Contesting and Defending the Boundaries of Accounting Standard-setting: The Case of the FASB’s Current Expected Credit Loss Model

The Financial Accounting Standards Board (FASB) introduced the current expected credit loss model (CECL) for the impairment of financial instruments in 2016. A few years after the release of the standard, the FASB found itself exposed to severe criticism by politicians reflected in several bills introduced in Congress to stop the implementation of CECL. Our paper focuses on how the FASB was able to maintain CECL in spite of the political criticism. For this purpose, we draw on boundary work, and more specifically aspects of issue framing and framing of justifications, to analyze Congressional hearings on CECL. We show that multiple issue frames within and beyond the traditional boundaries of FASB were used by politicians to criticize CECL. While the FASB was able to mobilize due process documentation and delays of the effective date to address criticism within its boundaries, it could rely on prudential regulators’ policy actions to defend against accusations of procyclicality and negative social impact of CECL. Our paper contributes to a better understanding of how private standard setters deal with political interventions.