Response to FAF Exposure Draft on 'Proposed Changes to Oversight, Structure, and Operations of the FAF, FASB, and GASB'

15 Pages Posted: 8 Feb 2008 Last revised: 12 Jun 2013

See all articles by George J. Benston

George J. Benston

Emory University - Department of Accounting

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting; University of Georgia

Robert H. Colson

Grant Thornton LLP

Karim Jamal

University of Alberta - Department of Accounting, Operations & Information Systems

Stephen R. Moehrle

University of Missouri at Saint Louis - Accounting Area

Shivaram Rajgopal

Columbia Business School

Thomas L. Stober

University of Notre Dame - Department of Accountancy

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Ross L. Watts

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: February 4, 2008

Abstract

The Financial Accounting Standards Committee of the American Accounting Association (the Committee) is charged with responding to requests for comments from standard-setters on issues related to financial reporting. The Financial Accounting Foundation (FAF) recently released for public comment, Proposed Changes to Oversight, Structure, and Operations of the FAF, FASB, and GASB (the proposal). Our commentary concerns four issues in the proposal which have the most relevance for accounting standard setting: 1. Reduce the size of the FASB from seven members to five; 2. Retain the FASB simple majority voting requirement; 3. Realign the FASB composition; and 4. Provide the FASB Chair with decision-making authority to set the FASB technical agenda.

We disagree with all four of these proposals. The current FASB is set up consistent with a political appointment model rather than a model designed to create an independent standard setting board. The four proposals put forth by the FAF increase the political nature of the FASB, further concentrate decision making power, and make it difficult to get general acceptance of accounting standards. We propose that the FAF move in the opposite direction. In particular, we recommend that the FAF not reduce the FASB size, and adopt a supermajority requirement not a simple voting requirement. If the majority cannot convince other members of the FASB about their views, how can we attain general acceptance of accounting standards in society? We also want a FASB that is open to more diverse views and more democratic. We urge the FAF to increase its engagement with the accounting community instead of becoming more elitist and further concentrating power in the hands of a powerful chairman and a small standard setting board.

Keywords: FAF, FASB

JEL Classification: M40, M41, M44, G38

Suggested Citation

Benston, George J. and Christensen, Theodore E. and Colson, Robert H. and Jamal, Karim and Moehrle, Stephen R. and Rajgopal, Shivaram and Stober, Thomas L. and Sunder, Shyam and Watts, Ross L., Response to FAF Exposure Draft on 'Proposed Changes to Oversight, Structure, and Operations of the FAF, FASB, and GASB' (February 4, 2008). University of Alberta School of Business Research Paper No. 2013-1010. Available at SSRN: https://ssrn.com/abstract=1090581 or http://dx.doi.org/10.2139/ssrn.1090581

George J. Benston

Emory University - Department of Accounting ( email )

Goizueta Business School
1300 Clifton Road
Atlanta, GA 30322
United States
404-727-7831 (Phone)
404-727-5238 (Fax)

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

University of Georgia ( email )

Athens, GA
United States

Robert H. Colson

Grant Thornton LLP ( email )

Chicago, IL
United States

Karim Jamal

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-5829 (Phone)
780-492-3325 (Fax)

Stephen R. Moehrle (Contact Author)

University of Missouri at Saint Louis - Accounting Area ( email )

8001 Natural Bridge Road
St. Louis, MO 63121
United States
314-516-6142 (Phone)
314-516-6420 (Fax)

Shivaram Rajgopal

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Thomas L. Stober

University of Notre Dame - Department of Accountancy ( email )

Notre Dame, IN 46556-0399
United States
219-631-7614 (Phone)

Shyam Sunder

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Ross L. Watts

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-325
Cambridge, MA 02142
United States

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