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a) The “due process” procedure includes consultations from financial analysts, accountants, stock exchanges, FASB members and other users. Thereafter, the Board issues an Exposure Draft based upon the meetings and consultations held earlier. The Board calls for public recommendations and discussions on the Draft, after analysis of which the final standard is issued.
b) In an accounting standard-setting, “economic consequences” signify the adverse impact on the economy and on businesses of imposing an accounting standard without proper deliberation with concerned users. Accounting standards define how a business works and functions in the industry. If all users of such standards are not consulted beforehand, implementation and presentation of accounting standards may create chaos in the economy.
c) The economic consequences that have been expressed in the letter are the adverse impact on the capital markets including the derivatives market; the weakened ability of companies to manage risk due to increased risk exposure; adverse control implications due to complexity and cost of implementing new standards and rules when other new initiatives such as the Year 2000 issues and a single European currency are already required to be implemented.
d) The main point of the letter is to address the issue that the FASB must consult and expose the proposal for issuing a final standard on derivatives and hedge accounting for public comment. Through this letter, leaders of major U.S. companies wish to inform the FASB that it should consider and address various economic, financial and risk implications before issuing a final accounting standard.
e) The main motto behind sending a copy of the letter to the U.S. Congress was to bring to their attention that the FASB failed to identify and address several material issues before issuing an accounting standard. The business community also aimed to notify the Congress about the importance of addressing various underlying issues which could have had an adverse impact on the economy and the businesses through this letter.
