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Congressional Spotlight on FASB.

FASB APPARENTLY QUIETED CRITICS in Congress and the business community with its two new Statements issued in July. But the key word is "quieted," not "silenced." Rep. Billy Tauzin (R.-La.), chairman of the House Energy and Commerce Committee, said he is cautiously optimistic about FASB's Statements No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible Assets." They were issued after years of hearings and data crunching by the FASB and second-guessing and complaints from the high-tech community. Congress also slapped FASB's wrists a few times on the way to final 141 and 142. Tauzin added, "I have some remaining concerns about the application of the new Standards. Are the triggering incidents accurate and precise, or are there gray areas? Are the impairment tests too burdensome? What are the costs associated with the new system? And, in particular, how will small to mid-sized companies handle the costs and administrative requirements associated with the new approach?" Sounds like the pow erful Committee chairman is reserving his right to start throwing brickbats at FASB again.

Statement 141 will significantly improve the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under a single method--the purchase method. Use of the pooling-of-interests method is no longer permitted. The purchase method provides investors with the information necessary to determine the true cost of one company buying another and, as a result, provides a basis for consumers to track future returns on the investment.

Statement 142 will improve the purchase method in a number of ways. Most significantly, it requires that goodwill no longer be amortized to earnings but will instead be tested for impairment. That improvement will provide greater transparency of the economic value of goodwill and the amount and timing of its impact on companies' earnings.
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Title Annotation:Financial Accounting Standards Board
Author:Barlas, Stephen
Publication:Strategic Finance
Article Type:Brief Article
Geographic Code:1USA
Date:Oct 1, 2001
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