ALIGNMENT OF SPECIAL-INTEREST SUBJECTS IN THE ACCOUNTING STANDARD-SETTING PROCESS: AN INVESTIGATION (FASB, DISCUSSION MEMOS)
Despite its surface appearance of precision, the establishment of accounting principles is an ongoing political process. This is because they affect different factions of the constituency in different ways. The Financial Accounting Standards Board (FASB) was structured so as to minimize potential undue influence by lobbyists. But is this independence illusory?
The present study replicates and extends prior work done by Brown (1981). "Influence attempts" was operationalized as comment letters written to nine FASB Discussion Memos (DMs). Two subsets of policy questions comprised the cues.
Letter writers were stratified into two subsamples. The "accounting group" contained the Big-Eight CPA firms plus five professional reporting societies. "Special-interest subjects" were drawn from Fortune-500 and specialized sampling frames.
Subjects' positions on each policy issue were obtained from their comment letters. The FASB's corresponding rulings were drawn from its Official Pronouncements.
A multidimensional scaling (MDS) was performed on each issue subset. Clusters of respondents holding similar positions were identified. A number of issues were discernible as dimensions in the perceptual spaces.
Several overall follow-up tests were performed. A Mann-Whitney U test was performed on the pairwise relative distances to the FASB. This was done for the accounting vs. special-interest subjects, and for Brown's vs. the additional policy issues.
There was no overall difference in average FASB alignment between accounting and non-accounting subjects. However, a marginal difference was evident between the two sets of policy issues. As a result, the Mann-Whitney U was rerun within each DM, with "issue subset" as a blocking factor. FASB alignment was closer to the accounting subjects for five sets, and to special-interest subjects for two sets.