Accounting Research Bulletins ARBs: Meaning, How They Worked

Despite the APB’s efforts, criticisms persisted regarding the lack of independence and the perceived influence of vested interests. These concerns ultimately led to the establishment of the Financial Accounting Standards Board (FASB) in 1973. The FASB introduced a more transparent and inclusive standard-setting process, involving extensive public consultation and rigorous due process. This approach not only enhanced the credibility of the standards but also ensured that they were more attuned to the needs of a diverse range of stakeholders. The FASB’s conceptual framework, introduced in the late 1970s, provided a theoretical underpinning for the development of accounting standards, emphasizing the importance of relevance, reliability, and comparability.

Dan’s career focus is in providing financial accounting, income tax planning and compliance, and business advisory services to businesses, private clients and family offices, individuals, trusts, estates, and private foundations. The Committee on Accounting Procedure (CAP) was the first private sector organization tasked with setting accounting standards in the United States. This means the content of the bulletins lacked significant influence and failed to encourage compliance by accountants. It was run by the American Institute of Accountants, now known as the American Institute of Certified Public Accountants.

Restatement and revision of Accounting research bulletins; Accounting Research Bulletin, no. 43

BALANCING STANDARDS AND JUDGMENT Professional judgment and common sense augmented by analogies to other standards can guide the accounting for many new accounting issues. Most parties agree that financial reporting is not useful unless there is a reasonable degree of comparability from company to company. However, almost all accounting rules require some degree of professional judgment in their application. The challenge to standards setters is to provide enough specifics to ensure parallel application without going overboard on detail. Readers cannot place much credibility in financial statements if, for example, one company decides that an expenditure qualifies as an asset and another company decides that the same expenditure is a current period expense. Among the numerous Accounting Research Bulletins issued, several stand out for their profound influence on the accounting profession.

They aimed to enhance the credibility of the accounting profession by promoting ethical practices and professional judgment. By offering clear guidelines, ARBs helped accountants navigate complex transactions and economic events, thereby fostering greater transparency and accountability. This, in turn, contributed to restoring public trust in financial reporting, which had been severely eroded during the economic turmoil of the 1930s. Topics covered by the bulletins included recommendations on United States Treasury tax notes, corporate accounting for ordinary stock dividends, intangible assets, and more. According to the very first bulletin, published in September 1939, the committee was created to implement an unbiased set of principles that would govern corporate accounting. The introduction read that accounting “must be judged from the standpoint of society as accounting research bulletin no 43 a whole—not from that of any one group of interested parties.”

Group Depreciation: Concepts, Calculations, and Financial Impacts

Sometimes they come about because the SEC challenges a particular registrant or accounting firm and the registrant or firm asks the EITF to resolve the differences of opinion. A two-thirds majority vote by the CAP was necessary to issue an Accounting Research Bulletin (ARB). The CAP issued three ARBs in 1939, the first of which included rules that had been recommended in 1933 to the New York Stock Exchange. The inception of Accounting Research Bulletins (ARBs) can be traced back to a period of economic upheaval and transformation. The Great Depression had exposed significant flaws in financial reporting, leading to a loss of investor confidence and a demand for more reliable and transparent accounting practices.

What Were the Accounting Research Bulletins (ARBs)?

• The SEC also tends to seek the maximum in uniform application of accounting standards, even those that include inherently subjective aspects.
• For those looking for a broaderrange of service and support from their accountant, Iwould certainly recommend reaching out to ARBAccountants.
• While most business people and senior partners of audit firms support general principles in theory, they often ask for much more detailed standards in practice.
• Emerging technologies such as blockchain, artificial intelligence, and machine learning are poised to revolutionize financial reporting and auditing.

Issued in 1953, it consolidated and revised previous bulletins, providing a comprehensive framework that addressed a wide array of accounting issues. This bulletin was instrumental in standardizing practices related to inventory valuation, depreciation, and the classification of current and non-current assets. By offering detailed guidance on these topics, ARB No. 43 helped reduce inconsistencies and improved the comparability of financial statements across different entities. This could result in less-detailed statements if third- or fourth-level issues are not specifically addressed, as they are in many standards at present.

• The inception of Accounting Research Bulletins (ARBs) can be traced back to a period of economic upheaval and transformation.
• The answer could be a resounding no if the complexity of new accounting rules outpaced the ability of well-intentioned professional accountants to keep up with and understand them or discouraged appropriate professional judgment.
• The principles and guidelines established by ARBs laid the groundwork for the development of more sophisticated accounting standards globally.

AICPA & CIMA SITES

Although Statement no. 125 is very detailed, after it was issued many parties asked FASB to be even more specific about the accounting for securitizations and certain other common transactions, so the EITF developed several interpretations. FASB itself is in the process of amending the statement in certain respects, and a document has been recently issued by FASB staff covering numerous other implementation questions and answers. All of this is designed to help accountants apply the fairly basic concept in Statement no. 125 that assets are considered effectively sold when they are no longer controlled.

However, the SEC strongly influenced accounting practice through periodic meetings with the CAP, as well as through informal rulings and private conferences with registrants. He focuses primarily on financial accounting and consulting for auto dealerships, commercial businesses, and nonprofit organizations. As a senior manager, he specializes in providing consulting and financial accounting services to construction, real estate development, manufacturing, and professional services firms. One example of an Accounting Research Bulletin (ARB) is ARB No. 43, “Restatement and Revision of Accounting Research Bulletins,” which was issued in June 1953. They can be found in the Accounting Standards Codification, which became effective after September 2009, and which is the single source of U.S. ARB definition and meaningRecommendations by the American Institute of Certified Public Accountants on how accountants ought to treat certain facts or items.

Some of these issuances dealt with topics that were highly specific to the era, such as Accounting for Special Reserves Arising Out of the War (ARB 13) and Renegotiation of War Contracts (ARB 15). In total, 51 ARBs were issued, covering topics such as revenue recognition, depreciation, inventory valuation, consolidations, and contingencies, among others. However, the ARBs were criticized for being based on individual cases and lacking a coherent framework or a set of underlying principles. One of the most significant advancements in modern standards is the emphasis on a conceptual framework. The influence of Accounting Research Bulletins extends beyond the borders of the United States, impacting international financial reporting practices.

SIFMA generally agrees with the concept but believes that the proposal should be extended to trading activities as a whole, not just those within the scope of ARB 43. Or, if you buy goods on account, this increases both the accounts payable account and the inventory account. ERI Economic Research Institute was founded over 30 years ago to provide compensation applications for private and public organizations.

Andy Smith is a Certified Financial Planner (CFP®), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career. A key step in business model modernization is determining how to implement services that satisfy clients and employees. Even more problematic is that the SEC expects public companies to follow guidelines set out in speeches by SEC accounting staff members at various conferences, particularly the annual AICPA National Conference on Current SEC Developments. The Dealer Accounting Committee of SIFMA provides comments to the Financial Accounting Standards Board (FASB) on the proposed FASB Staff Position ARB 43, Restatement and Revision of Accounting Research Bulletins. The proposal would require that inventories included in an entity’s trading activities be initially and subsequently measured at fair value, with changes in fair value recognized in earnings.

These pronouncements were issued by the Committee on Accounting Procedures of the American Institute of Certified Public Accountants during the years 1953 to 1959. And actions taken by companies to sell their products internationally, protect against a multitude of financial and other risks, adjust to new technology and react to other developments often raise new accounting issues. CREEPING COMPLEXITY Regrettably, this level of complexity of generally accepted accounting principles has become more the norm than the exception.

ARBs were pioneering in their time, providing much-needed guidance in an era of fragmented practices. The issuance of Accounting Research Bulletins marked a significant step towards the standardization of accounting practices, but the journey did not end there. As the business environment continued to evolve, so too did the need for more robust and comprehensive accounting standards. Accounting Research Bulletins were documents issued by the US Committee on Accounting Procedure between 1938 and 1959 on various accounting problems. They were discontinued with the dissolution of the Committee in 1959 under a recommendation from the Special Committee on Research Program. In all, 17 bulletins were issued; however, the lack of binding authority over AICPA’s membership reduced the influence of, and compliance with, the content of the bulletins.

Thomas Sanders, one of its authors, would become part-time research director for the CAP.In 1949, the CAP reconsidered developing a framework but instead codified and updated its first 42 ARBs. The CAP was criticized for its piecemeal, “firefighting” approach to setting standards and its failure to reduce the number of alternative accounting procedures. The CAP decided early on that formulating a statement of broad principles would take too long and instead approached issues on a case-by-case basis. Without a framework and often without adequate research, the CAP relied on the members’ collective experience for agreement on member-suggested solutions. The Accounting Research Bulletins were discontinued after 1959 as the Committee of Accounting Procedure was dissolved under a recommendation from the Special Committee on Research Program.

Understanding the Accounting Research Bulletins (ARBs)

Not addressing every possible issue will require corporate financial executives, auditors, regulators and other interested parties to recognize that professional judgment must play a more important role in financial reporting. At the same time, corporations and auditors, in particular, must continue to earn the trust of users of financial statements that judgment will not be abused. Also, all interested parties, not just the FASB, must assume a large part of the responsibility for simplification. They must make specific suggestions on how to simplify individual standards as well as the overall reporting framework without diminishing the quality of information to users. And they must be willing to actually accept general principles and apply them in good faith, which includes resisting the temptation to invoke the show me notion.