FAF Issues Statement Opposing Legislative Proposals to Curb FASB Independence
Source: Financial Accounting Foundation
The Financial Accounting Standards Board (FASB), after extensive analysis and with careful public due process, issued a proposal on March 31, 2004 regarding accounting for employee stock options and other equity-based compensation. As Trustees of the Financial Accounting Foundation (FAF) we do not take positions on the FASB's standards-setting proposals; we leave the complex task of accounting standards setting to the experts who comprise the FASB. However, we care deeply about the integrity and independence of the standards-setting process, which we believe is threatened by current legislative proposals.
We, therefore, strongly oppose any current or proposed legislation that would undermine the independence of the FASB by preempting, overriding, or delaying the FASB's ongoing effort to improve accounting for equity-based compensation. We believe that once Congress starts setting accounting standards through its political process, the integrity of U.S. accounting standard setting and the credibility of U.S. financial reporting will be dangerously compromised.
If Congress sends the message that special interests are able, through legislation, to overturn expert accounting judgment arrived at through open and thorough due process, necessary and timely improvements in financial reporting will likely become impossible. We also strongly oppose such legislation because it will severely impede the important ongoing efforts by the FAF Trustees and the FASB to achieve international convergence of high quality accounting standards that will enable global capital markets to better serve the needs of U.S. companies and investors.
The fundamental importance of the independent private-sector accounting standard setting to our capital markets has long been recognized and was recently reviewed and reaffirmed by Congress in the Sarbanes-Oxley Act of 2002 and by the U.S. Securities and Exchange Commission (SEC) in its April 2003 Policy Statement. Since its creation in 1972, the FAF has acted to preserve the independence of private-sector accounting standard setting so that the FASB is able to develop standards in a thorough, objective, and open way. We believe these efforts have contributed to the success of the FASB in developing high quality financial accounting and reporting standards that strengthen our capital markets and our economy by enabling efficient allocation of resources based on sound, credible and unbiased financial information. We, the FAF Trustees, as identified on the attached roster, therefore, strongly urge Congress to reject proposals that would thwart and supplant the FASB's process for establishing accounting standards for employee stock options or any other topic.
About the Financial Accounting Foundation
The Financial Accounting Foundation is responsible for overseeing, funding and selecting the members of the FASB and the GASB. For more information on the organizations it oversees, visit the Foundation's websites at www.fasb.org and www.gasb.org.