FASB Endorses Radical Change in Funding
In a significant change for the accounting profession, the Financial Accounting Standards Board released on March 19, 2002 a statement by its chairman, Edmund Jenkins, saying the FASB will support legislation that would replace its private funding with a fee collection system run by the U.S. government. The announcement came on the same day Public Oversight Board (POB) Chairman Charles Bowsher urged Congress to create an Independent Institute of Accounting to oversee FASB along with other standard-setters.
Only days earlier, the Financial Accounting Foundation (FAF), FASB's oversight body, released a statement saying that broad-based funding support from constituents is vital in order to avoid undue influence from any single source. Chairman Jenkins clarified that, "We are confident that the FASB's current funding structure has not impaired our independence." However, he voiced support for the provisions of proposed legislation that would create a fee-based source of funding for the FASB, saying, "We appreciate the sponsors' support of, and commitment to, private-sector accounting standard setting."
Specifically, FASB is supporting the fee provisions in proposed legislation known as the Investor Confidence in Public Accounting Act of 2002 introduced in the Senate and the Truth and Accountability in Accounting Act of 2002 introduced in the House on March 14, 2002. In addition to changing FASB's funding, the House bill would require that FASB submit a written response once a year to a report of "unresolved accounting standards issues" to be prepared by the Securities and Exchange Commission (SEC).
Chairman Jenkins cautioned Congress that FASB would not accept any government-collected fees as a replacement for the current private-sector contributions to FAF, the non-profit body that has historically funded the FASB, unless such fee-based funding was "free of substantive conditions, adequate in amount, and not subject to the type of Congressional or executive branch review that invites interference with the technical decisions and independence of the FASB."