Special Committee on Development of Accounting Principles

The creation of:

1. Committee on Accounting Procedures

a. 2-Role - With the recent increase in members, the SEC delegated the responsibility of issuing pronouncements on accounting principles to the Committee. The SEC worked with the Committee on Accounting Procedures to develop standards for accounting and financial reporting and issued 51 Accounting Research Bulletins (ARBs) over its lifetime (www.sechistorical.org). In 1949, they updated 42 of their original ARBs and codified them.

b. 1-History - In 1933, the Special Committee on Development of Accounting Principles was formed by the AICPA. Quite simply, this committee did not get much done and was replaced by the Committee on Account Procedures in 1936. For the first two years, this committee also made very little progress (www.sagepub.com/upm-data/27251_57.pdf). In 1938, the Securities and Exchange Commission issued Accounting Series Release No. 4 which asserted that any financial statements prepared in accordance with principles that had no substantial authoritative support would be considered inaccurate. This prompted the CAP to expand from 7 members to 21 members and increased its activity. (www.sechistorical.org). (Is it 7 to 21 or 8 to 22?)

c. Structure – The Committee on Accounting Procedures was committee formed by the American Institute of Accountants after the SEC delegated to it the responsibility of issuing pronouncements on accounting principles without government council. Initially, the CAP wanted to create guidance for solving accounting problems, but did not believe they had enough time. Instead, they began attacking specific problems and recommended accounting methods.

d. Strengths – Although the CAP did not produce an accounting framework, they set the stage for how accounting policies would be made, in the private sector. They also had more power than was granted to any committee prior to their existence.

e. Weaknesses - The committee did not have the best approach to solving accounting issues. Instead of creating a framework for financial reporting, they tended to release documents with multiple suggested solutions thus not solving the original issue.

f. Reason for creation/demise – The Committee on Accounting Procedures was formed back in 1933 because of the lack of authority over accounting issues at the time. Although the committee was able to make substantial progress in its' 20 years of existence, but many lost faith in their ability to get work done

(http://www.sechistorical.org/museum/galleries/rca/rca04a-committee-accounting-procedure.php).

2. Accounting Principles Board

a. Role – The APB was established to bring research to the forefront of critical accounting decisions. Initially, the research preceded any opinions issued by the committee. When the research division