Concerns Raised About FASB’s Independence
Political, special interest pressures are concerns for Investors' Working Group.
April 2, 2009
A group of investors and former regulators, the Investors' Working Group, on Thursday voiced concerns about the independence of the Financial Accounting Standards Board, an influential Norwalk, Conn. group that shapes accounting policy for US companies.
Specifically, IWG, which has in its ranks former Securities and Exchange Commission chiefs William Donaldson and Arthur Levitt, raised concerns about political and special interest groups pressuring FASB and how it sets accounting standards.
IWG was not singling out any new development this week when it raised its concerns, but it has in recent weeks voiced opposition to how FASB may change rules related to accounting for changes in the value of securities.
The pressures are “unacceptable and very troubling,” the IWG said in a statement. IWG said it is “concerned and dismayed by the lack of normal due process and accelerated timeline for commenting on FASB’s proposals on ‘other than temporary impairment’ issues and determining whether a market is distressed.”
IWG added that “to create high quality accounting standards, it is critical that the process be independent and free from political pressure. This will ensure that such standards are neutral and faithfully represent economic reality.”
Other members of the IWG include David Swensen, chief investment officer of Yale University, Ira Millstein, senior partner at Weil Gotshal, and Bill Miller, chair and chief investment officer of Legg Mason Capital Management.
Much of the group's concern is tied to the issue of how securities are valued, specifically if a drop in a security's value is other than temporary and how this should be recognized by a company.
In a March 30 letter to Robert Herz, chair of FASB, one of IWG's sponsors, the CFA Center for Financial market Integrity, voiced opposition to how changes were being made to accounting procedures. "We reiterate the concerns about due process ... The absence of adequate due process and failure to provide the basis for conclusions when amending a standard that has been applied for 15+ years is contrary to FASB's mission," the CFA Center noted in its letter.
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