Read the article titled “FASB Is Criticized for Inaction on Off-Balance-Sheet Debt Issue,” by Steve Liesman, Jonathan Weil, and Scott Paltrow in the January 18, 2002, Wall Street Journal.

Instructions Answer the following questions.

(a) Why has the FASB not set better rules for when a firm should be allowed to keep debt off its balance sheet?

(b) Who is helped (in the short term and the long term) by a firm’s being able to keep debt off its balance sheet? Who is hurt (short term and long term)?

(c) According to the article, when the FASB proposes new rules that would hurt them, “corporate America and its allies invoke portents of doom as to why we shouldn‘t have honest accounting treatment” of what's being proposed. How does this affect the usefulness of financial reporting for investors and creditors?

(d) One of the groups criticizing the FASB for moving too slowly is the Financial Executives International

(FED), which opposed requiring firms to consolidate the results of all their entities. The FEI also opposed the FASB’s proposal to require firms to expense executive stock options. Based on this, would you consider FEI “part of the solution” or “part of the problem”? Justify your answer.