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This study aims to evaluate whether the Big-4’s commenting efforts influence the characteristics of Financial Accounting Standards Board’s (FASB’s) Final_Standards using the content of their comment letters. Whether auditors lobby standard-setters to help their clients or to help themselves and whether they are successful are questions highly relevant to issues of auditor independence and audit effectiveness.

Based on components of Mergenthaler (2009), this study develops a rules-based continuum change score to measure how much more (less) rules-based a Final_Standard is compared to its exposure draft to evaluate the influence of the Big-4 on the FASB’s standard-setting for 63 accounting standards.

The findings show that extensive comment letters and increased uncertainty language are associated with increases in the rules-based attributes included in Final_Standards. These results suggest the Big-4 prioritize a reduction in their own litigation risk over the possible preferences of their clients for less rigid standards. Moreover, the results are consistent with their comment letters influencing the FASB’s decision to include more rules-based attributes in Final_Standards.

This study develops a potential proxy for audit risk by assessing the changes in the rules-based characteristics of proposed accounting standards and using the content of the comment letters to evaluate whether the Big-4 accounting firms may influence the FASB’s Final_Standards. Overall, this study provides a unique perspective on the influence of constituents on the FASB’s standard-setting.

Investigates the negative effect on employee welfare caused by economic decisions taken by corporate managements which they attribute to the adoption of an accounting standard, focusing on the case of McDonnell Douglas Corporation, which ended health‐care benefits for non‐union employees as a result of adopting the Financial Accounting Standards Board′s Statement 106 (FASB 106). It is estimated that the adoption of FASB 106 caused $148 billion in charges to earnings to be recorded by companies in the Standard & Poor′s 500 Index. Despite the large negative effect on earnings, FASB 106 had little or no impact on the economic condition of the affected firms. Nevertheless, managements have taken economic actions that have negatively affected employee welfare, and these actions have been attributed to FASB 106. Some of the hardest hit are employees at older industrial companies with mature workforces hired during the 1950s and 1960s. Some companies ended retirement health plans abruptly, while others required workers and retirees to pay more towards insurance premiums, or prevented new hires from receiving retirement health coverage.

The paper's aim is to research and discuss the issue of the lack of transparency in financial reporting and how companies take advantage of accounting rules in ways that inhibit transparency.

A literature review was carried out to see what had been written and discussed. Various legal cases were studied as well as Securities and Exchange Commission (SEC) and Financial Accounting Standards Board (FASB) studies of the impact of off‐balance‐sheet arrangements allowed by the FASB and SEC.

There are many ways that companies accomplish off‐balance‐sheet financing by taking advantage of rules‐based accounting. If there is not a rule to prevent an entity from handling a particular transaction a certain way, then it is difficult for the auditor to stop it from happening.

The paper is of descriptive nature. There are many policy implications from the results of the paper for all regulatory agencies. The economic substance of transactions needs to be communicated.

Financial managers and financial consultants need to refocus the structuring of financial transactions so that they comply with generally accepted accounting principles and that the economic substance of financial transactions is communicated. More accountability and ethical awareness needs to be instilled in the individuals who deceitfully structure financial transactions. Regulatory bodies need to ensure more transparency by closing loopholes and better enforcement of accounting standards. Boards of directors, especially the audit committees, need to be sure that a company is communicating the true economic reality of the financial transactions and financial position of the business entity. Off‐balance‐sheet financing is one of the most significant ways, among others, that the user of financial statements can be misled. It is time for regulatory bodies to eliminate overly rules‐based standards, clearly state the economic objective of each standard, and require firms to disclose the economic motivations for the accounting practices they adopt.

The value of the paper is that it studies the problems of the lack of transparency in financial reporting. It then suggests that if what is currently being done, (i.e. rules‐based accounting), is not working, then a new approach, principles‐based accounting needs to be implemented by the regulatory agencies. This paper provides an overview of the lack of financial statement transparency.

The ability of financial statement users, investors, donors and academic researchers to compare financial information issued by nonprofit universities, hospitals, fund-raising organizations and government agencies is affected by their understanding of current accounting recognition and reporting guidance. Public nonprofit organizations report different financial results from private nonprofit organizations. This study looks at the events that brought about the divergence in nonprofit financial accounting recognition and reporting for higher education institutions, discusses specific differences, and offers a look at additional changes in recognition and reporting for the sector currently underway.

Considers what role history plays in the US accounting standard‐setting process and how this role may be constrained by an emphasis on objectivity and an adherence to a positivistic view of bureaucratic decision making. Explores the role history could play in the development and review of accounting standards and, in particular, how history might contribute to pluralizing the past, problematizing the present and revisioning the future.

The purpose of this paper is to demonstrate the expected effect of diverging accounting requirements and practices on firms in two industries – construction and retailing – which typically undertake different types of leases, namely, equipment and real estate, respectively. The paper also discusses how the new standards will provide expanded disclosures to aid this financial statement analysis.

The research demonstrates how to estimate information comparable to that produced under IFRS from US GAAP financial statements and estimates the significance of the impact on key financial statement ratios.

Key profitability ratios – return on assets and return on equity – generally improve over the time period 2007-2013 while interest coverage drastically deteriorates particularly for retailing firms. This finding contrasts with what some view as the Financial Accounting Standards Board’s reason for its choice of income statement presentation – to avoid the front-end loading of costs that ensues from accounting for leases as one would any other long-lived asset acquired through long-term financing.

Current IFRS and US GAAP requirements do not provide sufficient information to estimate lease accounting changes for those firms which have no long-term debt other than long-term leases. Therefore, the estimates presented in this analysis are limited below what will be possible to do under new accounting requirements.

The research covers a current topic of new divergence between US GAAP and IFRS requirements for leases. In addition, improvements over analysis techniques currently required that will be possible with new financial statement disclosures also are discussed.

This paper aims to examine the status and implications of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (IASB) forthcoming standard on leases. The proposal arose from concern that many lease obligations are unrecorded on the balance sheet and that current accounting for lease transactions does not represent fully the economics of many lease transactions.

On September 20, 2012 and September 25, 2012, the Boards decided to account for some lease contracts using an approach similar to their proposed 2010 leases exposure draft (interest and depreciation) and to account for some leases using an approach that results in a straight-line lease expense. On May 13, 2013, the Boards decided to continue to account for some lease contracts on a straight-line basis, and others on an amortization basis separate from interest expense. Identification of the type of lease requires a two-step process at lease commencement, and all leases are recorded identically at inception. The subsequent measurement gives rise to differences. Some concerns are that an increase in assets and liabilities may result in debt covenant breaches that will require renegotiation and adjustment.

While understanding that many financial users, preparers and auditors favor retaining the current and long-standing leasing standards, the FASB and IASB should recognize many unexpected consequences of its new proposals, including the changing of many long-held financial ratios and the resultant violations of many bank loan covenants.

The only limitation is that this manuscript is not based on primary empirical data. There are no implications for the study’s purpose is an update of a proposed FASB/IASB standard, an analysis of the empirical impact studies that have been done, a questionning of whether a new standard is really needed or that the current standard is not being implemented properly, and guidance for the implementation at transition and on-going for the proposed standard. This study gives a reader a compact update, implications, ramifications and guidance for preparation of a new standard if it is passed.

The new rules will alter many key financial metrics that investors use to determine company valuations and credit agencies use to determine credit worthiness. Some items will improve, such as gross margin, cash flow from operations and earnings before interest and taxes. Reported interest coverage and return on assets will be lower under the new rules. Industries that make extensive use of operating leases such as transportation, banking, telecommunications, retail and real estate will be most affected.

In the best case scenario, the new standard would destroy approximately 190,000 US jobs. US gross domestic product (GDP) would be reduced by $27.5 billion annually. In the best case, the household earnings would be reduced by $7.8 billion annually. In the worst case, this decrease is $135.2 billion a year. The apparent liabilities of US publicly traded companies would increase by $1.5-$2 trillion, the equivalent gross state product of 20 states. Approximately $1.1 trillion of this would be attributable to balance sheet recognition of real estate operating leases, while the remainder would come from recognizing equipment and other leases as liabilities.

The value of this research is the unique analysis of the proposed lease standard, and in looking at why the previous models did not work or did they? Is it the current requirements that are wrong or their implemenation? The reader is given a detailed overview of the proposed standard, its economic and social impacts, an update of the proposed standard, what companies must do now to get ready for the transition and on-going requirements, and a discussion of the tremendous opposition to any proposed changes in the current lease requirements from what they are.

The paper analyses the concept of ‘user needs’, which has been widely adopted by official bodies as the basis of a conceptual framework for financial reporting, including the ASB in the UK, following the lead of the FASB in the US. The user needs approach is essentially deductive: if users of the financial statements are identified, together with the decisions such users want to make with the information such statements contain, then the required information can be specified in the appropriate form. The paper attempts to follow this logic, to test its viability, making reference to the literature and the conceptual framework statements of FASB and the ASB. The paper concludes that the approach throws up such serious problems that no clear conclusions can be drawn from it. FASB and the ASB do not explicitly face these problems, and effectively abandon the user needs criterion. User needs can only serve a rhetorical function within conceptual framework documents.

The purpose of this paper is to examine whether the significant clustering of defined benefit (DB) pension plan freeze announcements during 2001‐2006 is motivated at least in part by accounting concerns due to the Financial Accounting Standards Board's pending adoption of Statement of Financial Accounting Standards No. 158 (SFAS 158).

Using logistic regression models, the paper compares 147 “freeze firms” with a matched sample of firms that did not announce a DB plan freeze. Empirical models control for other DB plan motives including as a response to stricter contribution requirements under the Pension Protection Act of 2006 and improving the firm's competitive position.

The potential SFAS 158 impact is significantly associated with firms' decisions to freeze their DB plans. Firm profitability is also significantly associated with the freeze decision. However, there is no significant association between cash flow positions or pension plan contributions and the freeze decision.

It is possible that economic conditions adversely affecting the funded status of DB plans also motivate the freeze decision. While this study controls for the economic environment, economic factors could exacerbate the potential effect of SFAS 158.

This paper considers potential effects of accounting policy by examining its influence on real management actions and has consequences for a variety of stakeholders including investors, creditors, and, importantly, pension beneficiaries and workers, as DB plans represent implicit contracts between firms and their employees.

The objective of this paper is to critically examine the Canadian Accounting Standards Board's (AcSB) legitimacy management strategies directed toward financial statement users.

Suchman's legitimacy typology is used as a lens through which the AcSB's legitimacy management strategies directed toward users are analyzed. The data sources consist of documentary public information available for the overall Canadian standard‐setting process and for a sample of standard‐setting projects.

The results indicate that the AcSB devotes much more efforts to symbolic features and cultural accounts than to pragmatic concerns to ensure its legitimacy toward financial statement users. The legitimacy management strategies used mimic those in the USA and at the international level. Such an isomorphism contributes to the AcSB's cognitive legitimacy and overall cultural legitimacy.

Future research could assess a standard‐setting institution legitimacy management strategies directed to other audiences such as preparers, auditors, or other groups that fall under a broader public interest umbrella.

The results provide Canadian users with a general picture of the AcSB's efforts in their regard and invite them to be sceptical and critical about the so‐called user perspective in standard setting. It also provides standard setters with a legitimacy framework that they can use to identify areas for improvement to enhance users' view of their legitimacy and to help them better fulfil their mission statement.

This paper innovates by studying a standard‐setting institution legitimacy management strategies directed toward a specific audience, financial statement users.