An Investigation of the FASB'S Application of Its Decision Usefulness Criteria.

SYNOPSIS: This study provides an enhanced understanding of the FASB's application of its decision usefulness criteria that are identified and explained in the Statement of Financial Accounting Concepts No. 2 (May 1980). Initially, we respond to whether or not the FASB favors one quality over the other in all of its standards issued through December 1993. Later, we examine whether or not the type of accounting standard influences the Board's citations that make reference to the decision usefulness criteria. To gain a better understanding, a content analysis is performed on all of the Statements of Financial Accounting Standards (SFASs) issued during the FASB's first two decades. This analysis establishes both a primary terminology database and an extended terminology database. The two databases permit us to perform both exclusive and inclusive examinations. The overall results indicate that the FASB does not exhibit a bias when citing the two qualitative characteristics in the SFASs (1-117). Yet, the Board clearly exhibits a bias in its use (citation) of "relevance" when the SFASs are separated into two groups (recognition and disclosure) and an across group analysis is performed. The FASB cites "relevance" in disclosure standards more often than in standards that focus on recognition. Similar test results on the observed citations of "reliability" are not as conclusive.