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Accounting legislation introduced in US Congress

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11 Mar 2009

Proposed legislation – titled the 'Federal Accounting Oversight Board Act of 2009' and numbered as HR 1349 – has been introduced in the United States House of Representatives. The bill would establish a Federal Accounting Oversight Board (FAOB) that would be required to approve and oversee accounting principles and standards for the purposes of the financial reporting requirements of Federal financial regulatory agencies. The bill has been referred to the House Committee on Financial Services, which must decide whether to send it to the floor of the House for general debate and could amend it before doing so.

Under the proposal, the FAOB would consist of five members:

  • The Chairman of the Board of Governors of the Federal Reserve System (who would serve as FAOB chairman)
  • The Secretary of the Treasury
  • The Chairman of the Securities and Exchange Commission
  • The Chairman of the Federal Deposit Insurance Corporation
  • The Chairman of the Public Company Accounting Oversight Board

Click to download HR 1349 as introduced (PDF 178k). Here is the link to the webpage to follow progress of the bill. Below is an excerpt from the bill.

In approving and overseeing such accounting principles and standards, the FAOB shall consider –

  1. the extent to which accounting principles and standards create systemic risk exposure for
    1. the United States public;
    2. the United States financial markets; and
    3. global financial markets;
  2. the extent to which various accounting principles and standards resolve questions concerning liquid and illiquid instruments;
  3. whether certain accounting principles and standards should apply to distressed markets differently than well-functioning markets;
  4. the balance between investors' need to know a value of a company or financial institution's balance sheet at any given time versus financial regulators' responsibility to examine a company or financial institution's capital and value on both a liquidation and going concern basis;
  5. the accuracy and transparency of financial statements;
  6. the ability of investors and regulators to accurately judge the current and long term financial condition of companies and financial institutions from their financial statements;
  7. the need for accounting principles and standards to take into account the need for financial institutions to maintain adequate reserves to cover expected losses from assets held by such institution;
  8. the extent to which accounting principles and standards can improve the usefulness of financial reporting by focusing on the characteristics of relevance and reliability and on the qualities of comparability and consistency;
  9. the extent to which such principles and standards can be kept current to reflect changes in methods of doing business and changes in the economic environment; and
  10. any other factors that the FAOB considers appropriate.

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