Sunday, April 1, 2007

Government Control Over Accounting?


Here’s an article that you should read. Here’s why this matters.

The accounting rules have been developed by an independent body, The Financial Accounting Standards Board. Members come from accounting, and leaders from business leaders and the general public. The accounting standards have many problems, not least of which is that there is too many of them. But at least they make sense.

Compare to the income tax code. The problem is not just that the code originates from the government, it is what the government uses to drive the code: politics. The income tax code is not effort to arrive at some economic truth for what is best. It is the result of political manipulations.

The accounting standards at least try to arrive at the best and most truthful way to keep score. Transferring the power from an independent body to the government will inevitably lead to politically driven standard setting. This will be bad for everybody.

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