The APB's Independence and Its Implications for the FASB

Abstract

Although the Opinions of the Accounting Principles Board (APB) continue to be generally accepted, the APB is today only a historical fact. Much criticism had been directed at the Board during its tenure, such that a successor organization was duly conceived and shortly thereafter given life. As interested parties now orient themselves to the operations of the new Financial Accounting Standards Board (FASB), there persists the very important question of whether improvement in formulating accounting rules will in fact result. One of the primary features of the new FASB, which distinguishes it from the APB, is that its seven members are full-time personnel who have severed all official ties with their previous employers. As a result, the seven men are expected to view issues with an independence that some observers contend did not exist during the APB era. That is, no Board member will have any obvious constituency whose own unique interests might be unduly brought to bear on the Board's deliberation of some issue. Implicit in the belief that FASB pronouncements will be less tainted than APB Opinions, is the presumption that the former body's independence had in fact been a vulnerable point. Since the matter of FASB members' not having employment-oriented has been heralded as a significant improvement over the APB mode of operation, one is inspired to examine the nature and extent of the external constituencies issue. Recall that APB members were appointed to assure a well-defined representation of large international CPA firms, other CPA firms of varying sizes, business enterprises, and the academic community. Given this configuration, can it be shown that external constituencies were valid factors leading to the demise of the Accounting Principles Board. The objective here is to examine the voting behavior of Accounting