Question

Explain the role of the Emerging Issues Task Force in establishing generally accepted accounting principles.

Short answer

The Emerging Issues Task Force was set up by the Financial Accounting Standards Board in 1984. The objective behind establishing it is to reduce the use of the Financial Accounting Standards Board (FASB). It also helps by providing financial reporting on a regular basis.

Step-by-step solution

Meaning of Emerging Issues Task Force

The Emerging issues task force is defined as an entity whose motive is to provide support and guidance; it recognizes and resolves financial accounting problems with the purpose of developing the financial reporting system.

Role of Emerging Issues Task Force in establishing Generally Accepted Accounting Principles

The duties of the Emerging Issues Task Force are to deal with the emerging issues within the domain of Generally Accepted Accounting Principles (GAAP). The emerging issues task force comprises Certified Public Accountants (CPA), professional accountants, chief, members of the Financial Accounting Standards Board (FASB), members of the Securities and Exchange Commission (SEC) as well as members from the private and public sector who take part in the meeting and discuss the emerging issues.

The Emerging Issues Task Force (EITF) usually comes to consensus conclusions on particular financial reporting issues. These consensus conclusions are then observed as Generally Accepted Accounting Principles (GAAP) by practitioners as the Securities Exchange Commission (SEC) has stated that it will view consensus solutions as preferred accounting and need persuasive jurisdiction for drifting away from them. Hence, for public companies which are inclined to Securities Exchange Commission (SEC) oversight, consensus solutions developed by the Emerging Issues Task Force are adhered to unless eventually overruled by the Financial Accounting Standards Board (FASB). Moreover, Financial Accounting Standards Board (FASB) has taken ownership of GAAP established by the Emerging Issues Task Force (EITF) by demanding that the consensus positions be approved by the Financial Accounting Standards Board (FASB).