The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
The Financial Accounting Foundation is engaging in a review of the Financial Accounting Standards Board, which will include examining FASB's role, FAF President Teresa Polley told BNA Nov. 13.
The review, which has occurred behind the scenes so far, began soon after John J. Brennan, who was chairman of Vanguard Group and each of the Vanguard mutual funds, became chairman of FAF's board of trustees in February 2009, Polley said.
Polley described a general purpose of the review as ``taking
another look at the mission of the organization." That might
include study of the FAF board's composition, she suggested. Also
entailed in that review is an examination of the organization's strengths
and weaknesses, as proposed by Brennan, she said.
Asked if the review might include consideration of structural changes at FASB, Polley responded, ``It's
too early to tell."
Some groups are asking for a re-expanded FASB with more investor members. Los Angeles-based Capital Research and Management, a division of the Capital Group, asked for such a move in a Nov. 10 letter to Brennan.
The FAF in early 2008 decided to reduce FASB to five members from seven as part of a restructuring (see article in 4 APPR 222, 3/7/08).
Over the last several months, FAF has held meetings with a wide range of constituents--preparers
of financial statements, accounting practitioners, academics, and
others--to obtain feedback on the work of the foundation and
the two boards it oversees, FASB and the Governmental Accounting Standards
Board. FASB has been a primary focus of the outreach, Polley suggested.
Currently, she said, the FAF trustees are ``working on digesting
The foundation's board has been discussing the strategic review in closed meetings, as it planned to do again at a Nov. 17 in Washington, D.C., Polley said. However, she said she expects the FAF trustees will hold a public meeting on the strategic review in coming months. That meeting may take place early next year, she said.
In a letter obtained by BNA, Capital Research said that while it welcomes efforts to involve investors in FASB processes, ``we
believe that additional steps would increase the impact of investor
input, and in turn, the effectiveness of the FASB."
Capital Research suggested FAF:
* add three
or four investors members to FASB and increase the board size to seven
or nine members;
* require the
board agenda be set by a majority vote of the board, rather than by
* require that at
least one-third of FAF trustees be investor users of financial statements;
* require that at least one-third
of the members of FASB's Emerging Issues Task Force be investor users
of financial statements;
oversee FASB's ``outreach'' to its constituents and conduct
its own outreach where necessary to ensure the quality and effectiveness
of accounting standards; and
FASB to review the performance of each new standard it issues to see
if any changes are needed and issue reports to investors on its findings.
``In hindsight, if investors had had a stronger voice in the
standard setting, it could have resulted in more timely and substantially
better outcomes over the years" in several accounting and economic
areas, the letter said.
Areas of ongoing concern include uncertainty and lack of comparability about when reporting entities adopt fair value measurement of some items, lack of transparency in how companies account for derivatives, an increased use of other comprehensive income rather than recognition of items in income, and the use of off-balance-sheet investment vehicles whose use is only now becoming curtailed, the company said.
``These [are] examples of valid and useful investor recommendations that were made through the comment process, but were not adopted or were adopted much more slowly than optimal,"
which justifies ``giving investors greater voice," Capital
By Steve Burkholder and Steven Marcy
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)