The Financial Accounting Standards Board came under criticism on Capitol Hill again this week as the House Commerce, Trade and Consumer Protection Subcommittee focused in on the accounting turmoil at Freddie Mac – the Congressionally chartered mortgage financing company that expects to restate up to $4.5 billion in earnings due in part to faulty derivatives accounting.
Noting that FASB’s current standard for accounting for derivative instruments and hedging activities is nearly 800 pages long, subcommittee chairman Cliff Stearns, R-Fla., charged that the overly complex rule produces “different results from company to company, undermining an investors ability to make informed decisions based on comparisons of those companies’ financial statements.”
During hearings into those concerns, Stearns vowed to reintroduce legislation similar to the bill he proposed last year to streamline the FASB’s standard setting process.
FASB Member Leslie F. Seidman defended the board’s efforts to improve standard setting, testifying that a number of “monumental steps” have been taken in that direction over the past 18 months.
Stearns, however, appeared unimpressed. Noting that it took FASB 30 years to formulate standards for revenue recognition, he indicated that Congress was losing patience with the pace of the board’s activities.
