Stock compensation: AICPA opposes standard-setting legislation.
Dodd chairs the Senate Banking, Housing and Urban Affairs Subcommittee on Securities, which held hearings on competing bills that, if signed into law, would block implementation of the Financial Accounting Standards Board's controversial Accounting for Stock-Based Compensation exposure draft. The ED requires companies to recognize an expense for all stock-based compensation awards an account of FASB's testimony before Dodd's subcommittee appears on page 20).
Chenok said his purpose was not to express an opinion on the accounting issue, since "the AICPA has not yet developed its position" on it, but, rather, to convey the Institute's views on the standard-setting process--particular its concern over statutorily mandated accounting standards.
"The AICPA is strongly opposed to any legislation that would seriously harm the ability of the independent FASB to continue in its role as the private-sector body that sets accounting standards for American businesses--standards that are universally recognized as the most comprehensive in the world," Chenok wrote. "We fear," he continued, "that the pending legislation, if enacted, would cause such harm."
Avoiding a "slippery slope." Chenok, pointing to recurring attacks on FASB's independence since it superseded the Institute's Accounting Principles Board in 1973, referred to the conclusions of the Wheat committee (see sidebar) and observed: "True, the pending legislation does not propose the wholesale relocation of standard-setting authority to government. But the fact is that a single significant legislative interference in the objective process followed by the FASB is a major step down a slippery slope to that very result."
He added that FASB's procedures provide for the collection a analysis of data and views fro sources and that the "FASB as issued only an exposure draft. Many other due-process procedures remain to be carried out."
The views ultimately expressed by the AICPA on the specific accounting standards for employee stock options, Chenok concluded, "may or may not be reflected in a final FASB statement. But the AICPA will remain convinced that such a statement will have been adopted only after the most careful and objective consideration that it, like every other FASB statement, should be followed by American business."
The Financial Accounting Standards Board was established in 1973 on the basis of recommendations in the report of a committee headed by former Securities and Exchange Commissioner Francis M. Wheat. Here is an excerpt from that report, Establishing Financial Accounting Standards: Report of the Study on Establishment of Accounting Principles:
"There are distinct disadvantages to transferring the standard-setting function to the public sector. One very real concern is that government agencies may be more susceptible to political pressures than private bodies. This could lead to accounting standards being designed to accomplish the self-serving objectives of private interest groups rather than solely to meet the needs of those who use financial statements in making economic decisions. The political pressures evident in 1971 when Congressional action was taken to regulate the accounting treatment of the investment tax credit reinforce this concern" [emphasis added].
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|Publication:||Journal of Accountancy|
|Article Type:||Brief Article|
|Date:||Jan 1, 1994|
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