Could accounting standards be the next political football?
Every profession has its vulnerabilities, and its bad actors. Recent economic failures have got politicians talking in ways that are making a lot of accountants queasy. That’s why members who attended the annual meeting of the American Accounting Association had some weighty questions for their guest, House Financial Services Committee chairman, Barney Frank (D-Mass).
“We do not need to be politicizing accounting standards. That will be a disaster. Exactly as Barney mentioned, we have influences, and if accounting standards are going to be politicized, smaller community banks would have a different set of accounting rules than would large banks. All sorts of things can get involved when you politicize accounting, so the last thing in the world I want to see is us making accounting rules, because we will make them for the wrong reasons."
- · A proposal that would alter the impact of mark-to-market accounting. Mark-to-market, said Frank, has forced U.S. banks to recognize billions in losses on mortgage-related investments.
- · A proposal to stop the automatic consequences that can happen when the value of bank investments are slashed due to mark-to-market accounting. Instead, Frank would like to see banks have time to rebuild their capital.
- · A proposal to allow banks to treat investments held for sale differently than investments held on the books for the long-term. This, he said, would avoid punishing companies for market fluctuations of investments that are not currently for sale.
While he had their attention, Frank also took the opportunity of the meeting with accountants to touch briefly on other issues relevant to the profession.
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