Proposed U.S. Law Changed, FASB Independence Maintained

A U. S. Congressional committee last week removed language from an bill that would have given a new regulator power to oversee FASB standard-setting activities for U.S. GAAP.

The legislation, from the House Financial Services Committee would have transferred the SEC's accounting standards oversight authority to a proposed new regulator with a mandate to take an active role in accounting standards that it deemed could pose systemic risks.

The SEC has statutory authority to establish financial accounting and reporting standards for publicly held companies under U.S. law. Historically, however, the SEC has supported FASB’s independence and relied on FASB to set accounting standards.

The amendment passed Thursday acknowledged that the proposed systemic risk regulator that would be created under the bill would have the ability to comment, like other interested parties, on FASB standards-setting issues.

The AICPA, the Center for Audit Quality (CAQ) and many state CPA societies opposed earlier versions of the legislation and the CAQ held a joint press conference to highlight opposition to a legislative proposal that they said could put bank regulators in control of U.S. accounting standards and circumvent the key role of due process in standard setting.

Earlier in November, AICPA President and CEO Barry Melancon sent a letter to the leadership of the House Financial Services Committee to state that the Institute is “strongly opposed” to any legislation that would “undermine the independent accounting standard process as currently carried out by FASB.” Melancon noted that the SEC and FASB “have made great strides” to improve financial reporting, and that if Congress were to follow through, “it will be viewed by many as disregard for the interests of investors.”

The CAQ, the U.S. Chamber of Commerce and the Council of Institutional Investors expressed similar opposition to the idea.