Human Services

Solomons described in his article the policization of accounting. He claims that accounting was traditionally seen as an unnecessary subject. He insists that accounting today is seen as political. The rule making in accounting is nearly a political, voting process. Accounting rules and standards are written in favor towards one party. The FASB should consider political implication on accounting theories and research. Accounting standard and procurements are based on a political selective process. Acceptance for these standards could be favored or forced depending on the political implications. Furthermore, Solomon believes there is a representation problem. Those who serve on the board of the FASB and in the SEC, are not the best people to make choices for accounting standards. Enforcement and power play big roles in accounting standards. Also, political motivated answers and suggestions may or may not be appropriate when making decisions. Public accounting firms must be aware when making these decisions. There is also an economic impact with accounting standards. For example, the rule to record the purpose of goodwill had an impact. It is said that the standard has an advantage to foreign companies in bidding with American businesses. Because foreign entities are not subject to the same accounting requirement, they can afford to offer higher prices. Another impacting issues is cooperating with foreign currency translations. There is the temporal and direct method. Under the temporal method, assets and liabilities of a foreign entity must be translated. They must be translated at the current rate exchange at the balance sheet date, in order for consolidation purposes.

Questions:

1. How do you think the political implications on accounting standard will have a long term affect?

2. Do you believe that the appropriate people are making the right choices to develop these standards?

3. Do you agree or disagree with Solomon?