New York (March 23, 2004) -- In response to the introduction of a number of proposed bills in Congress that recommend legislative action for the accounting for stock options, the Big Four accounting firms called on Congress to preserve the Financial Accounting Standards Board's independence and to avoid legislation that would restrict FASB’s ability to establish accounting standards.
In a joint letter to members of Congress last week, leaders of the four firms also reaffirmed their support for the mandatory expensing of all employee stock options "whose fair value would be determined in a manner suitable for the reporting company."
"[FASB’s] independence provides an essential barrier of protection against undue pressure or influence from a particular segment of the capital markets or other self-interested parties," the March 17 letter stated. It continued, "Interfering with FASB’s processes and judgments could unintentionally relegate the interests of investors to a subordinate role, and result in accounting that fails to convey economic substance."
"We believe it is important for FASB to address concerns that exist regarding the reliability of the valuation models used to determine the fair values of stock options. FASB's final standard should be consistent with the broad objective of providing investors comparable fair value information among different companies for similar transactions," said the letter. It was signed by Dennis M. Nally, PricewaterhouseCoopers chairman and senior partner; KPMG chairman and chief executive Eugene O'Kelly; James H. Quigley, CEO of Deloitte & Touche; and James S. Turley, global chairman and CEO of Ernst & Young.
The letter concluded, "As we have done in the past on similar matters, we urge Congress to continue to recognize the critical contribution of an independent FASB to the effective operation of the capital markets."
-- WebCPA staff
