ASB has been criticized by various parties almost since its inception more than 25 years ago. However it has operated under an especially intense climate of scrutiny and criticism during the last five years. Such controversial accounting issues as accounting for stock options and derivatives have engendered fierce opposition to the accounting standards proposed by FASB. As a result, the threat of government intervention in the establish ment of accounting principles has increased. For example, Rep. Richard H. Baker (R-LA) has introduced the Financial Accounting Fairness Act of 1998, which calls for judicial review of FASB statements. Furthermore, Sen. Lauch Faircloth (R-NC) has also introduced a bill, The Accurate Accounting Standards Certification Act of 1997, which, in many circumstances, essentially absolves banks from any FASB statement on derivatives.
Given this contentious climate, we sought to solicit the perceptions of individuals who are both knowledgeable of the accounting principles promulgated by FASB and whose organizations are affected by their requirements-the chief financial officers (CFOs) of the 500 largest U.S. companies. This population represents a wide range of industries, from financial services to industrial organizations, and as a result, the views expressed are not limited to a particular business sector.
Our mailing of 500 questionnaires to the CFOs of our target group resulted in 105 usable responses. The possible responses to most of the statements on the questionnaire consisted of a six-point scale ranging from "very strongly agree" to "very strongly disagree." We aggregated the responses depicted in our tables into two categories: "agree" (consisting of "agree," "strongly agree," and "very strongly agree") and "do not agree" (consisting of "uncertain," "strongly disagree" and "very strongly disagree").
First, as the results in Table 1 indicate, it is apparent that CFOs have an acute interest in FASB pronouncements; more than 90% of the respondents stated that they receive the exposure drafts (EDs) of proposed FASB standards and that this has been the practice for the past five years (statements 1 and 2). Statement 3 indicates that the CFOs believe it is important that accounting standards be promulgated by a body in the private sector. When asked why they felt that way, the largest number (33) of those responding stated that FASB members are either more knowledgeable, objective, or open-minded, than other parties such as the SEC. The second most frequent reason cited (23) for their response was that a private sector rule-making body can be independent and avoid political processes, while the third (9) was the advantage of the due process system that FASB employs.
Statement 4 indicated overwhelming agreement that a formal set of accounting standards is necessary for both publicly traded and privately held firms. The results associated with Statement 5 are interesting, for, despite all the complaints in the media regarding FASB standards, 77% of the respondents indicated that their firms in general, as well as other similar firms, support FASB's output. When they do not support an accounting standard, the only reason cited by a majority of CFOs (54.5%) was that there are too many accounting standards already.
It is hard to determine how much weight to give this reasoning, since a high percentage of the CFOs were generally supportive of FASB standards. The result concerning standards overload seems partially contradicted by another: A small (51%) majority think that there is a backlog of current problems that FASB should address. Of 40 items mentioned by the CFOs as needing attention, the areas most frequently listed were business combinations (17), derivatives (7), international issues (6), and accounting for financial instruments.
Organizational Pressure and Influences The statements listed in Table 2 relate to pressures and influences impacting the work of FASB. …