Magazine article The CPA Journal

Financial Accounting Foundation Says, "No" to Levitt, Almost

Magazine article The CPA Journal

Financial Accounting Foundation Says, "No" to Levitt, Almost

Article excerpt

It all began somewhat innocently. The Financial Accounting Foundation, the body that is responsible for funding the operations and choosing the members of both the Financial Accounting Standards Board (FASB) and the Government Accounting Standards Board (GASB), was seeking recommendations to improve the standard setting process. Quite naturally, the Financial Executives Institute (FED, a major representative of the financial statement preparer community, responded with recommendations directed toward improving the work of FASB. The FEI called for more involvement by FASB's constituents, greater use of task forces, a third-party group to set FASB's agenda, and a smaller number of FASB members. In the meantime, certain very visible and outspoken members of the FEI were expressing their concems about the FASB's search for "theoretical accounting purity" instead of the practical effects of what they are trying to do. These comments and recommendations, coupled with the FASB's well-publicized retrenchment on accounting for stock-based compensation because of heat from corporate executives, seem to have led SEC chairman Arthur Levitt to examine the basic organization of FASB and its safeguards for pressures from special interest groups. In April of this year, Mr. Levitt, seeking to ensure the independence of standards setting, expressed his view in a letter to the FAF and in public statements that the trustees of the Financial Accounting Foundation should be more representative of the public interest and that nominations to the position of trustee would be subject to some sort of SEC approval.

The reaction to Mr. Levitt's letter and remarks were not well received by the financial reporting community, who regarded Mr. Levitt's views as an attack on the whole private-sector standard setting process. The FEI immediately issued a press release strongly supporting the existing make up of the FAF. FEI president Norman P. Roy said, "We believe that oversight by a balanced Financial Accounting Foundation Board of Trustees most effectively prevents domination of the process by any special interest and ensures that all constituencies are represented."

The Government Finance Officers Association's (GFOA) executive board voted to oppose the move of chairman Levitt to restructure the makeup of FAF's trustees. Presently the GFOA and the National Association of State Auditors, Comptrollers, and Treasurers nominate candidates for three of the 16-member FAF board of trustees. …

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