Question 8Q - Intermediate Accounting (Kieso)

Question

In what way is the Securities and Exchange Commission concerned about and supportive of accounting principles and standards?

Step-by-Step Solution

Answer

Securities and Exchange Commission assists in advancing and regulating financial information issued to stockholders. SEC has proclaimed its support for the Financial Accounting Standards Board (FASB) by specifying that financial statements that comply with standards set by the FASB are assumed to have substantial authoritative support.

Meaning of Accounting Principles and Standards

Accounting standards are generally accepted accounting principles that provide the basis for accounting policies and for the preparation of financial statements. It provides useful information to the users to interpret published reports. Also, it helps the interested parties to understand the information properly and to make meaningful comparisons and interpretations for decision-making purposes.

 

Ways that suggest that the SEC is concerned about and supportive of accounting principles and standards

Securities and Exchange Commission is concerned about and supportive of accounting principles and standards in the following ways:

• Securities and Exchange Commission has full power to authorize in a way it desires, the accounting policies and practices to be employed by companies that lie in its jurisdiction. The SEC motivates the establishment of a corporate standard-setting body as it affirms that the private sector has the right resources and talent to accomplish this task. Therefore, accounting standards have advanced in the private sector either with the help of the American Institute of Certified Public Accountants (AICPA) or by the Financial Accounting Standards Board (FASB). 

 

• Securities Exchange Commission (SEC) is dependent on the Financial Accounting Standards Board (FASB) for developing accounting standards. SEC requires registrants to comply with Generally Accepted Accounting Principles (GAAP). Securities Exchange Commission (SEC) affirms that setting up and improving accounting standards should stay in the private sector with Securities Exchange Commission (SEC) oversight.