"We believe that once Congress starts setting accounting standards through its political process, the integrity of U.S. accounting standard setting and the credibility of U.S. financial reporting will be dangerously compromised," the FAF said in a letter addressed to Rep. Barney Frank, the Democratic chairman of the House Financial Services Committee.
The FAF wants to make sure that calls to suspend fair value or mark-to-market accounting does not wind up on the House floor. A proposal contained in the revised financial rescue bill reaffirms the Securities and Exchange Commission's existing authority to suspend mark-to-market accounting. But the issue is becoming increasing contentious as the banking industry and some lawmakers have intensified pressure to suspend the rules altogether. Fair value pegs the value of assets to their current market price, rather than the price paid for them or the price they are expected to fetch in the future. Banks have complained the strict application of mark-to-market rules has forced them to write down billions of dollars worth of mortgage-related securities, intensifying the squeeze in the credit markets
More than 60 lawmakers reportedly wrote to the SEC Wednesday, urging the regulator to immediately suspend the mark-to-market rule.
"If Congress sends the message that special interests are able, through the legislation, to overturn expert accounting judgment arrived at through an open and thorough due process, necessary and timely improvements to financial reporting will likely become impossible and the best interests of participants in the capital markets will not be served," the letter states.
Investor groups and accounting professionals also oppose such a change. "Suspending fair value accounting during these challenging economic times would deprive investors of critical financial information when it is needed most," said the Council of Institutional Investors, Center for Audit Quality and CFA Institute in a joint statement. "It would not help solve our economic difficulties." - Donna Block
The Financial Accounting Foundation, the independent private sector organization responsible for overseeing the Financial Accounting Standards Board, wants Congress to stay out of making accounting rules through the political process.
