Problem 1. Accounting standards could be established using descriptive theory, which explains practice, or normative theory, which leads practice. Which theory is currently being used in setting standards? Which do you think should be used? Justify your response.
Problem 2. Accounting standards are very complex and require expertise in their interpretation and application. Smaller companies often do not have the resources available to obtain this expertise, leading to the concept of "big GAAP" and "little GAAP" whereby there would be two sets of standards: one for large, publicly traded companies and another for smaller companies. Should there be two sets of accounting standards? Why or why not?
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