Results of 2002 Survey on FASB's Priorities

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The Financial Accounting Standards Board (FASB) got an earful this year, when it conducted its annual survey on priorities. As in prior years, members of the Financial Accounting Standards Advisory Council (FASAC) and others were asked their views. But, this year, everyone was asked to start with a clean sheet of paper, rather than the usual list of projects to rubber stamp.

Here are a few ideas for high priority projects that haven't yet made it onto FASB's agenda:

  1. I would recommend that the FASB conduct a formalized, root-cause analysis and diagnosis of the current accounting weaknesses or vulnerabilities that led to, or might have contributed to, the problems at Enron, WorldCom, Dynegy, Reliant, and other major corporations. (Robert T. Blakely, formerly of Lyondell Chemical Company)
  2. Suggested project: Back to the basics of measurement. To what question is GAAP income, as envisioned by FASB, the answer? (Joel S. Demski, Frederick E. Fisher Eminent Scholar in Accounting, University of Florida)
  3. Suggested project: Study of restatements. A study project on the causes of the large increase in earnings restatements from 1997 to 2002, along with recommendations for what should be fixed. (Marc E. Lackritz, President, Securities Industry Association)
  4. Suggested project: Public trust and confidence. The FASB should undertake a project to ask broadly what other things the FASB can do specifically to help restore investor trust and confidence in the accounting numbers being released by issuers. This would be a broader inquiry that looked at substance, process, enforcement, education, and communication, for example. (Mark E. Lackritz, President, Securities Industry Association)
  5. Suggested project: Simplification to address disclosure overload. It is disturbing to read in the press that financial disclosure has become so overblown that items are considered hidden when they appear in the footnotes. The time has come to take a fresh look. . . (Philip B. Livingston, President and chief executive officer, Financial Executives International)
  6. Suggested project: Disclosure of intangible assets. I'm probably in the minority here, but capital markets need more information about the source(s) of a company's competitive advantage. . . The traditional accounting model doesn't tell us enough about what those are. (John F. Richards, Managing partner, Crabtree Ventures, LLC)
  7. Suggested project: Estimation sensitivity and risk disclosures. The quality and comprehensiveness of firms' estimation sensitivity and risk disclosures are almost uniformly abysmal. (Stephen G. Ryan, Associate professor of accounting and Peat Marwick Faculty Fellow, New York University)
  8. Provide a framework for identifying the boundaries of the reporting entity. This would be key to addressing issues that will continue to arise because of the growth in alliance partnerships, outsourcing arrangements and off-balance-sheet transactions. (Mary S. Stone, Hugh Culverhouse Endowed Chair of Accounting, the University of Alabama)
  9. Suggested project: Disclosure adequacy of accruals and estimates. The fear of earnings management runs rampant these days, and by its very nature, accrual accounting lends itself to manipulation. It would be less likely to occur, however, if there was required disclosure of the activity in the accounts that are the easiest to manipulate. (Jack T. Ciesielski, Jr., President, R.G. Associates, Inc.)
  10. Suggested project: Recognition by the FASB of the differences between publicly and privately held entities. Exclude privately held entities from most of your pronouncements. (Sherman L. Rosenfield, CPA)
  11. Suggested projects: 1. Develop a dictionary of terms within GAAP and proscribe alternative definitions within any presentation claiming conformance with GAAP. 2. Develop an omnibus opinion that removes the proliferation within the standards of legal form guidance rather than a focus on economic substance. (Wanda A. Wallace, The John N. Dalton Professor of business administration, the College of William & Mary)

Download the full report, "Summary of Responses to the Annual FASAC Survey." Teresa S. Polley, FASAC Executive Director, explained, "The FASB will discuss the results of the survey with FASAC members at the upcoming FASAC meeting on December 5. The discussion is expected to focus on how the survey results will impact the Board's priorities in the coming year."

-Rosemary Schlank

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