An Evaluation and Critique of the Changes Provided by Statement of Financial Accounting Concepts No. 6.

Abstract This article focuses on the Statement of Financial Accounting Concepts (SFAC) Number 6 Elements of Financial Statements issued by the U.S. Financial Accounting Standards Board (FASB) in December 1985. SFAC Number 6 expands SFAC Number 3 to include terminology that applies to nonbusiness organizations, to clarify several minor points, to widen the definitions of assets and liabilities and to restrict the definition of income. The dissemination of a new replacement statement by FASB simply to amend and correct previously stated positions is puzzling. The conceptual framework effort was envisioned as a five-step progression from objectives to implementation. The issuance of the revision is therefore alarming, as it seems to suggest that a new concept statement will be issued whenever the FASB needs a revised concept. The Statement of Accounting Concepts should not be presented as a series of updates, but instead should consist of a single orderly discussion of thought. The FASB would present a much more cohesive depiction of accounting concepts if all six existing SFAC were withdrawn, and a single unified Statement of Financial Accounting Concepts, 1987 were issued to reflect the best thought currently available. The existence of a single Statement of Financial Concepts would provide a clear and precise presentation of accounting's conceptual framework. Libraries would contain the various additions so that students and researchers could study the evolution of the most current edition, but a comprehensive statement of the basic postulates and principles would indicate the foundations of current accounting thought. Users then could rely upon a succinct statement from which they could interpret the ways that economic events should be measured and communicated.