Could any philosophy or cast of mind be seen as more vile these days than that of being “antibusiness”? It is like being “soft on communism” back when there were communists to be soft on. And according to prominent corporate executives, an antibusiness view, disgraceful and opprobrious though it may be, has permeated an unlikely home—the Financial Accounting Standards Board. This seemingly banal organization, which sets the rules governing corporate accounting, reflects “an implicit antibusiness bias.” It fails to recognize “business reality” and is unresponsive to business’s “valid concerns.” This broadside has been leveled by the Financial Executives Institute, a 14,000 member corporate executives group, and it is only the latest in a series of attacks on FASB from business. . . . But what gives rise to the “antibusiness” rhetoric and the overall virulence of the FEI attack? P. Norman Roy, its president, said his members think FASB has become an accounting “policeman” (a role he would prefer to see played by individual auditors). FASB’s thick encyclicals, he added, are too “prescriptive.” Naturally, executives want flexibility over how they report earnings.
a. Why would corporate executives desire more flexibility in how they report earnings?
b. How would more managerial flexibility in the reporting of accounting data affect the quality of accounting information?
c. What are the ethical obligations of the FASB in setting rules for reporting financial information?