Congress Meets; Gets Input from Representatives of Financial Statement Users

During the past week, the House Capital Markets Subcommittee heard from FASB Chairman Robert Herz, PCOAB Chairman Bill Gradison, SEC chief accountant Scott Taub, chief executives Colleen Cunningham of Financial Executives International (FEI) and Barry Melancon from the AICPA and Rebecca McEnally, capital markets policy director for the Charter Financial Analyst Center. Herz, Gradison and Taub primarily described the ongoing activities at their organizations and Melancon praised the potential of XBRL. The women were more prescriptive: Cunningham set forth a four-point program for improving financial reporting: less second-guessing by regulators of reasonable accounting interpretations, continued tort reform with emphasis on control of frivolous lawsuits, improved priorization of framework and standards by FASB and a more proactive approach by users in assuring usable and understandable financials. For her part, McEnally called for an emphasis on the shareholder's perspective in preparing financials, a single operating statement to summarize changes in assets and liabilities, fair value reporting on the balance sheet and a halt to quarterly earnings guidance from corporate executives.

Since the goal of financial accounting is to reflect the needs of financial statement users, it seems reasonable that the proposals of Cunningham and McEnally at least get good faith consideration. There may be good reasons not to accept certain recommendations from either Cunningham or McEnally, but they should not be dismissed out of hand.