1. What is meant by the term “economic consequences” in accounting standard-setting?

A. Accounting standards can have detrimental impacts on the wealth levels of the providers of financial information. Financial accounting is objective; if a company is not doing well, that's what the financial statements must present.
"Economic consequences" is meant the impact of accounting reports on the decision making behavior of business, government, unions, investors and creditors. It is argued that the resulting behavior of these individuals and groups could be detrimental to the interests of other affected parties. And, the argument goes, accounting standard setters must take into consideration these allegedly detrimental consequences when deciding on accounting questions.

2. What economic consequences arguments are used in this letter?

A. The economic consequences arguments that are used in this letter is the considerations of the wide range of concerns that have been expressed about the derivatives and hedging proposal, including concerns related to the potential impact on the capital markets, the weakening of companies’ ability to manage risk and others. The letter is suggesting for fairness and transparency with regard to the proposal of FASB and be open for public debate and comments as this is important in businesses, the customer’s and the economy as a whole.

3. What do you believe is the main point of the letter?

A. The main point of the letter is to postpone the issuance of the newest approach that is about to finalized or issue by the FASB without any further study or consultation from the public. The FASB has developed, over the last few weeks, a new approach that it proposes to adopt as a final standard. The FASB may not have adequately considered the wide range of concerns that have been expressed about the derivatives and hedging proposal, including concerns related to the potential impact on the capital markets, the weakening of companies’ ability to manage risk, and the adverse control implications of implementing costly and complex new rules imposed at the same time as other major initiatives including the Year 2000 issues and a single European currency. The main point here is the community of these group of businesses wants a full study of this approach before it will be released as a final standard by the FASB.

4. Why do you believe a copy of this letter was sent by the business community to influential members of the U.S. Congress?

A. I believe a copy of this letter was sent by the business community to influential members of the U.S. Congress to urge them to study first the crucial events that involves or might affect the said proposal before its final issuance. They want an assessment on the impact that these proposed rules may have on the capital markets, on company’s risk management practices, and on management and financial controls. It was stated in the letter that FASB itself has said throughout this process, its mission does not permit it to consider matters that go beyond accounting and reporting considerations. I believe this is one of the reason why these group of businesses have extended this letter to the other agencies in the US because there are other issues that involves already that maybe beyond FASB’s control. And this letter is actually a recommendation about the steps that should be conducted or followed if the FASB is to produce the best possible accounting standard while minimizing adverse economic effects and maintaining the competitiveness of U.S. businesses in the international market place.