Read the Communication Case 1-7, "Accounting Standard Setting" below and complete the exercise.
One of your friends is a financial analyst for a major stock brokerage firm. Recently she indicated to you that she had read an article in a weekly business magazine that alluded to the political process of establishing accounting standards. She had always assumed that accounting standards were established by determining the approach that conceptually best reflected the economics of a transaction.
In one to two paragraphs, explain what is meant by the political process for establishing accounting standards. Be sure to include a comment on the need for the FASB to balance accounting considerations and economic consequences.