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

Posted: 2 Jul 2013

See all articles by Robert H. Colson

Robert H. Colson

Grant Thornton LLP

George J. Benston

Emory University - Department of Accounting

Douglas R. Carmichael

City University of New York - Stan Ross Department of Accountancy

Theodore E. Christensen

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

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: June 1, 2010

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) released for public comment on December 18, 2007 with a response period ending on February 10, 2008, ‘"Proposed Changes to Oversight, Structure, and Operations of the FAF, FASB, and GASB" (the proposal). This commentary concerns four important public policy issues in the proposal with 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.

On February 26, 2008, the FAF accepted all four proposals that we commented on. Despite their approval by the FAF, we maintain that each of these proposals not only does not improve, but potentially weakens the standard setting model. We encourage the FAF to renew its commitment to a member selection model designed to create an independent standard setting board. The four proposals put forth by the FAF can only increase the political nature of the FASB, further concentrate decision making power, and create higher barriers to achieve general acceptance of accounting standards. We maintain that the FAF should 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 expect 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 renew its commitment to openness and engagement with the accounting community instead of becoming more elitist and further concentrating power in the hands of a powerful chairman and a smaller standard setting board.

Suggested Citation

Colson, Robert H. and Benston, George J. and Carmichael, Douglas R. and Christensen, Theodore E. 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, 'Proposed Changes to Oversight, Structure, and Operations of the FAF, FASB and GASB' (June 1, 2010). Journal of Accounting and Public Policy, Vol. 28, No. 1, 2009; University of Alberta School of Business Research Paper No. 2013-1024. Available at SSRN: https://ssrn.com/abstract=2278549

Robert H. Colson (Contact Author)

Grant Thornton LLP ( email )

Chicago, IL
United States

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)

Douglas R. Carmichael

City University of New York - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States

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

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

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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