The grandstand for principles-based accounting was officially sold out Tuesday night. By a vote of 412-0, the U.S. House of Representatives approved a bill that would require the chairs of the Securities and Exchange Commission, the Public Company Accounting Oversight Board, and the Financial Accounting Standards Board to report once a year to the House Financial Services Committee about “their efforts to promote transparency in financial reporting.”
Clambering to get their support for principles-based reporting on record, the representatives pushed through the Promoting Transparency in Financial Reporting Act of 2007 in a blur, suspending House rules to get the 1-page measure considered and waiving it through without objections.
For some reason, the representatives felt a special urgency to promote such truisms as: clear reporting is needed to maintain investor confidence in the capital markets; the “increasing detail and volume of accounting, auditing, and reporting guidance pose a major challenge”; and the “complexity of accounting and auditing standards in the United States has added to the costs and effort involved in financial reporting.”
In a show of unanimity that even exceeded the House’s 423-3 passage of the Sarbanes-Oxley Act, the representatives went on record in the new bill as supporters of principles-based accounting, interactive data, and plain English.
Apple pie, however, was not on the agenda. Indeed, if the legislation is enacted, the Financial Services Committee isn’t likely to encounter much resistance to its edict from Christopher Cox, Robert Herz, and Mark Olson, the chairs of the SEC, FASB and the PCAOB, respectively. All have been pounding the podiums of Capitol Hill of late in their support for principles-based accounting and auditing.
Further, the SEC and the PCAOB are likely to enact measures packed with references to the need for auditors and corporate executives to move from niggling, overly detailed reporting to a much more principles-based attack. The most recent news release on FASB’s website also reported—typically—that one of the objectives of a new fair-value reporting standard is to “reduce complexity in accounting for financial instruments… .”
Media representatives of the three agencies said that the chairs would be happy to talk to Congress about transparency on whatever basis legislators choose. “We are committed to promoting transparency and greater use of interactive data,” said SEC spokesperson John Nester. At FASB, “it’s no secret that Bob Herz has been a very open leader in the war on complexity…[and] would be willing to talk to anyone about, it,” said Gerard Carney, the board’s director of public relations. And PCAOB’s Olson will testify before Congress “any time it wants,” said spokesperson Colleen Brennan.