(Models for Setting Accounting Standards) Presented below are three models for setting accounting standards.

1. The purely political approach, where national legislative action decrees accounting standards.

2. The private, professional approach, where financial accounting standards are set and enforced by private professional actions only.

3. The public/private mixed approach, where standards are basically set by private-sector bodies that behave as though they were public agencies and whose standards to a great extent are enforced through governmental agencies.

Instructions

(a) Which of these three models best describes standards setting in the United States? Comment on your answer.

(b) Why do companies, financial analysts, labor unions, industry trade associations, and others take such an active interest in standards setting?

(c) Cite an example of a group other than the FASB that attempts to establish accounting standards.

Speculate as to why another group might wish to set its own standards.