A key member of the U.S. House Committee on Financial Services introduced a bill that would force a financial accounting standard-setting organization to operate under the same set of rules as federal agencies.
Rep. Blaine Luetkemeyer, R-Mo., authored the measure, which would require the Financial Accounting Standards Board to follow the Administrative Procedure Act that directs how federal agencies develop rulemaking.
The organization derives its authority to create accounting standards from the Securities and Exchange Commission, but it is independent from government oversight. The board developed the current expected credit loss accounting standard, or CECL, that changes how financial services companies estimate and record loan losses on their books.
The Administrative Procedure Act directs federal agencies to disclose proposed and final rules in the Federal Register, as well as to provide agency guidance. The law also requires that policies receive a time period for the public to weigh in via a formal comment submission process.
Luetkemeyer, ranking member of the House Financial Services Subcommittee on Consumer Protection and Financial Institutions, has been leading the charge in the House to delay CECL's implementation, scheduled to go into effect for large-cap firms in early 2020. According to the lawmaker, the bill preserves the board's independence, but it "will force them to perform the due diligence they have proven unwilling to do," Luetkemeyer wrote in an op-ed.
The bill would also require the board to consider the impact that accounting principles will have on the U.S. economy, market stability and availability of credit, which the board failed to do when developing CECL, according to Luetkemeyer.
"Accounting standards should not be a political issue, and FASB’s independence has served as a laudable method of keeping standard-setting and the economic implications that come with it out of the political fray," Luetkemeyer wrote. "However, when independence leads to complacency and that complacency threatens U.S. consumers, businesses, and the greater American economy, it is time for our citizens’ representatives to step in."
