The FASB, guidance, and Statement 96.

• Author: Giles, Jill Peperone
• Position: Financial Accounting Standards Board

The FASB, guidance, and Statement 96

Two FASB staff members discuss how much guidance is desirable when issuing a new accounting standard. Focusing on Statement 96, Accounting for Income Taxes, and the questions that have arisen over its implementation, the authors review how the new implementation guide was developed. How much guidance is enough when writing a new statement of financial accounting standards? Some prefer as little as possible and urge the FASB to allow the profession to use professional judgement. Others want every possible scenario examined and all questions answered before they feel comfortable implementing a new statement. Some believe that, where two acceptable alternatives exist, the accountant should make the choice. Others criticize the Board for creating diversity in practice when allowing choices between two acceptable alternatives. How much guidance is enough? The question will never be answered to everyone's satisfaction.

Should the Board or its staff issue guidance?

At a meeting in mid 1988, the Financial Accounting Standards Advisory Council (FASAC) discussed several issues relating to the extent of FASB guidance. Would staff time be better spent on new projects than on providing implementation guidance? Is implementation guidance a proper function of the Board? Could standards be simplified so that implementation guidance is not required each time a standard is issued? Advisory Council members were divided on whether the Board should be providing implementation guidance. Some believed that the Board should be writing broad standards, with the specifics left to practitioners. Other Council members believed that this would result in wide diversity in financial reporting, thereby creating less credible financial statements.

While the debate over implementation guidance rages on--who should provide it and how much, if any, should be provided--the fact is that, at present, the FASB staff, with guidance from Board members and a great deal of help from task forces, does provide that guidance on FASB statements and pronouncements issued by the Accounting Principles Board and the Committee on Accounting Procedure. Implementation guidance is not a new phenomenon; the Board and its staff have been answering technical inquiries in a variety of ways since the inception of the Board. Inquiries on certain accounting pronouncements continue to come to the staff long after the original pronouncement is issued. For example, APB...