The Effect of Imposed Voting Requirements on FASB Decisions

To issue an accounting standard, members of the Financial Accounting Standards Board (FASB) must approve pronouncements with a majority. Since its inception, the FASB has been subjected to two types of voting requirements: a simple majority, which requires the approval of four of seven members, or a supermajority, which requires the approval of five of seven members. This study investigates the effects of different voting requirements on (1) the time taken to generate a pronouncement and (2) the need for subsequent revision of the accounting pronouncement. The results indicate that the supermajority voting requirement hinders the pronouncement generation process. This is evidenced by a decrease in the frequency of pronouncements issued and an increase in the amount of time required to generate an accounting pronouncement. In addition, the supermajority was found to have no effect on subsequent interpretation or supersedure of the pronouncement. As a result, the findings provide limited justification for the existence of a supermajority requirement.