This video discusses the Emerging Issues Task Force (EITF). The EITF was created by the Financial Accounting Standards Board (FASB) in 1984. The EITF identifies issues of divergent practice in accounting and attempts to find a consensus as to what the accounting treatment should be under the existing Accounting Standards Codification. In so doing, the EITF deals with problem issues so that they don’t have to be tackled by the FASB. The EITF tends to focus more on short-term issues, while the FASB handles long-term projects.
EITF stands for “Emerging Issues Task Force.” The EITF was created by the Financial Accounting Standards Board (FASB) in 1984 to address issues of divergent practice in accounting. On occasion, companies will account for the same type of transaction in different ways. The role of the EITF is to identify these situations and come up with a consensus as to how the transaction should be accounted for within the existing GAAP. This allows the FASB to save time by not having to create a new accounting standard. Thus, the FASB can focus its time on long-term projects while the EITF handles short-term issues.
One final note: when I say the EITF addresses “issues of divergent practice” in accounting, I’m not referring to situations where one company chooses straight-line depreciation and another company chooses an accelerated depreciation method, or where one company uses FIFO and another company uses the average-cost method. These differences are allowed because they are all acceptable accounting methods under GAAP. Instead, what I’m referring to is a situation where two companies accounting for a similar transaction in different ways, and it isn’t entirely clear the correct accounting treatment is under GAAP. In those cases, the EITF gets involved and determines the appropriate application of GAAP. This makes the FASB’s job easier because they don’t need to go back to the drawing board and issue an entirely new accounting standard.
If you’re confused, just think of the EITF as Santa’s Little Helper for the FASB.