FASB Oversight Subject of Congressional Interest
As we previously reported, Rep. Ed Perlmutter (D-CO) introduced a bill earlier this year (HR 1349), which would create a Federal Accounting Oversight Board (FAOB). More recently, Rep. Gary Miller (R-CA) proposed an amendment to create a Financial Reporting Forum (FRF). The two legislative initiatives vary in terms of how much oversight power the recommended bodies would have over the FASB. Various constituents have spoken out or filed comment letters recently on the proposed legislation that would impact FASB oversight specifically, and on the general subject of accounting standard-setter independence, as detailed below.
Perlmutter's Proposed FAOB Would Take Over Oversight of FASB
HR 1349, Section 4 would amend the Securities Act of 1933 to remove the SEC's role as the ultimate authority and overseer of accounting standards for public companies (a role which SEC has traditionally delegated to FASB, with oversight by the SEC, as reinforced in the Sarbanes-Oxley Act) and replace the SEC's authority in this area by assigning it to a new body called the Federal Accounting Oversight Board (FAOB). The FAOB as proposed by Perlmutter would focus on, among other things, systemic risk implications of accounting standards, and its five members would include the Chairmen of the Federal Reserve Board, FDIC, SEC and PCAOB, and the Secretary of the Treasury. We understand that Perlmutter intends to offer an amendment on the Financial Stability Improvement Act (the bill relating to systemic risk regulation) to incorporate language from HR 1349.
Miller's Proposed FRF Has Similarities To CIFiR Proposal
Last week, Rep. Gary Miller (R-CA) offered an amendment to the Investor Protection Act (HR 3817), which some view as a competing amendment to Perlmutter's bill. Miller's amendment, adopted by voice vote by the House Financial Services Committee on October 27, would create a Financial Reporting Forum (FRF). There are some similarities - and some significant differences, between Miller's proposed FRF, and the concept of an FRF proposed in last year's final report of the SEC Advisory Committee on Improvements to Financial Reporting (CIFiR). (See Rec. 2.3, CIFiR final report.)
Miller's proposed FRF would differ dramatically from Perlmutter's proposed FAOB, primarily because the FRF (as shown in the current version of Miller's amendment) would NOT have oversight authority over the FASB.
For further analysis of the two proposals, and some reaction to the proposals, read more here.