Emerging Issues Task Force (EITF)

Summary

The video script discusses the Emerging Issues Task Force (EITF), established by the Financial Accounting Standards Board (FASB) in 1984 to address accounting practice diversity. The EITF aims to provide guidance on transactions with varying treatments without issuing new standards, allowing FASB to focus on long-term projects. Members, often from large firms, work to reach a consensus on proper accounting practices, which the SEC respects as the preferred treatment, thereby easing the FASB's workload.

Takeaways

• 📚 The EITF, or Emerging Issues Task Force, was established by the Financial Accounting Standards Board (FASB) in 1984 to address accounting diversity.
• 🔍 The EITF's role is to provide guidance on situations where different firms may account for the same transaction in different ways, within the existing accounting standards.
• 🤝 The task force aims to reach a consensus on the proper accounting treatment for transactions without necessitating the FASB to issue new standards.
• 🛠️ The EITF allows the FASB to focus on long-term projects while the EITF handles short-term, immediate issues.
• 👥 Members of the EITF are appointed by the FASB and come from various backgrounds, including large accounting firms and other entities like Google.
• 📊 EITF meetings involve not only its members but also participants from the SEC and FASB, ensuring a broad perspective in discussions.
• 🏛️ The SEC respects the consensus reached by the EITF, treating it as the preferred accounting treatment.
• 🔄 The EITF's goal is to resolve accounting diversity issues swiftly to prevent them from escalating to the FASB's attention.
• 🛑 The EITF acts as a 'firefighter' within the accounting standards framework, addressing and resolving issues promptly.
• 📈 By resolving issues at the EITF level, the FASB is saved from undertaking extensive projects to determine accounting standards for specific transactions.
• 📝 The EITF's work streamlines the accounting standards process, ensuring efficiency and consistency in financial reporting.

Q & A

What is the EITF and why was it created?

The EITF, or Emerging Issues Task Force, was created by the Financial Accounting Standards Board (FASB) in 1984 to address situations where there is diversity in accounting practices, meaning different firms may account for the same transaction in different ways.

What is the role of the FASB in the context of the EITF?

The FASB is responsible for appointing the members of the EITF and is the organization in charge of making the accounting standards for the US, known as US GAAP. The FASB created the EITF to help provide guidance on accounting issues without having to issue new accounting standards for every case of diversity in practice.

How does the EITF aim to resolve diversity in accounting practices?

The EITF aims to resolve diversity in accounting practices by reviewing issues where there is a diversity of treatment and providing guidance within the existing accounting standards codification on how transactions should be properly accounted for.

What is the significance of the EITF reaching a consensus on accounting issues?

When the EITF reaches a consensus on how a transaction should be accounted for, it provides a preferred method of accounting that the SEC will respect, thus reducing the need for the FASB to get involved in long-term projects to resolve these issues.

Who are the typical members of the EITF?

The members of the EITF are typically appointed by the FASB and often work at large accounting firms. However, membership is not limited to these firms, as individuals from other large organizations, such as Google, have also been members of the EITF.

Can participants other than EITF members attend EITF meetings?

Yes, in addition to EITF members, representatives from the SEC and the FASB, including the chief accountant for the SEC and FASB board members, can also participate in EITF meetings and discussions.

What is the ultimate goal of the EITF's discussions and consensus?

The ultimate goal of the EITF is to come up with a consensus solution for accounting issues that exhibit diversity in practice, providing a clear and preferred method of accounting that avoids the need for the FASB to issue new accounting standards.

How does the EITF's work benefit the FASB?

The EITF's work benefits the FASB by allowing it to focus more on long-term projects, as the EITF handles short-term issues and provides immediate guidance on diverse accounting practices.

What is the relationship between the EITF and the SEC?

The relationship between the EITF and the SEC is collaborative. The SEC respects the consensus reached by the EITF on accounting issues, effectively treating it as the preferred accounting treatment.

Why is it important for the EITF to provide guidance within the existing accounting standards?

Providing guidance within the existing accounting standards is important because it allows for a consistent approach to accounting without the need for the FASB to issue new standards for every unique situation, thus streamlining the accounting process and maintaining consistency.

How does the EITF's approach differ from the FASB's long-term projects?

The EITF focuses on resolving short-term issues and providing immediate guidance within the existing framework, whereas the FASB is more focused on long-term projects that may involve the creation of new accounting standards.