The Emerging Issues Task Force

How IETF influences GAAP

The Emerging Issues Task Force (EITF) is charged with the role of identifying, discussing and resolving issues within the guidance of existing laws. EITF is designed to reduce diversity in financial reporting on a timely basis. It reduces the need for the Financial Accounting Standards Board (FASB) to spend time in the implementation of regulations to handle issues that can be handled within the existing literature (Bielstein, 2012). The EITF always intends to resolve issues in a timely manner and does not attempt to resolve issues that will evidently not be resolved within three to four meeting. According to an article on the CPA journal titled Current developments in the private sector: Recent and ongoing projects on the FASB, PCC, and EITF agendas (2014), the EITF are an advisory body for FASB. FASB however is always at liberty to choose whether or not to implement what EITF advises.

The consensus reached by the EITF is deemed authoritative only after the FASB has ratified it. In that case, it is classified as category (c) of the Generally Accepted Accounting Procedures (GAAP). Being put in category (c) implies that it may be surpassed by category (a) and category (b) pronouncements. These include the FASB interpretations and statements. It should be noted however that the pronouncements of the EITF are interpretations of existing GAAP.

The influence of the EITF is based on meetings that are held after an issue has been identified. Usually, the meetings are planned early. The public is then notified about the issue and given time to respond. In response, the public responds in the form of comment letters. The issues raised in the letters are then determined in the EITF meetings to assist in the resolution of the diverse issues. The primary way therefore that the EITF influences the GAAP is by interpreting the legal frameworks available to resolve current emerging issues. The GAAP interpretations are then harmonized in the process to prevent diversity in the accounting profession. However, sometimes it helps to align certain laws so as to avoid confusion. The reconciliation of such laws is however only done on grounds of other existing laws and regulations.

Improvement that the EITF could take in order to more effectively influence GAAP

The EITF could be more effective if it incorporates more members. Currently, it comprises of a minimum of ten members to a maximum of fifteen members (Weiss, 2013). The bigger number of members would help in several ways. First, the members would become more knowledgeable of the issues surrounding their profession hence enabling them to work more efficiently and to understand the guidelines that are put up to guide them. Secondly, the involvement of more individuals will help to increase the diversity of the solutions raised at the meetings. This will enable the EITF to be more effective in its resolution attempts. It will also make the resolution process easier and faster as more people will be involved.

Issue 12F: Recognition of Pushdown in Certain Circumstances

In May 2014, the EITF discussed whether pushdown would be allowed or mandatory for companies that had been newly acquired by a controlling entity. The board reached a consensus that it would be allowed but not required that entities to practice after they were acquired by another controlling entity. The company suggested that all companies were in a position to practice pushdown as soon as they were acquired by a controlling mentor. The EITF found no situations that would disallow or require application of pushdown accounting in entities that had been newly acquired by a controlling company. The decision of whether pushdown would be applied would be determined independently for each newly acquired firm.

The legal framework failed to provide the threshold to which pushdown would be applied. With the ratification of the proposal by IETF, the companies would be able to easily determine this. The new directives divided acquisitions into three categories. First, companies that had over 95 % of another firm were required to practice pushdown. Those that owned 80-95% of a company were allowed to practice it while those with less than 80% ownership were prohibited.

Recommendations that would enhance the EITF’s conclusions

Inclusion of specific guidelines for the pushdown process is likely to be contributive in this case. It would enable companies that had intentions of acquiring other firms to understand the process hence making it easier. The decision making process would also be more effective due to the availability of sufficient information regarding the process.

While the consensus provides a way forward, it fails to provide guidelines towards the process of pushdown.  This leaves the organizations unsure about the right methods of pushdown for the two companies. The adoption of the FSAB to ratify this law will enable other companies an easier time when dealing with the decision on whether and when to practice pushdown.

BDO USA LLP public comment

The comment by BDO USA LLP argues that the company that acquires another company should be in a position to determine the best course of action for its newly acquired company. This should be dependent on the facts that are available to the two companies and the resources that were available.

The comment by BDO USA is a valid one. If companies are not allowed to make judgment depending on their performance, they may not be able to improve their services or improve performance.

My position with examples

It is necessary for companies to be able to manage themselves through available data rather than through a set of uniform regulations. While a set of uniform regulations make regulation easier, it also makes the companies harder to manage as they strive to a follow the laid down procedures.

Example 1

Suppose company A acquires 80% of company B. Company A should be in a position to choose how the accounting process of company B is to be performed. Company B should also be able to continue operating as it did before the acquisition if the acquiring company permits. The limitation of the law does not permit these situations to occur.

Example 2

Suppose company A requires to practice pushdown with a company it has acquired partly and needs to make further acquisition. Without proper regulations, the company cannot tell the amount of the other company it needs to acquire in order for it to be able to perform pushdown. With the ratified regulations, the company is able to negotiate with its newly acquired company about pushdown.

Proposal for a new agenda item for the EITF to consider

In the process of obtaining funds from other organizations in the form of loans or equities, various organizations provide different financial statements to show their capacity to pay. In determining the statements to provide for analysis, the organizations may argue that their privacy is compromised or that certain statements paint a better picture of their organizations than others. The diversity in the financial statements provided by organization, especially private companies whose financial statements are unavailable to the public is an important issue that needs resolving.


Current developments in the private sector: recent and ongoing projects on the FASB, PCC, and EITF agendas. (2014). The CPA Journal, (7). 38.

Weiss, J. (2013). EITF Issue No. 13-B: Accounting for Investments in Qualified Affordable Housing Projects. GAAP Update Service, (23). 1.

Bielstein, M. (2012). FASB Emerging Issues Task Force.

BDO USA LLP (2013) Comment on Issue 12F of EITF Available at:

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