Edmund Jenkins, chairman of the Financial Accounting Standards Board (FASB), has warned Congress not to take its post-Enron zeal for market regulation too far. He was responding to proposed legislation that would give the US Securities and Exchange Commission (SEC) and Congress greater power to oversee FASB activitivies.Earlier this month, Democratic senators Christopher Dodd, of Connecticut, and Jon Corzine, of New Jersey, a former co-chairman of Goldman Sachs, introduced 'The Investor Confidence in Public Accouting Act of 2002', which, among other things, would supplement FASB's funding with SEC-imposed charges on securities issues. It would also require FASB to submit an annual report to Congress.
A separate bill introduced in the US House of Representatives would require the SEC to annually review "unresolved accounting standards issues" at FASB and report its findings to Congress. FASB would then need to issue a formal response to the SEC report.
Jenkins praised the two bills' sponsors for their committment to FASB's independence, but added, "We caution Congress that any legislation mandating particular actions or procedures by FASB can compromise the very independence that the legislation seeks to enhance."
Jenkins added that the replacement of current private-sector contributions to FASB with government-collected fees must be free of substantive conditions and political interference. "The greater the involvement of Congress and the exectuive branch in the activities of the FASB, the greater the potential for harmful pressures on the standard-setting process," said Jenkins.
FASB is the self-regulatory body that determines generally accepted accounting practices for US companies.
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