Goup 3

Ni Nyoman Tri Setya Prajayanti 15063058808

Ida Ayu Artha Widya Sari 1506305143

POLITICAL LOBBYING ON ACCOUNTING Made Cahyani Prastuti 1506305144
STANDARDS
Political lobbying is the term used here to describe concerted campaigns of action against
a proposal, where the lobbyists make overt or covert threats to seek intervention to overturn a
proposed standard or to compromise the standard-setters reputation, independence, powers or
even its existence. In what circumstances does political lobbying emerge as an issue for
standardsetters? The answer to this is principally in situations where the standard-setter proposes
to issue a standard on a topic not previously covered, or to eliminate or sharply reduce optional
accounting treatments in an existing standard, and where a regulatory body will intervene to secure
strict compliance with the standard.
The motivations of the lobbyist can include a desire to make earnings look larger, smaller
or less volatile. In the case of governments, lobbying can concern the desire to ensure that various
economic incentives have more attractive accounting results.
The Political Lobbying here can be divided into 3 categories : U.S political lobbying up fro
1990, political lobbying of IASC/IASB, and political lobbying of the FASB convergence with the
IASB. US lobbying from 1990 concerned marketable securities, stock options and goodwill; two
of which were repeats of earlier cases. Lobbying of the US standard-setters up to 1990 included
that on replacement cost depreciation, the investment tax credit, business combinations, petroleum
exploration costs, marketable securities, leases, segment reporting, restructuring of debt, and post-
employment benefits.
Political lobbying of the IASC/IASB consists of lobbying with the elimination of LIFO,
share based payments (2001), financial instruments (2002-2004), and the last is operating
segments. The example we give here is about the elimination OF LIFO. This occurred in 1992,
when the IASC board attempted to carry out one of the provisions in its Statement of Intent, issued
in 1990, that LIFO should be eliminated as an acceptable treatment.30 Because LIFO could be
used for income tax purposes in Germany, Italy, Japan and South Korea, countries in which tax
reporting and financial reporting were intertwined, the delegations to the IASC board from those
countries voted against the elimination of LIFO. One supposes that the delegations aligned
themselves with views expressed within their countries that nothing should be done to disturb the
tax benefits conferred by LIFO. These four negative votes constituted a blocking minority, and the
motion to eliminate LIFO failed. The defeat of the motion, which was unexpected, became an
embarrassment to the IASC board. Interestingly, the US delegation to the board voted in favour of
eliminating LIFO, despite the common use of LIFO in the US (see Chapter 8), believing that it
was not a proper accounting method. Finally, in 2003 the IASB, as part of its Improvements
project, eliminated LIFO in its revision of IAS 2.
It was not enough for preparers to confront the FASB on particular accounting issues.
Beginning in 1985, they took a number of steps to try to rein in the FASB. In 1985, the Financial
Executives Institute (FEI) urged that a second preparer be appointed to the seven-person FASB,
which was done, displacing the lone former financial analyst on the board. In 1988, the Business
Roundtable, composed of the chief executive officers of some 200 of the largest US publicly traded
companies and banks, pressed the SEC to cooperate in setting up a board to oversee the FASB.
Prior to the 1990s, the US Securities and Exchange Commission was the only securities market
regulator that rigorously enforced compliance with GAAP.