles (GAAP). The procedures in GAAP are meant to assure that financial reports are constructed and illustrated so an audience of interest can interpret those reports and can make informed decisions (Spiceland, Sepe, Nelson, & Tomassini, 2009). The SEC has statutory authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. Throughout its history, however, the Commission's policy has been to rely on the private sector for this function to the extent that the private sector demonstrates ability to fulfill the responsibility in the public interest (Harden, 1993). .
Before FASB was appointed as the authoritative body, it replaced the Committee on Accounting Procedure (CAP) and the Accounting Principles Board (APB) of the American Institute of Certified Public Accountants (AICPA). CAP was the first private sector organization that had the task of setting accounting standards in the U.S. It was a committee run by the American Institute of Accountants, now known as American Institute of Certified Public Accountants. Its primary mission was to rationalize and legitimize the reporting of business performance. However, it was inefficient in assuring its primary purpose. .
In 1959, the APB was the former authoritative body of the AICPA with its primary purpose of issuing pronouncement on accounting principles. The APB was disbanded in the hopes that the smaller, fully independent FASB could more effectively cultivate accounting standards. The SEC concluded that APB was reasonably good, but it seemed more logically possible for a smaller, more direct, entity to control the private sector ("FASB may get 'watchdog'", 1994).
