An SEC committee today called for a “judicious” approach in expanding the use of fair-value accounting as part of its 25 recommendations to improve the usefulness of financial information to investors and reduce the complexity of the financial reporting system.
Chaired by Robert C. Pozen, chairman of MFS Investment Management, the SEC’s Advisory Committee on Improvements to Financial Reporting urged more disclosure on what part of earnings are derived from historical cost accounting and what part comes from fair value.
“The committee didn’t try to resolve the debate” between historical accounting and fair value, Mr. Pozen said at a webcast briefing today with Christopher Cox, SEC chairman, unveiling a 172-page report containing the recommendations.
The Council of Institutional Investors is “concerned that the recommendations should not tie the hands of FASB and hinder progress to fair-value accounting,” said Amy Borrus, CII deputy executive director, in an interview. In general, “preparers, companies and banks have not been supportive of fair-value accounting,” Ms. Borrus added. CII supports moving to fair-value accounting, she added.
Mr. Pozen at the briefing said the recommendations are consistent with what the Financial Accounting Standards Board is doing in the area.
Mr. Cox said he instructed SEC staff to analyze recommendations to come up with proposals to present to the SEC commissioners.
Other recommendations include calling for FASB to be the only organization setting the GAAP accounting standard and keeping the SEC from issuing broad interpretive implementation guidance.
