Marketing GAAP

Unlike FASB's avatars, international financial reporting standards may be catching on because their creators are super sellers.
Alan RappeportJanuary 11, 2008

The Financial Accounting Standards Board isn’t known for its marketing prowess. As the caretaker of America’s accounting standards, the outfit is often derided for spawning overly rigid and complex rules. What’s more, while its international counterpart hands out its standards to anyone who will adopt them, FASB is seen as stingy with its pricey copyrights and bound volumes.

But FASB may be starting to take a more welcoming tack. All of its pronouncements are now freely downloadable from its Website. Further, it’s launching a “codification” project aimed at simplifying accounting by gathering feedback from practitioners. Still, some think FASB has room for improvement, and that the success of international financial reporting standards, all the rage these days, is the result of standard-setters who know how to market their product.

FASB “has long protected its brand name, including by asserting copyright over its U.S. GAAP standards and selling them for profit,” says Lawrence Cunningham, a George Washington University law and accounting professor. “In contrast, [the International Accounting Standards Board], its international counterpart, although also asserting copyright over its international financial-reporting standards, gives its products away free to all persons within any country that recognizes IFRS as official.”

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Cunningham argues that the differing approaches symbolize why people have positive associations with the IFRS but tend to loathe America’s GAAP. Early versions of the IFRS were considered hazy and vague, but the revamped model has charmed users with its passion for principles. “People ridicule rules-based systems as bad and costly,” he told “Principles are wonderful, easy to use, and allow for the exercise of judgment. It’s an easy thing to sell.”

The International Accounting Standards Board has had good success getting the IFRS adopted in more than 100 countries. Cunningham suggests that part of the reason stems from its policy of waiving its copyright restrictions in countries that adopt the international standard.

As more countries adopt the IFRS, the more easily it can be marketed as the best set of standards. “Our objective is to encourage use of IFRSs across the world,” says the IASB’s Mark Byatt, noting that the text of the standards has to be written into the law of each country. “In most countries the text of law is freely available, so we waive copyright in each adopting country for the bare standards to allow this to happen.”

FASB posts digital versions of its various pronouncements on its Website. Those, however, are for individual use and can’t be reproduced. If a publisher wants to reproduce FASB documents, it must apply for and buy a license.

Although U.S. accounting rules are enforced by the Securities and Exchange Commission, their status as laws is a topic of debate. Some consider accounting rules to be “business practices”; yet because violating the rules can bring legal action, Cunningham contends they are “de facto” laws and that copyrights should be waived.

Before the Sarbanes-Oxley Act, which provided FASB with funding, its entire budget came from the sale of its publications. Now, although it has federal funding, it still earns $17 million a year from its bound volumes and other products, according to Ron Guerrette, vice president of the Financial Accounting Foundation, which oversees FASB. A full set of its bound volumes can sell for up to $240 each.

In a paper Cunningham published in the Michigan Law Review in 2005, he noted that FASB could easily drop its copyright fees now that it has funding. In fact, he wrote, sales of publications could potentially be disguised contributions from those trying to influence FASB’s decisions.

For Cunningham, the crusade against FASB’s copyrights is also personal. When he wanted to use FASB pronouncements in a textbook for class on accounting and law, it took him five months and $3,000 to gain access. FASB contends that the point is moot since all of its rules are available online and because changes may be on the way with convergence of accounting standards moving ahead quickly.

Despite those changes, FASB is unlikely to drop its right to charge for its publications anytime soon. “We have the copyrights for this material and we are allowed to charge for them,” says Guerrette.

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