Accounting Standard Setting at a Crossroads

In the late 1960s and early 1970s, when it became clear that the standard-setting process in the hands of the Accounting Principles Board (APB) had serious shortcomings, leaders emerged both within the accounting profession and in the related business community to craft a new structure called the Financial Accounting Standards Board (FASB). The FASB was to deal with the shortcomings identified during the APB years. While the criticisms of the APB were numerous, 3 rather broad criticisms were apparent. First, the APB was accused of making too many ad hoc decisions. A 2nd criticism was that the APB process was too closed. Third, the business community was critical of the APB process because it felt APB was dominated too heavily by the public accounting perspective. The FASB structure to accounting standard setting has fallen short of expectations in 2 principal areas: development of an effective conceptual framework and the achievement of diversity in the deliberation process.