FEI Committee Splits Verdict on FASB Exposure Drafts

Norwalk, Conn. (May 5, 2004) – Responding to four recent exposure drafts from the Financial Accounting Standards Board, the Committee on Corporate Reporting of Financial Executives International split its opinions – supporting two proposals, questioning a third, and disagreeing with a fourth.

In a letter to FASB, the committee said that it supported the board’s treatment of short-term convergence with international accounting standards, which the EDs were meant to address, but that it could not support a particular exposure draft on “Accounting Changes and Error Corrections.”

The proposal would require that changes in accounting principle be treated by “retrospective application.” The committee wrote, “Under such constant changes to prior-period numbers, even multiple changes within the same year, the perceived reliability and credibility of financial statements would suffer.” It was also concerned that, with in an increase in financial statement changes, investors might confuse mere accounting changes with corrections of errors.

For the ED on “Inventory Costs,” the committee felt that further research was needed, as it believed that the proposal, and particularly the application of its concept of “normal capacity,” would precipitate a larger and more significant change in practice than FASB anticipated.

The two EDs that the committee supported were on “Earnings per Share” and “Exchanges of Productive Assets.”

-- WebCPA staff

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