Standard Setting: Political Issues

Which of the following steps in when issues cannot be fixed with the help of bargaining, contracting, and/or market forces?

• Negotiation

• Regulations

• Laws

• Democracy

Why was the SEC Regulation FD adopted in 2000?

• To prohibit companies from selectively disclosing information

• To prevent false information from circulating

• To prohibit companies from releasing information to everyone

• To prevent small investors from obtaining private information

The process of standard setting is best described as

• Public interest theory

• Interest group theory

• All the above

• None of the above

Which of the following is not a benefit from reducing information asymmetry?

• Reducing bid-ask spread

• Reducing estimation risk

• Tightening up the linkage between current and future firm performance

• Expanding market liquidity

A public interest group is interested in policies and regulations that will provide to society:

• Purposive incentives

• Collective benefits

• Lower taxes

• Selective benefits

Bertomeu and Magee discusses:

• Competition of pressure between interest groups

• Amount of regulation changes depending on position in business cycle

• Regulation is assumed to have best interests of society

• Maximizes social welfare of general public

The argument over rules-based versus principles-based standards is potentially moot unless it can be shown that the regimes result in different reporting/disclosure outcomes

• True

• False

What is not a difference between US GAAP and IFRS leasing accounting standards?

• U.S. GAAP uses quantitative criteria whereas IFRS is less specific

• US GAAP requires capitalization of a lease if at least one of four criteria is satisfied whereas IFRS requires five criteria to be satisfied

• U.S. GAAP is less specific whereas IFRS uses quantitative criteria

• U.S. GAAP uses bright lines criteria, whereas IFRS is more vague

How does the history of bananas relate to accounting standards in the paper “Going bananas, lessons from evolutionary biology. Beyond Numbers”?

• The author likes bananas

• Banana fruit is uniform and consistent which is similar to accounting standards

• Banana fruit is diversified which is similar to current accounting standards

• Both B and C

According to the paper “A Perspective on Global Standard Setting,” which of the following is a disadvantage by having a uniformed accounting standard

• Stifle innovation and quality

• Encourage experimentation

• Increase costs

• All of the above