Congress Should 'Butt Out' of FASB Issue

J. Edward Katz, an accounting professor at Penn State University, claims members of Congress don’t understand the accounting issues at hand in the recent controversy over a proposed Financial Accounting Standards Board (FASB) ruling regarding the accounting treatment of merging companies.

FASB is proposing doing away with the pooling of interests method of accounting when companies merge. Katz described the effects of the pooling method as resulting in situations where “investors cannot read the financial statements” of companies whose assets and liabilities have been pooled. Katz believes pooling gives managers an opportunity to create and display fictitious revenues, and to create gains, which can result in “a fraudulent statement of the firm’s earnings.”

Detractors of the proposed FASB ruling claim the ruling would stifle mergers and restrict U.S. economic growth.

California Congressmen Christopher Cox (R) and Calvin Dooley (D) have introduced legislation in an attempt to delay implementation of the proposed FASB standard, claiming it would reduce incentives for business combinations and, as a result, harm the high-tech industry.

Most importantly, Katz claims Congress should “butt out” because the FASB should be allowed to do its job. “If Congress intervenes, it would damage whatever authority and credibility the FASB possesses.”

http://www.postnet.com/postnet/news/wires.nsf

You may like these other stories...

All that was needed on Tuesday was a voice vote for the House of Representatives to pass a bill that would prevent state and local governments from taxing access to the Internet.Now the ball is in the Senate’s court....
The Republican-controlled House of Representatives passed a bill on Friday morning that would permanently extend the bonus depreciation tax break for businesses.The measure, HR 4718, which was crafted by Representative Pat...
The Republican-led House of Representatives is expected to pass a bill this week that would permanently extend the bonus depreciation tax break. But don’t expect President Obama to sign it.The Obama administration said...

Upcoming CPE Webinars

Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.
Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.