FASB and IASB: Dependence Despite Independence

Abstract

Most regulatory bodies are either powerful or independent. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are both — at least in theory. This paper argues that in practice, the two boards are less powerful and less independent than many critics claim. Both the FASB and the IASB face outside pressure, especially from politics, and both have made concessions to please their constituencies. Plato's famous philosopher kings illustrate why: without rulemaking powers, accounting experts will never be as independent as if they were legislators.

Note: This article is based on a briefing paper prepared for the EU-US Financial Services Roundtable (2005) and on a presentation held at the Future of IASB-Funding Conference (2006).

Keywords: FASB, IASB, IAS, IFRS, accounting, internationalization, legal harmonization, standardization

JEL Classification: F50, G15, G18, G38, K22, M41, M48