Former SEC Officials See Changes Ahead for FASB

If, at some point in the future, U.S. companies adopt international financial reporting standards (IFRS) in place of U.S. generally accepted accounting principles (GAAP) as Donald Nicolaisen, former chief accountant at the Securities and Exchange Commission recommended last week at the SEC roundtable, the future standards setting role of the Financial Accounting Standards Board (FASB) may be substantially changed, according to a comment in

The success of FASB’s and the International Accounting Standards Board’s (IASB) joint convergence project which has led to the SEC’s acceptance of IFRS for non-U.S. registrants by 2009 could also lead to unanticipated consequences for IASB.

Arthur Levitt, Jr., former chairman of the SEC, in a Wall Street Journal opinion argues that FASB and the Government Accounting Standards Board (GASB) today are losing their independence and must be reconfigured. He emphasizes the importance of US GAAP to the strength of U.S. capital markets in the global economy, and the need to have relevant standards.

Nicolaisen wants the SEC to permit U.S. companies to replace U.S. GAAP with international accounting standards, reports, saying that “a single standard” for worldwide accounting benefits both companies and investors. The single standard might well be the IFRS, according to other panelists, including J. Phillip Jones, director of external reporting at DuPont, because they are more principles-based, reports.

An earlier panel recommended that U.S. companies be allowed to choose between the two standards, and John White, director of the SEC’s Division of Corporate Finance, said that SEC Chairman Christopher Cox has hinted that U.S. companies may have this option, reports.

Nicolaisen said that he thought it would be a mistake to allow U.S. companies to choose between the two standards.

As an example of the turn to complexity that FASB has taken recently, Levitt cites FAS 133, Accounting for Derivatives, now an “800-page treatise,” which continues to grow. He sees the influence of lobbying groups and constituency groups weighing on the quality and timing of standards setting at both FASB and GASB.

Although Sarbanes-Oxley created an independent funding mechanism for FASB, both boards still need donations from their constituents, Levitt writes in the Journal. “Congress should also create an independent source of funding for GASB.” He recommends further that “FAF trustees should be appointed by the SEC in an open nomination process.” “The result of these changes should be accounting rules that are less complex and more relevant,” he says. “It’s an approach that we should undertake not only here in the U.S., but among our international standard setters as well.”

You may like these other stories...

As the volume of account reconciliations continues to surge, most corporate accounting and finance departments in the United States and Canada are still using a labor-intensive process to make sure their accounts’...
The average starting salary for students graduating this year with a business major – including accounting – has declined slightly over the last year, according to the latest salary survey from the National...
No matter how much we may want to put them on hold, we all have projects at work we need to start, right? Well, according to a recent survey of human resources (HR) managers by Accountemps, the most productive day of the...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.